Productivity Primer

Does productivity growth mean lower employment?

At the firm or industry level, a productivity-enhancing factor, such as the introduction of new technology, can mean that fewer workers are required to meet production needs. This is not always the case, however, as a firm with innovative products can stimulate such strong demand that it needs to put on more workers to raise production to meet the demand.

At the aggregate or economywide level, the general evidence is that productivity growth does not mean fewer employment opportunities. Productivity growth stimulates sufficient growth in income and output to generate overall employment growth. As an illustration, employment growth and a reduction in unemployment accompanied Australia's record productivity growth in the 1990s.