TEXT: Workforce productivity is one of the hallmarks of development. It drives economic growth and affects everyone in the economy.
A highly productive economy will be able to produce more goods or services with the same amount of resources or produce the same level of goods and services with less resources. For businesses, higher labour productivity will bear greater profits whereas for the workers, it can translate into higher wages and better working conditions. For a government, a higher level of productivity can bring in more tax revenues.
Economists define labour productivity as the amount of economic output per worker in the economy. It is calculated by dividing the gross domestic product (GDP), adjusted for purchasing power parity (PPP), by the total size of the labour force. According to CEIC past global data, Pakistan Labour Productivity dropped by 1.23%, compared with a growth of 3.09 % in the previous year. At macro level, some of the key impediments to workforce productivity are infrastructure, regulations, trade policies, and human capital.
Global economy is transforming from physical to service and intellectual capital. According to report by Ocean Tomo USA 90% of the value of S&P 500 companies comes from intangible assets and only 10% is attributable to tangibles. This is in contrast to previous manufacturing-based economy when intangibles value creation was just 17%.
With the emergence of ESG framework, human capital has become highly important for investment analysis, both from social and financial impact perspective. Human capital is now a key consideration for most companies around the world. It is recognized as one of the most important drivers of competitiveness, value creation, and sustainable competitive advantage.
Worldwide investors are engaging with board directors to improve the human capital risk assessment and disclosure to cope rapid environmental and technological changes.
Copyright Business Recorder, 2022
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