ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -As productivity increases, workers can produce more goods and services in the same amount of time, leading to higher living standards. Hourly compensation growth. Historically, hourly compensation has grown in line with productivity so that workers have shared in the gains from higher productivity.

Detailed explanation-2: -The relationship between productivity and wages-wages equal “marginal revenue product”-also has attractive moral properties. If the relationship is strong, then workers are being paid, in a sense, “what they are worth” to the firm.

Detailed explanation-3: -Labor productivity is defined as real output per labor hour, and growth in labor productivity is measured as the change in this ratio over time. Labor productivity growth is what enables workers to produce more goods and services than they otherwise could for a given number of work hours.

Detailed explanation-4: -As productivity rises it takes fewer hours of work to produce the same amount of output. This allows employers to increase wages.