Standard of living

Definition of productivity
Standard of living
The extent to which a person is able to provide the things that
are necessary for sustaining and enjoying life.
Standard of living of a representative family differs greatly in
different parts of the world.
What is considered a necessity in one part of the world could
be considered a luxury in the other.
Basic necessities of a minimum decent standard of living:
Food, clothing, housing and hygiene. Also, security and
education also considered constituents.

Greater the amount of goods and services produced in any
community, the higher its the average standard of living.
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Standard of living
There are two ways of increasing the amount of goods and
services produced:
- Increase the employment and investment in creating jobs. So
that more people are producing goods required for the society.
- Increase productivity. Same amount of labor produces more
goods.
We want:
More and cheaper food by increase in agricultural productivity
More and cheaper clothing and housing by increased industrial
productivity
More hygiene, security and education by increasing overall
productivity.
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Productivity
Ratio between output and input.
Arithmetic ratio of the amount produced to the amount of any
resources used in the production.
The resources may be: land, material, plant, machines, tools,
labor. It could be combination of all!
Over a period of time, one can see if the productivity has
increased.
How?
Combination of improved technology, better planning, greater
skills etc.
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Productivity
Note that, increased production does not mean increased
productivity.
Higher productivity means that more is produced with the same
expenditure of resources; that is, at the same cost in terms of
land, material, machine, time or labor.
Alternatively, same amount is produced at less cost in terms of
land, labor, material etc; thereby releasing some of these
resources for the production of other things.
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Productivity and standard of living
If more is available at the same cost, or the same amount is
available at lesser cost the whole community benefits.

As per the ILO, higher productivity provides ways for raising
the standard of living by:
1. Larger supplies of both consumer goods and capital goods at
lower cost and prices
2. Higher real earnings
3. Improvement in working conditions, e.g. by reduced working
hours
4. In general, strengthening of the economic foundations of
human well-being.
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Productivity in industry
Many factors affecting productivity of each organization; also,
they are dependent.
Depending on the individual environments, decisions are to be
made.
Industries where labor and capital costs are low compared to
the material costs, better use of material and plant gives the
greatest scope of cost reduction.
In countries where capital and skilled labor are in shortage
compared to unskilled labor, one should look to increase the
output per machine or per skilled worker.
Increasing the number of unskilled workers may be beneficial
if by doing so an expensive machine or skilled craftsmen are
enabled to increase production.
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Governments responsibility
Government can create conditions favorable to raise
productivity. It can:
1. Have a balanced programs of economic development
2. Take steps necessary to maintain employment
3. Make opportunities for employment.
Last step is specifically important for a developing country
like India.
Government should make provisions for workers who are
going to loose jobs because of technology improvement
training and education programs.
Example: Indias First Five-Year Plan (1952).
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Managements responsibility
The main responsibility for raising productivity in an
individual organization lies with the management.
It can implement productivity programs.
It can create a positive environment and obtain co-operation of
the employees.
Trade unions should encourage its members to provide such
co-operation when the productivity program is beneficial to
workers, as well as the organization on the whole.

We will look at managements role in increasing productivity
of individual resource:
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Productivity of material
At the design stage:
Ensure least consumption of material,
Purchase equipments and plants such that consumption of
material is economical.

At the operation stage:
Use of correct process,
Right use of the process,
Operator training,
Proper handling and storage of products at all stages,
Proper packaging to reduce damage in transit.
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Productivity of land, machines and
manpower
Effective utilization and maximum productivity is an important
source of cost reduction.
Reduction in the original specification, before the land is
purchased saves capital outlay (as well as interest expenses)
A savings in material which has to be imported saves import
duty and excise.

Productivity of manpower and machines is typically measured
in terms of time (man-hours; machine-hours).
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Factors tending to reduce productivity
Work content added due to the product design for a
manufacturing firm:
The product or its components are designed such that it is
impossible to use most economical manufacturing processes.
Excessive variety or lack of standardization.
Incorrect quality standards.
Excessive amount of material removal required.

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Factors tending to reduce productivity
Work content added due to process:
Incorrect production process (and/or machine) used
Process not operated properly
Non-optimal layout with wasted movements.
Working methods of operation causing wasted movements,
time and efforts.
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Factors tending to reduce productivity
Ineffective time due to management
Marketing policy which demands unnecessarily large number
of products.
No standardization of components between as well as within
products.
Failing to meet customers requirement from the beginning.
No plan for flow of work.
Improper supply of material, equipment.
Improper maintenance of plant and machines.
Insufficient safety measures.
Improper working conditions resulting in interrupted work.
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Factors tending to reduce productivity
Ineffective time within the control of worker:
Taking time off without good cause: by lateness, by idling at
work etc.
Careless workmanship causing scrap or rework.
Failing to observe safety standards.
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