18. Productivity

Sustainable Development

Decent work

Economy Social Environment Employment Protection Rights Dialogue
Relevant SDG Targets
2.3, 8.2
Relevant Policy Outcomes
1, 4, 5, 10

On this page: DWA-SDG Relationship | Cross-cutting policy drivers | Partnerships | ILO Capacity | Resources

Low productivity is one of the root causes of the “working poor” phenomenon: people who work long hours, often in the informal economy or in subsistence agriculture, but still do not earn enough to feed their families37. Raising productivity - and ensuring that the productivity gains are equitably shared between business owners and investors (higher profits and shareholder value) and workers (higher wages and better working conditions) - is, therefore, of critical importance in efforts to reduce poverty. The virtuous circle of productivity, employment and development can be fuelled through the re-investment of productivity gains into product and process innovations, plant and equipment improvements, and measures to enhance the skills and improve the work environment of the workforce.

Productivity refers to how efficiently resources are used; it can be measured in terms of all factors of production combined (total factor productivity) or in terms of labour productivity, which is defined as output or value added divided by the amount of labour used to generate that output. Labour productivity increases when value added rises through the better use, coordination, etc. of all factors of production. Value added may increase when labour is working smarter, harder, faster or with better skills, but it also increases with the use of more or better machinery, reduced waste of input materials, or with the introduction of technological innovations. Labour productivity measures the efficiency of a country with which inputs are used in an economy to produce goods and services and it offers a measure of economic growth, competitiveness, and living standards within a country (55).

Governments, workers and employers are united in their pursuit of enhanced productivity because greater productivity is the primary source of improvements in living standards, the most sustainable route out of working poverty, and the basis (and measure) of competitiveness in global markets.
Productivity growth may have employment-displacing effects and can even cause the disappearance of entire job families. These effects are central to the discussion around the “Future of Work” since new technologies and the automation of work processes may cause profound disruptions in the world of work. However, experience has shown that in the longer term and at the aggregate level, productivity growth may not necessarily reduce employment growth in a country. Productivity gains can work their way through the macro economy so that job losses in one location or sector is compensated by job gains in another area or sector.

DWA-SDG Relationship

Employment is the primary means of income generation for the poor. Increasing productivity of the poor, improving their employability and creating productive employment opportunities for the poor is an important way to fight poverty.

The term “productivity” appears in SDG targets 2.3 and 2.4 (agriculture, in particular subsistence agriculture) and in SDG target 8.2 (total factor productivity), thus recognizing that greater productivity is essential to combat hunger, advance decent work and boost economic growth. SDG target 2.3 is addressed by ILO policy outcome 5 through support programmes for rural employment whereas target 8.2 is linked to policy outcomes 1 and 5. Both SDG targets 2.3 and 8.2 are supported by policy outcome 10 since productivity growth required the active participation of workers’ and employers’ organizations.

The ILO supports productivity growth through skills development programmes, the strengthening of labour market institutions, through social dialogue mechanisms and through dedicated projects and programmes such as “SCORE” (sustaining competitive and responsible enterprises) and “Better Work” (improving working conditions and competitiveness in the garment industry, one of ILO’s five flagship programmes). The ILO Cooperative Programme promotes productivity enhancement through improved work organization and economies of scale in both agriculture and non-agricultural occupations. In the past, the ILO supported the establishment of productivity centres in numerous developing countries; many of those are still active and now operate independently. Labour productivity is an element of ILO’s Key Indicators of the Labour Market (KILM).

Cross-cutting policy drivers

The ILO promotes the so-called “high road” to productivity which seeks to enhance productivity through better working conditions and the full respect for labour rights as compared to the “low road” which consists of the exploitation of the work force.

As highlighted above social dialogue is crucial to all efforts aimed at improving productivity, in particular those that adopt the “high road”. A recent ILO story from Colombia illustrates very well how social dialogue and collective bargaining have greatly improved productivity in the garment industry.

SDG target 2.3 singles out women, indigenous peoples, family farmers, pastoralists and fishers as population groups that should primarily benefit from measures to enhance agricultural productivity. ILO programmes in support of target 2.3 should incorporate this target-group specific dimension.

It must be noted that productivity growth, if achieved through mechanization and the use of fossil fuels, can have negative effects on the environment and contribute to climate change. ULO’s “Green Jobs” programme seeks to attenuate these negative effects by promoting greater resource efficiency and a low-carbon economy.

Partnerships

Several major development partners support ILO’s efforts to raise incomes and profits, improve working conditions, ensure compliance with labour laws and enhance competitiveness through greater productivity: Norway, Switzerland (SECO), Canada, Denmark, Germany, Netherlands, the UK, the US, i.e. the donors involved in the aforementioned SCORE and/or Better Work programmes, private sector companies operating in global supply chains, as well as governments of beneficiary countries. UN agencies addressing productivity issues include the World Bank and its private sector arm, the International Finance Corporation (IFC), UNIDO, UNCTAD, the International Trade Centre (ITC) and, from the agricultural perspective, the FAO and the International Fund for Agricultural Development (IFAD).

ILO Capacity

The ILO does not have a central unit or department dedicated specifically to productivity, but many technical units contribute to productivity improvement in different ways: skills development, employment policy, enterprise development, rural employment, sectoral activities, labour administration, and working conditions. In addition, the departments responsible for workers’ and employers’ activities are involved in productivity-improvement programmes. ILO technical specialists representing these various units in the field can provide advice and support projects and activities aiming at productivity growth.

Resources

Numerous ILO publications issued by various units address productivity, including the handbook productivity management (1987/1992) which however is now largely outdated. The ILO has also published a collection of “Tools for the High Road to Productivity and Competitiveness” tailored specifically to the Caribbean region. More recently the Office published the manual “Productivity Improvement and the Role of Trade Unions” (2015). Many additional ILO tools and publications address productivity in one way or another.


37 - Hence, productive employment refers to employment that yields sufficient income to allow the worker and his/her household a consumption level above the poverty line.

55. ILO. 16: Labour Productivity. International Labour Organization - Key Indicators of the Labour Market. [Online] 2015 October 2015. /global/statistics-and-databases/research-and-databases/kilm/WCMS_422456/lang--en/index.htm.