Question

Productivity was up 35% in 2017 while labor costs fell 41%. What was the percent change in output?

Answer 1

Solution:

Assume each of old productivity and old labor costs = 1

New productivity = Increased by 35%

New productivity = 1.35

New labor costs = Decreased by 41%

New labor costs = 0.59

Productivity is calculated as,

Productivity = Output / Input

Output = Productivity x Input

New Output = New Productivity x New Labor costs (Assuming only one input as labor costs)

New Output = 1.35 x 0.59

New Output = 0.7965

Change in output = (1 - New output)

Change in output = (1 - 0.7965)

Change in output = 0.2035

Percent change in output = 0.2035 x 100

Percent change in output = 20.35%