[This is part of the series: The Complete Guide To Economics 101.]
Everyone knows what productivity is.
I mean, we all want to be more productive, right?
Productivity is just what someone produces (output) in a given hour, week, month, or year.
- Can you write one article per day? Or, 12?
- Can you bale two bales of cotton per hour? Or, 100?
- And are you only capable of shipping 100 units a day? Or, can you ship 1,000?
It works the same in economics on a national basis in asking how productive a particular country is.
In fact, there is a strong link between one’s productivity, earnings, and their standard of living.
In short, the more productive people (and nations) are, the higher their wages and standard of living.
Think of it like this in regard to someone in the business of digging ditches:
- Someone digging ditches with a spoon might be worth paying $0.50 per hour.
- Someone digging ditches with a shovel might be worth paying $5 per hour.
- Someone digging ditches with a mechanical ditch-digger might be worth paying $500 per hour.