What is the importance of labour productivity?What is the importance of labour productivity??? It is a question from the subject"PRINCIPLES OF MANAGEMENT." The answer is required for t.Y.B.A.F...

What is the importance of labour productivity?

What is the importance of labour productivity???

It is a question from the subject"PRINCIPLES OF MANAGEMENT." The answer is required for t.Y.B.A.F level....

The answer should have points, which could be highlighted.

Expert Answers
Lorraine Caplan eNotes educator| Certified Educator

I think you need to think about how businesses make money to answer this question properly.  Profits are derived by subtracting the cost of production from the money made from the product.  Labor is one of the costs of production, and it is a very high cost, often including not only wages, but also health insurance, retirement, sick leave, vacation, disability coverage, workers' compensation, and payroll taxes.  If an employee makes five widgets per hour, the company can sell five widgets.  But is it charges $10.00 for each, the company might not make any money at all because the employee costs the company that much. And of course, that calculation does not take into account all the other overheadd the company has: equipment, buildings, utilities, taxes, etc.  What might happen if the employee were able to produce ten widgets per hour? Multiply the effect of this across hundreds or thousands of employees and you will begin to see why labor productivity is so important. 

Good luck on your exam.