Allowing for unemployment in productivity measurement

Abstract

The labour productivity index is a mainstay measure for comparing countries’ relative economic performance, but the Covid-19 pandemic could expose some of its inherent limitations: it focuses on people in work and ignores unemployment, and it is not standardised. In theory, a country’s index value could increase, even though its GDP might fall, because of significant increased unemployment in low-productivity sectors such as tourism and retail. It follows that the index value could fall when these sectors recover. Also, high-performing countries could see their index value fall because of the pandemic’s impact in high-value sectors, such as demand for oil.Consequently, a wider perspective of productivity is necessary. This paper, therefore, proposes a complementary index which adjusts labour productivity for levels of unemployment—the social labour productivity index (SLPI)—and recommends that the labour productivity index itself should be standardised. The relationship between employment and productivity is complex. For example, the UK’s economic performance, involving comparatively low labour productivity and low unemployment, has been deemed a ‘productivity puzzle’. A literature review discusses this relationship, but it is clear that econometric worldwide evaluation requires very large data sets, that are unlikely to be routinely available in practice to monitor international performance. By contrast, data sets on national productivity are small and already available, although they contain little or no data on causal factors. SLPI values were calculated for differing levels of unemployment and relative labour productivity for newly employed workers for countries where data was available; with patterns over the period 1986–2016 established for the G7 countries, Portugal, Ireland, Greece, and Spain. There were marked variations between the two indices for countries with high unemployment. The SLPI presents a practicable measure which can be utilised quickly in these unprecedented times. Using available data to compare countries’ GDP with their total workforce, it arguably provides a better measure of their overall economic and social health. Sensitivity analyses varying assumptions can model differing potential scenarios to sit alongside GDP and labour productivity index predictions.

The Determinants of Labour Productivity Growth in Malaysia

“…These results were consistent with Das and Sengupta (2015) who also found insignificant relationship between employment growth and productivity growth by using Indian data which showed most sectors in India used a tiny workforce relative to the quantity of capital. Furthermore, for unemployment result in past studies were found insignificant in study of (Gandy and Mulhearn, 2021;Rolčíková et al, 2014;Amassoma and Nwosa, 2013). It was explain that unemployment rate and productivity growth in Nigeria found for both the long run and short-run models indicated that the unemployment rate had little impact on productivity development (Amassoma and Nwosa, 2013).…”

“…Unemployment is defined as those over a particular age who are jobless, available for paid work or self-employment, and actively seeking work. Increase in unemployment, with the biggest effect likely to be in low-skill and decrease productivity sectors, such as tourism and retail some countries because it only measures the productivity of those who work (Gandy and Mulhearn, 2021). According to Michael and Geetha (2020), unemployment is a situation in which people who are actively looking for work are unable to find work.…”

“…Some studies found insignificant relationship between unemployment and productivity. Gandy and Mulhearn (2021) revealed that there is no relationship between nations' labour productivity and unemployment rates in the G7 nations, Spain, Greece, Ireland, and Portugal. Rolčíková et al ( 2014) stated that although the rate of unemployment was increasing in Czech Republic, the study found no significant relationship between unemployment and labour productivity.…”

A Focus on Ethical Value under the Vision of Leadership, Teamwork, Effective Communication and Productivity

“…In addition, various productivity factors and the risks of investment versus economic return need to be analyzed, as not everything that is carried out with great effort and dedication is profitable (Arulraj and Annamalai 2020;Schweikl and Obermaier 2020) in the latter article related to IT projects analyzing the Solow Paradox, which may tempt entrepreneurs to make unethical decisions. The continuous challenge of increasing productivity often neglects the relevance of the human and ethical factor, focusing mostly on economic profit and survival (Gandy and Mulhearn 2021;Guo and Clougherty 2020;Rashid et al 2020).…”