P roductivity is a measure of how efficiently an economy transforms its labour, capital, and raw materials into goods and services. One common measure of an economy’s productivity is labour productivity, or the output per worker. This is not merely a measure of how hard people work but how “smart” they work. It is a measure of the extent to which Canadian businesses and industries take advantage of better education, training, management, equipment, and technology to increase the amount of production per worker. Productivity and the standard of living Labour productivity plays the dominant role in how fast the incomes of workers improve. Productivity growth allows real wages to increase by lowering prices, thus leading to real improvements to our standard of living. Increased productivity, which means reduced real costs to producers, is often confused with two other related but very different concepts: competitiveness, which means lower production costs than the competition, and profitability, which means low production cost
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