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Unformatted text preview: In order to increase productivity, each worker must be able to produce more output. This is referred to as labor productivity growth. The only way for this to occur is through an in increase in the capital utilized in the production process. This increase can be in the form of either human capital or physical capital. An example will help to illustrate the basic way that labor productivity growth works through increases in the capital stock. Say there is a riveter named Joe. Joe works in a factory that makes metal boxes that are riveted together. He has a riveting tool that can rivet at a rate that allows Joe to finish 4 metal boxes every hour. Joe's labor productivity is thus 4 boxes per hour. One day, Joe gets a second riveting tool. With two tools, Joe can produce 8 metal boxes every hour. Now Joe's labor productivity has increased from can produce 8 metal boxes every hour....
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- Fall '10