16th April 2023See What we can do
The work we do has a value pertaining to it that emerged upon a demand sustained in a society that would leverage the growth of a system or a work. Whereas the quantity of the value is curated based on the hour or time that we worked for the society that is determined by productivity ultimately. Productivity is not just about how much work an individual can get done in a day, it also applies to companies and countries. Productivity growth estimates the standard of living of a nation on the other hand it would aid the company to determine the improvement in wages for their employee or the continuous enhancement in their operations.
Productivity growth is a measure of the increase in the efficiency of producing goods and services over a certain period of time. It is one of the key drivers of economic growth and has a significant impact on the standard of living of individuals and societies as a whole. The factors that facilitate growth can be measured in various ways, including labor productivity, capital productivity, and total factor productivity (TFP). Labor productivity measures the amount of output produced per unit of labor input, capital productivity measures the amount of output produced per unit of capital input, and TFP measures the efficiency of both labor and capital inputs together.
Growth is a phenomenon that eventually proceeds by anchoring to various productive ways. It is essential since it allows for the production of more goods and services with the same amount of resources. This can lead to higher profits for firms, higher wages for workers, and lower prices for consumers. Further, productivity growth can lead to higher economic growth rates, which can translate into higher standards of living for individuals and societies. In addition to that, it could help firms compete in domestic and international markets, which can lead to increased market share, profits, and employment.
Labor market drift:
The labor market is being drastically affected by technology, which is reducing the demand for low- to middle-level conventional skills and increasing the demand for more advanced analytical, technical, and managerial skills. However, the enhancement of workers' skills has not kept up with these technological changes, harnessing the broader adoption of innovation in economies. Moreover, larger economies are confronting challenges related to aging populations, stagnant labor force participation rates, and basic education levels, increasing the importance of productivity and technological advances in driving economic growth.
Disproportionate in wages:
The modern economy is characterized by a growing income inequality, driven by technological changes favoring capital and enhanced skills, which have led to a reduction in labor's share of income and increased wage inequality. This has resulted in more concentrated industry structures and higher economic rents for highly competitive firms, exacerbating the gap between labor and capital income. This inequality has fueled political divisiveness and social tensions, causing populist and nationalist movements to emerge in many countries that have turned against international trade, blaming it for job losses and wage stagnation among low-skilled workers.
Variation in growth patterns:
The decreasing income inequality between countries, mainly due to the convergence of emerging economies with advanced economies, is facing challenges from technological advancements such as automation, which is causing a decline in the comparative advantage of emerging economies in labor-intensive production, and thus requiring them to seek alternative pathways to growth.
Revolution in technology:
Despite fears of increased income inequality and job losses due to automation, digital technologies have the potential to significantly boost productivity and create new and improved job opportunities. However, the constant change in technology is innately disruptive and encompasses difficult progression. As it develops the parties in the form of winners and losers. It is necessary to adopt policies that perform well. It takes time to coordinate productivity on a scale with technological changes. It is advised to have more improved and responsive policies that could create better outcomes.
As productivity growth is directly linked to the increase in wages and living standards, it is imperative to maintain it, especially for aging economies that rely on productivity gains to boost economic growth, and the slowing labor productivity growth has raised concerns as it can negatively affect the purchasing power of consumers and demand for goods and services. Hence, to break open the strength of productivity to advance the economy is under the control of demand and digital diffusion. To encourage widespread transformation, corporations require a competitive environment that compels them to perform at higher levels, along with business institutions and policies that promote innovation and progress, as well as the necessary infrastructure and skilled workforce to make it happen.
Demand that levitates the focus towards enhancement in productivity growth in situations includes financial crisis and long-drawn-out structural losses. The steps could be taken such as prioritizing fiscal efforts, it is essential concentrate on productive investments, increasing the purchasing power of low-income consumers who are more likely to spend, facilitating private investments for businesses and residences, and providing support for worker training and transition programs to ensure income stability during periods of change.
As technology continues to reshape the business world, market regulations, and institutions must adapt accordingly. Specifically, competition policies need to be updated to reflect the digital age and promote an equitable and competitive marketplace that limits monopolistic tendencies. Additionally, new regulations need to address the unique challenges surrounding data in the digital economy. Finally, markets must remain flexible to facilitate adaptation to disruptions and structural changes arising from digital transformation.
The OECD provides suggestions on policies that optimize productivity growth such as implementing or taking risks in executing new technologies, the company could do it by enhancing its incentives, channelize its resources, and further, rising the potential to participate in global value chains. Accommodate the policies that ease labor mobility.
To recover from the financial crisis that declines productivity has to focus on investment gradually reducing uncertainty and clearing the path for productivity to regain from its historic losses. The capacity of the recovery depends on the company’s ability and quality of policies that may accelerate digitalization and rising demand for growth. To ensure sustained productivity growth, it is necessary to implement a range of government policies that address tangible and intangible assets, as well as human capital through tax and regulatory policies, science and technology policies, and education and training policies.