Can you enumerate the factors that determine labor productivity? Explain. 

 

The key factors that determine the productivity of labor includes technological change, human capital and physical capital.

Human capital is an important factor that determines labor productivity. It is the accumulated knowledge gained through experience and learning. Human capital includes the skills and expertise that labor possesses. Higher level of education will lead to higher human capital and as a result labor productivity will increase.

Another important factor that determines labor productivity is physical capital. Physical capital includes, machinery, plant, equipment used by a firm and infrastructure like roads that significantly contribute to the economy. Physical capital affects labor productivity in two ways. The first one is the increase in the quantity of physical capital and the next one is the increase in the quality of physical capital. Since the quantity and quality of physical capital increases labor productivity.

Lastly we have technological change as a factor that determines labor productivity. Technological change refers to the advances in innovation, invention and knowledge. Technological advances lead to higher labor productivity. It also minimizes the unnecessary steps that are taken by the laborers to complete the work. It significantly helps with the organization of work. Hence, the workers become more efficient. It also helps to reduce the time spend by workers to complete a particular task. Technological change also helps in increasing the quality of work done by the employees. Hence, it is a significant factor that determines labor productivity.

Step-by-step explanation

The key factors that determine the productivity of labor includes technological change, human capital and physical capital.

Human capital is an important factor that determines labor productivity. It is the accumulated knowledge gained through experience and learning. Human capital includes the skills and expertise that labor possesses. Higher level of education will lead to higher human capital and as a result labor productivity will increase.

The second important factor that determines labor productivity is physical capital. Physical capital includes, machinery, plant, equipment used by a firm and infrastructure like roads that significantly contribute to the economy. Physical capital affects labor productivity in two ways. The first one is the increase in the quantity of physical capital and the next one is the increase in the quality of physical capital. Since the quantity and quality of physical capital increases labor productivity.

Lastly we have technological change as a factor that determines labor productivity. Technological change refers to the advances in innovation, invention and knowledge. Technological advances lead to higher labor productivity. It also minimizes the unnecessary steps that are taken by the laborers to complete the work. It significantly helps with the organization of work. Hence, the workers become more efficient. It also helps to reduce the time spend by workers to complete a particular task. Technological change also helps in increasing the quality of work done by the employees. Hence, it is a significant factor that determines labor productivity.