Tip 1: How to calculate labor productivity
The actual labor productivity of the operating enterprise is calculated on the basis of the indicators obtained as a result of observation: the total labor costs and the volume of output. To calculate the productivity of labor, the actual amount of output (in terms of product or volume) is divided by the actual total labor (in man-hours). Thus, labor productivity is the inverse of labor intensity. Based on the specifics of the initial data, it shows how much production is actually produced by the given production in the actual available production and economic conditions per unit of labor expended by the production.
To analyze the development potential and the viability of an enterprise within an industry, economic theory uses indicators such as cash and potential labor productivity.
The cash productivity is calculated in the same way as the actual, but the maximum quantity of production produced for the period is taken as the initial data, with minimum labor costs, that is, under the conditions when production operates under conditions of minimization and exclusion of associated costs and downtime. The purpose of this operation is to calculate the labor productivity that is maximally achievable in the given economic conditions (available equipment, raw materials, production organization).
Potential productivity, as a logical development of the general idea, considers the conditions for maximum output in the conditions available at this stage of technical development. It is supposed to use the most up-to-date high-tech equipment, the best (from possible) raw materials, etc. and, accordingly, the minimum of the achievable costs of living labor in the time dimension.