measure of output produced per unit of input used. Two widely used
measures of productivity are output per worker and output per hour of
work. The rate of increase in productivity provides one measure of
technological change.
Most economists believe that productivity growth driven by technological
change is the primary cause of rising material living standards over
decades and centuries. If you want to know why your real income
(purchasing power) is likely to be several times that enjoyed by your
great-grandparents 75 or 100 years ago, the reason is that you are likely to
be much more productive than they were. Your greater productivity is
due to better health, better skills, and the fact that you work with much
better equipment than did workers back then.
In recent years, however, the rate of productivity growth in Canada has
been slowing, and it has also become clear that it is below the rate of
growth in other developed countries like the United States and the United
Kingdom. The importance of productivity growth in sustaining our rising
path of living standards has led economists in universities and
government to spend a great deal of effort researching the causes of the
slowdown as well as policies that might encourage faster productivity
growth. See Applying Economic Concepts 8-1 for more on this important
issue.
Applying Economic Concepts 8-1