Essay on Productivity and Economic Growth

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Essay on Productivity and Economic Growth

Economic growth should be a positive force for the whole planet. This is why we must make sure that financial progress creates decent and fulfilling jobs while not harming the environment. We must protect labor rights and once and for all put a stop to modern slavery and child labor. If we promote job creation with expanded access to banking and financial services, we can make sure that everybody gets the benefits of entrepreneurship and innovation. Productivity is a measure of the efficiency with which a country combines capital and labor to produce more with the same level of factor inputs. Economic productivity is the value of output obtained with one unit of input.

Economic growth contributes most to poverty reduction when it expands the employment, productivity and wages of poor people and when public resources are channeled to promoting human development. Broadly we divide occupations into three types. Agriculture, animal husbandry, forestry, fishery, etc., are collectively known as ‘primary’ activities or industries. They are primary because their products are essential or vital for human existence. They are carried on with the help of nature. Manufacturing industries, both small and large scale, are known as ‘secondary’ activities. Mining is sometimes included under secondary activities, but properly speaking, it is a primary activity. Transport, communication, banking and finance and services are ‘tertiary’ activities which help the primary and secondary activities in the country.

The occupational structure of a country refers to the distribution or division of its population according to different occupations. Unemployment affects population groups differently, with women and youth (defined as persons aged 15 to 24) having a higher risk of being unemployed at the global level than men and adults (defined as persons aged 25 and over), respectively. The ILO estimates that the global youth unemployment rate is expected to reach 13.1 percent in 2016 and remain at that level through to 2017 (up from 12.9 percent in 2015). This is very close to its historic peak in 2013 (at 13.2 percent). As a result, after falling by some 3 million between 2012 and 2015, the number of unemployed youth globally will rise by half a million in 2016 to reach 71 million and will remain at this level in 2019.

Decent Work and Economic Growth

Over the past 25 years the number of workers living in extreme poverty has declined dramatically, despite the long-lasting impact of the economic crisis of 2008/2009. In developing countries, the middle class now makes up more than 34 percent of total employment – a number that has almost tripled between 1991 and 2015. However, as the global economy continues to recover, we are seeing slower growth, widening inequalities and employment that is not expanding fast enough to keep up with the growing labor force. According to the International Labor Organization, more than 204 million people are unemployed in 2015.

The Sustainable Development Goals (SDGs) aim to encourage sustained economic growth by achieving higher levels of productivity and through technological innovation. Promoting policies that encourage entrepreneurship and job creation are key to this, as are effective measures to eradicate forced labor, slavery and human trafficking. With these targets in mind, the goal is to achieve full and productive employment, and decent work, for all women and men by 2030. Decent work is one of 17 global goals that make up the 2030 Agenda for Sustainable Development. An integrated approach is crucial for progress across the multiple goals. The 2030 Development Agenda:

Sustain per capita economic growth in accordance with national circumstances and, in particular, at least 7 percent gross domestic product growth per annum in the least developed countries.
Achieve higher levels of economic productivity through diversification, technological upgrading and innovation, including through a focus on high-value added and labor-intensive sectors.
Promote development-oriented policies that support productive activities, decent job creation, entrepreneurship, creativity and innovation, and encourage the formalization and growth of micro-, small- and medium-sized enterprises, including through access to financial services.
Improve progressively, through 2030, global resource efficiency in consumption and production and endeavor to decouple economic growth from environmental degradation, in accordance with the 10-year framework of programs on sustainable consumption and production, with developed countries taking the lead.
By 2030, achieve full and productive employment and decent work for all women and men, including for young people and persons with disabilities, and equal pay for work of equal value.
By 2020, substantially reduce the proportion of youth not in employment, education or training.
Take immediate and effective measures to eradicate forced labor, end modern slavery and human trafficking and secure the prohibition and elimination of the worst forms of child labor, including recruitment and use of child soldiers, and by 2025 end child labor in all its forms. Protect labor rights and promote safe and secure working environments for all workers, including migrant workers, in particular women migrants, and those in precarious employment
By 2030, devise and implement policies to promote sustainable tourism that creates jobs and promotes local culture and products.
Strengthen the capacity of domestic financial institutions to encourage and expand access to banking, insurance and financial services for all.
Increase aid for trade support for developing countries, in particular least developed countries, including through the Enhanced Integrated Framework for Trade-Related Technical Assistance to Least Developed Countries.
By 2020, develop and operationalize a global strategy for youth employment and implement the Global Jobs Pact of the International Labor Organization.

In every progressive economy, there has been a steady shift of employment and investment from the essential ‘primary’ activities. Structural change take place in economies as the process of economic development proceeds further and gathers momentum. These structural changes result in changes in the proportion of national product and of the labor force. The most common pattern of structural change follows a sequence of as shift from agriculture to industry and then to service. These structural changes are observed both in the relative shares of national product and in labor force.

Productivity is a measure of the efficiency with which a country combines capital and labor to produce more with the same level of factor inputs. We commonly focus on labor productivity measured by output per person employed or output per person hour. A better measure of productivity growth is total factor productivity which takes into account changes in the amount of capital to use and also changes in the size of the labor force. If the size of the capital stock grows by 3% and the employed workforce expands by 2% and output (GDP) increases by 8%, then total factor productivity has increased by 3%.

Productivity is an important determinant of living standards – it quantifies how an economy uses the resources it has available, by relating the quantity of inputs to output. As the adage goes, productivity isn’t everything, but in the long run it’s almost everything. Higher productivity can lead to:

Lower unit costs: these cost savings might be passed onto consumers in lower prices, encouraging higher demand, more output and an increase in employment.
Improved competitiveness and trade performance: productivity growth and lower unit costs are key determinants of the competitiveness of firms in global markets.
Higher profits: efficiency gains are a source of larger profits for companies which might be re-invested to support the long-term growth of the business.
Higher wages: businesses can afford higher wages when their workers are more efficient.
Economic growth: if an economy can raise the rate of growth of productivity, then the trend growth of national output can pick up.

Productivity improvements mean that labor can be released from one industry and be made available for another – for example, rising efficiency in farming will increase production yields and provide more food either to export or to supply a growing urban population. If the size of the economy is bigger, higher wages will boost consumption, generate more tax revenue to pay for public goods and perhaps give freedom for tax cuts on people and businesses. The following are the main determinants of productivity in a country: access to hard technology, skills of labor force, quality of management, training and education standards, competition within markets, and cultural factors such as attitudes and aspirations.

Employment Productivity in the Context of Globalization

Technological changes during the last few decades have induced an increase in demand for services even at even relatively lower levels of per capita income. Moreover, development of communication technologies and reduction of the barriers to commodity flows and movement of people, specially, skilled persons due to impact of globalization, have produced demonstration effects resulting in shifting the pattern of demand in developing countries in favor of those prevailing in developed countries much earlier than the historical experience would justify. As consequences, both the production and consumption of services have shown a quantum jump. Unfortunately, the pattern of production of services which is capital intensive has failed to bring about a significant proportion of the workforce to services even. In an overall view, pattern of GDP growth did not bring about a shift in employment pattern to either industry or services.

Workforce Participation of Various Countries

Labor, being a primary factor of production, the size of labor force is of great importance for the level of economic activity in a country. In the determination of the size of the labor force, it is customary to exclude children below the age of 15 and old people above the age of 60, through in India, poverty forces people belonging to these groups also to work for bare subsistence. The work force participation rate in a country, i.e., proportion of working population to total population, depends upon such factors as age and sex composition, attitude to work, availability of work, etc. all these factors differ in different countries and may differ even within the same country in different periods. In advanced countries like England, Japan and others, work participation rate often ranges between 45 to 50 percent, while in India it has been around 32 percent.

Importance of Human Resource Management

According to Rensis Likert, “All the activities of any enterprise are initiated and determined by persons who make up that institution. Plants, offices, computers, automated equipment and all else that make a modern firm are unproductive except for human effort and directions of all the tasks of management. Managing the human component is central and the most important task because all else depends on how well it’s done”.

It is, thus, through the combined efforts of people that economic and material resources are utilized for the achievement of organizational objectives. Therefore, creating and maintaining a motivated workforce is the central responsibility of management everywhere. The effectiveness with which human resources are coordinated and utilized determines the success in achieving organizational objectives. Human resource management is important to the organization in a number of ways, as following: importance for the organization, employees and society.

Importance for the Organization

Human resource management is important for the organization due to following:

Good human resources practices help in attracting and retaining the best people in the organization.
In order to make use of latest technology the appointment of right type of person is essential. The right people can be fitted into new jobs properly only if the management performs its HR function satisfactorily.
Globalization has increased the size of the organizations that employ thousands of employees in different countries. The performance of the company depends upon the qualities of the people employed. This has further increased the importance of HRM.
Human resource planning alerts the organization to the types of the people it will need in the short, medium and long run.
Human resource development is essential for meeting the challenge of future. The importance of HRM has increased because of the shortage of really good managerial talent in the country.

Importance for the Employees

The human aspect of organizations has become very important over the years. HRM stresses on the motivation of employees by providing them various financial and non- financial incentives. Right organizational climate is also stressed upon so that the employees can contribute their maximum to the achievement of the organizational objectives. Effective management of human resources promotes team work and team spirit among employees. It offers excellent growth opportunities to people who have the potential to rise. It also encourages people to work with diligence and commitment.

Importance for the Society

Society as a whole is the main beneficiary of good human resources practices. Good human resource efforts lead to productivity gains (ratio of output to input) to the society, since it enables the managers to reduce costs, save scarce resources, enhance profits and offer better pay, benefits and working conditions to employees. The importance of human resource is very intelligently explained by Herbert E. Meyer in following words: “The name of the game in business today is HR. You can’t hope to show a good financial or operating report unless your human relations are in order and it is immaterial what kind of company you are running. A chief executive is nothing without his people. You got to have the right ones in the right jobs for them and you got to be sure that employees at every level are being paid fairly and being given opportunities for promotion. You can’t fool them and any chief executive who tries is going to hurt himself and his company”.

Conclusion

The Sustainable Development Goals are a call for action by all countries – poor, rich and middle-income – to promote prosperity while protecting the planet. They recognize that ending poverty must go hand-in-hand with strategies that build economic growth and address a range of social needs including education, health, social protection, and job opportunities, while tackling climate change and environmental protection. SDG 8 promotes “sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all”. It reaffirms the mutually supportive relationship between economic and social policies, full employment and decent work. Among others, inclusive and sustainable economic growth, technology, and structural transformation are critical and must be guided by an overall strategic direction. This may be more crucial than ever, in view of the unprecedented impacts of new technology clusters on all SDG areas and particularly on the future of work and global growth. High levels of inequalities continue as major obstacles to SDG 8 progress. Achieving many of the other SDGs depends on progress under the SDG 8 targets. Mobilizing the policy priorities, instruments, partnerships and resources that SDG 8-related interventions can bring is therefore crucial for ending all forms of poverty and reducing inequalities, while ensuring that no one is left behind. Furthermore, progress towards SDG 8 alone ‘means nothing’, if it allows environmental degradation and social exclusion. There is no substitute for productivity growth or trade-off, heightened productivity growth is needed for job creation. Protection of rights and jobs must happen in tandem with clear creation of employment policies.

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