Production is a total, productivity is a ratio

1. Production answers how much was made, so it rises if a firm simply hires more people and works longer hours.
2. Productivity answers how efficiently it was made, so it rises only if the same inputs produce more than before.
3. The two can move in opposite directions, because a firm that doubles its workforce and less than doubles its output has raised production and lowered productivity.

Higher productivity raises what the economy can produce

1. More output from the same resources means the economy's capacity grows, which is the source of growth described in 3.1.5.
2. It lowers the cost of producing each unit, so firms can hold prices down while paying more, which supports the target in 3.4.1.
3. Higher productivity is what allows real wages to rise, because a worker producing more can be paid more without raising the price of the output.
4. It also improves competitiveness abroad, since a lower cost per unit lets UK output compete without the pound having to fall.

Productivity depends on skills, capital and organisation

1. Education and training: a better-skilled worker produces more in the same hour, which is why training is a supply-side measure in 3.7.1.
2. Investment in capital: better machinery and technology raise the output each worker can achieve.
3. Organisation and management: the same people and machines produce more when work is planned well and waste is designed out.
4. Specialisation: dividing production into tasks so each worker repeats one of them raises output per worker, as set out in 2.1.4.
5. Motivation: pay, conditions and job security all affect how much effort a worker puts in.
6. Infrastructure: roads, rail, ports and broadband decide how quickly workers, materials and information can move.

Production alone can be a misleading measure

1. Rising production tells you the economy is bigger, not that anyone is better off, because the extra output may have taken extra hours to make.
2. Living standards depend on output per person, which is why 3.1.2 uses GDP per capita rather than GDP alone.
3. Growth by adding workers also runs out, since a population and a workforce cannot expand indefinitely.

Judging the importance of productivity for the economy

1. It depends on the time period, because productivity gains come from investment and training that take years to arrive.
2. It depends on who gets the gain, since higher output per worker raises wages only if it is shared rather than kept as profit.
3. It depends on what is measured, because output per hour and output per worker differ when hours change, and services are harder to measure than manufactured goods.
4. Overall: productivity matters more than production for the economy, because it is the only source of growth that raises living standards without needing more resources, but it responds slowly and unevenly, and weak UK productivity growth has been the single clearest constraint on the economy.