Explain your views on the following "improving productivity results in the loss of jobs".

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

UNIVERSITY EXAM..................

The answer should have points, which could be highlighted.

the answer is for7-8 mks....

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Productivity is measured by the efficiency of the factors of production. When any of the factors of production are increased it is done so to increase output thus increasing profit. However, when adding additional factors of production all firms are exposed to the law of diminishing returns where by there comes a point when adding another factor of production actually results in decreased profits. If a firm passes the economies of scale (where production loses efficiency) it costs more for the firm to operate while profits decrease. When this occurs many firms 'downsize' which often times results in job losses. Downsizing allows large firms to reorganize and streamline operations. Once a firm reaches the law of diminishing returns job loss is necessary if the firm intends to survive. Although a hard sell to anyone who loses their job under these circumstances, downsizing will bring production costs under control ultimately making the firm a profitable company again. 

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What is productivity?  It is the measure of the output of an employee, whether in goods or services, or both.  If productivity increases, each employee is making more products or providing more services.  If I have 10 employees, each of whom makes 25 widgets per day, what happens if their productivity doubles? They make 50 widgets per day, right? When this happens, there are several possible scenarios.  First, I might have a company that has a market for 500 widgets a day, have the space to warehouse them, the drivers to deliver them, and the ability to purchase the raw materials to double my widget production.  But I might not. That would be the second scenario.  I might be able to sell only 250 widgets per day, have no room to store them, have insufficient cash or credit to purchase the raw materials to create the widgets, and so on.  In that event, what should I do?  The logical step to take is to eliminate five employees, since I can maintain the production I want and need with only five employees.  My profits increase because my costs have decreased.

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