Effectiveness and productivity of labor

     NATIONAL UNIVERSITY OF LIFE AND ENVIRONMENT SCIENCE OF UKRAINE 
 

     Department of agrarian sociology

     Paper course

       “Effectiveness and productivity of labor” 
 

     Fulfilled by:

     2nd year student, group №6

     Department of agrarian management 
 
 

Kyiv – 2011 
 
 
 

PLAN

Introduction………………………………………………………………………..3

Part 1. Theoretical aspects of effectiveness and productivity of labor…………….5

1. The substance of effectiveness of labor…………………………………….5
2. The system of indices of labor effectiveness. Productivity of labor as the main index of labor effectiveness…………………………………………..7
3. Indices and methods of measurement of labor’s productivity……………...9

Part 2. Reserves of increasing of labor productivity, their classification…………13

2.1 The concept of factors and conditions for higher productivity……………13

2.2 Reserves of increasing of labor productivity in agriculture……………….16

Part 3. The role of labor normalization in the reduction of labor input and rational using of working time…………………………………………………………….19

Conclusions……………………………………………………………………….23

The list of using literature………………………………………………………...25

  Introduction

   A highly efficient agricultural sector – is the basis of material and social well-being of society, without which sustainable development is impossible. It is a kind of guarantor and preservation of national security. Not accidentally agriculture is a priority area in the developed world. In these areas rarely experiment with his guard and police, using new scientific and technological progress.

   In our country the revival of agriculture is necessary. The basis for its effective and efficient development of agricultural production - is improving the technical level and quality of production, improvement of production and work, attracting highly skilled workers, motivation of employees.

   Also to increase the capacity of agricultural production requires a thorough analysis of all indices. One such indicator is productivity. It is also the indicator of efficiency of labor costs for the production.

   One of the main and most important functions of general economic and industry conditions in the domestic market realities of the management of human resources at all levels of the national economy, which will manufacture competitive products, to improve economic of employees and profit growth. Realization of these goals is impossible without boosting productivity and work efficiency.

   From this point of view there is a need in research productivity, because of growth of enterprise efficiency. An important contribution to research category of "productivity" have made such scientists, economists as: Marx, A. Smith, Bushena, Varzar,  Kerzhentsev, Kharchenko, Rubinsky, Slezinher, Umansky, and others. However, today in Ukraine is almost no conceptual research and development to improve the mechanism for efficient work, as the priority direction of state regulation, properly developed theoretical and methodological aspects of interdependence between performance and its stimulation, assessing the effect of stimulating work in systems. From the theoretical point of view there many interpretations, which makes the same terminology and the formation of a unified approach to the research work efficiency. That is what explains relevance of the chosen topic.

   It can be argued that in modern conditions of market relations in Ukraine held negative processes, which are characterized by imbalance between the assessed work and economic performance. These trends hinder the growth of national economy, since they have not corrected sign of labor market processes and, in particular, deficient performance management work without the direct participation of the state. Under such circumstances, in my opinion, it should be developed a conceptual mechanism of work for the mobilization of labor potential to increase work efficiency at all levels: from local to national.

   The aim of course work is the improvement of management efficiency based on such concepts that:

   - amending existing legislation in the definition of the term "labor efficiency";

-  implementation of effective methodological development during the change in the current legislation with the participation of scientists and scholars;

-  improvement of cooperation at all levels of the national economy between all parties and social and labor relations to achieve a balance between performance and pay based on its increasing responsibilities of employers for the timely and full payment of wages - as the event play its stimulating function and security enhancements rights of employees. 
 
 
 
 
 
 
 

PART 1. THEORETICAL ASPECTS OF EFFECTIVENESS AND PRODUCTIVITY OF LABOR.

1. The substance of effectiveness of labor.

   Labor performance – is its effectiveness, ratio of manufactured goods or assets (material and nonmaterial) to the cost of labor. The growth of labor efficiency means goods produced growth without increasing costs of labor. In economic literature and business practices of our country for the performance characteristics of the labor used category of "productivity," this characterizes the ratio of production and costs of its production.

   Labor productivity is a complex economic category, because labor is an important characteristic of human activity, is closely connected to the means of production and living labor.

   According to the recommendations of the International Labor Organization (ILO) distinguish the concept of "productivity" and "productivity of labor".

   Productivity – is the efficiency of use of resources (labor, capital, land, materials, energy, and information) during the production of various goods and services. It reflects the relationship between quantity and quality of goods or services provided and resources were spent on their production. Productivity allows you to compare production at different levels of economic system (at the level of some individuals, shops, businesses, organizations, industry and state) with the resources used. During their evaluation should take into account the rising cost of energy, raw material costs associated with unemployment, etc. [11, pp 43-63].

   Productivity is a general indicator that characterizes the efficiency of resource use for production. Modern economic theory argues that it is impossible to determine the exact role and share of the costs of various resources on production. Therefore, the efficiency is most commonly used indicator of productivity.

   Labor productivity – is the efficiency of this particular labor costs, defined number of products produced per unit of working time, or amount of time spent per unit. Productivity growth means increasing the number of products produced per unit time, or savings of working time spent per unit.

   In the process of living a particular work function is to create new value, and the transfer of working hours, materialized in the real elements of production, the product generated. That’s why labor productivity reflects the efficiency of both living and total (live and reified) work. There the notion of individual (living wage) and social (living and reified) work.

   Labor productivity is closely related to its intensity. Intensity describes the degree of labor intensity per unit time and measured the number of human energy spent. The higher level of labor intensity, those higher its performance. The maximum level of intensity is determined by physiological and psychological capabilities of the human body, which means that the intensity of labor is limited.

   Under normal social and work rate should understand this level of intensity of work, which ensures the rational use of physiological abilities while maintaining high productivity and health. It provides a long period of high efficiency and hence high productivity. If the labor intensity is higher than the accepted in society, some time is reduced productivity, increased work time loss, injuries, lack.

Tab. 1. The value of productivity growth in the economy. [2, p.195] 

     National income or gross national product if productivity increases faster than the cost figures. Reduced productivity is leading to inflation, trade balance passive, slow growth or decline in production and unemployment. (Comparative Dynamics of GDP, number of employees and real wages shown in the table 2). 

   Tab. 2. Comparative dynamics of GDP, number of employees and real wages.

(According to Statistical Yearbook of Ukraine 2010 [20]) 

2. The system of indices of labor effectiveness. Productivity of labor as the main index of labor effectiveness.

   In practice, economic activities for planning, accounting, performance analysis work utilizes indices of determining productivity on a scale of individual worker, manufacturing site, company, organization, industry and society in general. Indicators of labor productivity should be cross erected, comparatively, have a high degree of generalization, be universal in application.

   Labor productivity is measured ratio of production to labor costs (average number of personnel). Depending on the direct or inverse ratio are two indicators: output and labor content.

   Output - is the amount produced per unit time or number of products, which accounted for the average worker or a worker for a year, quarter, month. It measures ratio of production to the value of working time spent on its production:

Output = Q/T (formula 1.2.1) [10]

where Q - volume production; T - costs of working time.

      Labor content - a measure that characterizes the cost per unit time (i.e. the inverse value Charging):

Labor content = T/Q (formula 1.2.2) [10]

      The higher production output per unit time or the smaller cost per unit time, the higher the level of productivity. Output and labor input are interconnected and are in inverse dependence, but the percentage increase Charging is not equal to the percentage of saving labor [11].

   In the economy-wide labor productivity in the sphere of material production is determined by the ratio of newly created value – the national income – for a certain period (year) to the average number of personnel involved in material production during this period.

   The level of productivity in the enterprise can be characterized by indicators of labor intensity of production. Labor content reflects the amount of labor cost industrial-production personnel (living labor) on the production unit and is measured in man-hours (normal hours).

   Labor index reflects the direct relationship between output and labor costs. There are following types depending on the complexity of components of labor costs per unit:

   Technological complexity (TC), which includes all the basic costs of labor workers – both piece-workers and hourly workers:

TC = TV + TP (formula 1.2.3)

where TV – fixed cost of labor piece-workers;

TP - fixed costs of labor hourly workers.

   Total complexity (T) - is labor costs of all categories of industrial personnel:

Т = Т_{technological} + Т_{service production} + T _{production management} (formula 1.2.4)

   The nature and purpose distinguish normative, actual and planned labor. Normative defines the labor costs of labor for production unit or the performance of a certain amount of work, calculated in accordance with applicable regulations.

   Actual labor costs represent the actual work on the production unit or a certain amount of work.

   Planned labor – is a labor cost per unit or a specific work taking into account possible changes in regulatory complexity by implementing the measures provided a comprehensive plan for improving production efficiency.  

3.  Indices and methods of measurement of labor’s productivity.

   Methods of measuring productivity depend on how you define the volume of production. There are natural, and labor cost (money) methods.

   The level of performance determined by the number of products (scope of work or services) that it produces one worker per unit of working time (hour, shift, day, month, quarter, year) or the number of working hours spent on the production unit (work or services). Methods of measurement and basic indicators used in the practice of management are shown in Table 3 

  Tab. 3. Methods of measuring performance and productivity levels.

  [4, pp.20-47] 

   The essence of a natural method is that the volume of production and labor productivity calculated in natural units (pieces, tons, and meters). This method has wide application in the enterprise: the workplace, in the brigades, some polling stations in those industries that produce homogeneous products (electricity, oil and gas industry). The disadvantage of this method: a limited scope, which does not reflect the quality of products, you cannot take into account changes in the amount of progress, which in some areas has a large share of total production (construction, shipbuilding, etc.)

   If the company (department, district, brigade) produce something that has the same purpose, but is characterized by one basis, output can be calculated by a qualified natural units.

   Work method most often used in the workplace, in the brigades, industrial districts and in the shops, where the volume of products or work performed is determined in normal hours, after which it refers to actual time worked. For scientific and reasonable for a period of unchanging rules this method quite accurately describes the changes in labor productivity, is used to assess the level of productivity in certain industries, where diverse manufactured products and semis. Work method is of limited use because it requires stable labor standards, which contradicts the need to review the rules in the process of organizational and technical measures.

   In modern conditions, a universal method of measuring productivity is the cost (money), which uses cost indices output (gross, commodities, regulatory processing cost, clean, pure and regulatory conditionally clean production, gross revenue). Labor productivity by this method is calculated as the ratio of production to the labor costs of its production or average number of employees or branch [21, pp. 146-176].

   The benefit cost method is the ability to compare products varied with the cost of its production as a separate enterprise or industry and the economy. In this regard, cost method is used at all stages of planning and accounting as at branch and at the territorial level.

   Indicators of labor productivity, calculated on gross and commodity products, have similar advantages and disadvantages. Drawback is mainly that the level of charging more past due to reified labor costs of living than work.

   In some industries, such as sewing, printing, productivity calculated using the index of standard cost of processing. To do this, for each kind of product is determined through a period of consistent and constant ratios of expenses for items such as: the basic wage of production workers with social insurance, and guild, general costs. The drawback of this indicator: not characterize the entire volume of work performed (full cost), cost of production, the newly created value, not taking into account the actual cost of processing, but its normative value.

   Score of net product accurately describes the newly created products, if products are sold at market prices, but nowadays they make great influence on monopoly prices, which change the real contribution of the enterprise, the new value. The net production is calculated as the difference between gross output and costs of raw materials, semi finished products, fuel, energy, depreciation (reified elements of work):

NP = GP - MC (formula 1.3.1)

Or

 NP = W + Pr (formula 1.3.2)

where NP - the amount of net production;

GP - gross production;

MC - material costs;

W - wages and benefits of social insurance;

   Pr - profits. [17, p220]

   Widely applied in the business productivity index, that calculates on the basis of regulatory net rate of production.

   Scope of standard method for measuring net production is that each type of product, which now comes along with a wholesale price, is set as the standard of clean production. The volume regulatory net production in the enterprise is determined by multiplying the volume of each product in a natural measure (pieces, kg, etc.) for standard and compiling the results. Standards friendly products should be stable, so the volume regulatory-friendly products are compared during the period.  
 
 
 
 

PART 2. RESERVES OF INCREASING OF LABOR PRODUCTIVITY, THEIR CLASSIFICATION.

2.1 The concept of factors and conditions for higher productivity.

  One of the main and most important functions of general economic and industry conditions in the domestic market realities is the management of human resources at all levels of the national economy, which will manufacture competitive products, improve economic activity and rising incomes of workers. Realization of these goals is impossible without boosting productivity and work efficiency.

  Cost of developed countries in science and high technology is ten times higher than costs in Ukraine, which allows development of high technology that brings the lion's share of export earnings, increase production of competitive goods and services. However, it should not be forgotten that productivity gains cannot be an end in itself, as a priority in the civilized world today is a quality human development.

  Therefore, taking care of the problem of productivity growth, cannot be ignored importance of social processes, providing minimum guarantees for labor and social security, education, science, ensuring health, safety, training, continuous professional training. A key challenge for companies remains low motivation for effective work to develop innovations, inventions. Scientific and technical, technological and socio-economic background of productivity growth today are seldom discussed the social partners at different economic levels, not included in collective labor agreements, although the legal basis for such regulations already exist. [6, pp33-37]

  An important element of productivity is the search for reserves, the use of which would allow the company to enter the lower level of personnel costs relative to competitors and provide the same opportunity to survive in the market.

  Increasing productivity is the main factor of growth of production volume, so its planning occupies a central place in the management of the business [3, p. 113].

   Labor productivity at the macro level shows GDP per capita and GDP per employed (Table 4).

   Tab. 4 Dynamics comparison of GDP per capita between Ukraine and other countries (US Dollars) (calculated according to [15])

   The growth of labor productivity of any enterprise depends on many factors - both external and internal. All factors increasing productivity can be combined into four major groups.

   Technical and technological factors determined the level of development of production with the introduction of new technologies, using quality raw materials. An important factor is industrialization, which is to create a progressive industrial and technological base. This is a complex process which is new application of modern production technologies, introduction new software developments, the transition to mechanized assembly of various products and the like.

   Organizational factors aimed at creating such an organization of the production process, which eliminates the loss of working time and provides optimal load as all members of the staff and the basic production assets of the enterprise.

   Social-economic factors can be divided into factors of moral and material incentives. These include wage increases, bonuses and additional payments, the possibility of self-expression and artistic interest, career, training, etc.

   Natural conditions and geographic location produce and analyze primarily in the business of extracting and processing of some industries, such as affecting activity of the enterprise and its relationships with suppliers and customers [12, p. 113]. 

   There are several classifications of reserves growth in labor productivity.

   Firstly, they all fall into two groups: potential for improving the use of living labor (labor) and reserves of more efficient use of fixed and working capital funds.

   The first group includes all reserves, related to the organization of working conditions, increase workers efficiency, structure and placement of personnel, creation of organizational conditions for continuous work, as well as providing very high material and moral interests of workers in the study results.

   The second group of reserves includes better utilization of production capacity for power and time, and reserves more efficiently and fully use raw materials, components, fuel, energy and other working capital funds.

   Secondly, reserves on the basis of their capacity shares into holding and losses reserves.

   By the time of using reserves divided into current and prospective.

   Current provisions can be implemented without significant technological changes process and without additional capital investment, require prospective reserves restructuring of production, advanced equipment, capital costs and significant time for the preparatory work [2, p. 169].

   Reserves productivity growth in content is divided into three groups:

• Socio-Economic - identify opportunities to improve the quality of labor used;
• Logistical - determine the possibility of using more efficient means of production;
• Organizational and economic - identify improvement opportunities union labor, and capital goods.

Search and analysis of reserves based on productivity comparison of information received during the measurement and evaluation of progress level of productivity in the enterprise in general and on certain types of work including available information on the maximum possible level productivity in similar works. To find reserves of productivity it gains to encourage highly qualified representatives of various professions, possessing solidity and breadth of views and able to see the future. 

2.2 Reserves of increasing of labor productivity in agriculture.

   Direct factor that affects the productivity level is made of gross output and total number of employees. But there are several other factors that may affect the same level of labor productivity.

   In calculating labor productivity of agricultural production must take into account some features of evaluation of finished products. Thus, due to gross output value of indicators most accurate for assessing the efficiency of utilization of labor, but to assess the effectiveness of labor productivity index should be used above all. The difference between gross sales and in agriculture caused by internal turnover, which include most of the techniques in gross production, which is also used, and direction often got products for internal use (seed, feed milk to calves or pigs etc.).

   In addition, labor productivity can influence objective factors: natural climatic conditions in the place of development management position, the difference in fruitfulness of some land, which belong to the same enterprise, technology and staffing level of productivity, etc. A new factor that influences the level of productivity in a particular sector – is unemployment in the region in general and unemployment of agricultural workers separately. This figure is an additional factor motivating workers to improve the quality and quantity of production.

   Methods for determining its level of influence on labor productivity has not yet developed, but with some degree of accuracy it can be determined in each sector using data analysis for several years.

   In the economy of Ukraine agriculture remains extremely important part, which crucially determines the socio-economic situation of society and food security.

   Since Ukraine's independence in the village made deep structural reforms have been radically restructured and reoriented created organizational and legal structure of the market type on the basis of private ownership of land and property of the individual, family and collective forms of work organization. However, these critical processes require continued government support and stimulation [18, c. 181]. This necessity is caused by both objective features of the functioning of agriculture, domestic agriculture lag compared to developed countries for the technological level of production and the need to solve specific problems of the Ukrainian agricultural sector, accumulated over the years of post-development [19].

   But it is clear that with limited funds the state is facing a task most effectively use them in all directions, including on developing more effective agricultural policy. The purpose of research is the elaboration of methodologies for evaluating the level of state support and the effectiveness of the agricultural sector, which is used in the Organization for Economic Cooperation and Development (OECD) and the means to support the agricultural sector to meet WTO requirements.

   In world practice using a number of estimated parameters of state support agricultural sector:

   AMS (aggregate measure of support)

   NPC (nominal protection coefficient)

   EPC (effective protection coefficient)

   PSE (producer support estimate)

   CSE (consumer support estimate)

   TSE (total support estimate)

   However, the use of one or another of them depends on the specific measurement tasks. Thus, for purposes of WTO calculated this indicator as a measure of aggregate measure of support (AMS). This ratio shows the degree of influence on domestic policy conditions of international trade [12]. 
 
 
 
 
 

   Among the strategic directions of development of agriculture in Ukraine, according to the concept of the Ministry of Agrarian Policy, is funding for "green box":

• development of advertising and other marketing services, information for all market conjuncture of information, establishing an agricultural advisory service (demand by 2010 - 200 million UAH);
• reform of agricultural science to improve the efficiency of research and their practical implementation of (demand - 500 million UAH);
• development social development of rural infrastructure development towards non-productive use in rural areas (demand - 1 billion);
• adoption program to create new jobs, employment and retraining opportunities, develop programs to improve the overall level and profile of education in rural areas (demand - 500 million UAH);
• greening of agricultural production, environmental safety land use, environmental protection (demand - 150 million UAH);
• payments under regional assistance programs (demand - 50 million UAH);
• other (the need – 300000000 UAH.).

   Total demand for 2010 - 2,7 billion UAH, that in 1,4 times more than in 1994-1996, taken for the base period [12]. 
 
 
 
 
 
 
 
 
 

PART 3. THE ROLE OF LABOR NORMALIZATION IN THE REDUCTION OF LABOR INPUT AND RATIONAL USING OF WORKING TIME.

   Labor resources in agriculture are quite limited, that the same is true of labor productivity, the possibility of its growth, in fact, endless. The successful solution of various economic and social challenges facing the country, no other way except the accelerated growth of labor productivity, a sharp increase efficiency of all social production. Especially important is a provision for agriculture, where the entire product growth provided by increased productivity. This is a key issue of agricultural economics.

   Increasing productivity directly and immediately concerned with scientific and technological progress in the implementation of comprehensive intensification of production. [8, p.205]

   Intensification, and thus increase energy fund and equipment of work permit in the first live saving work, reduce its costs. In practice, it is expressed in the growth of cultivated areas and livestock animals to employees, reducing labor costs per unit of land area and the head of cattle, etc.

   Increased level of technical equipment of agriculture by improving the quality of work observance of optimum terms of their performance not only contributes to reducing the demand for labor, but also increase crop yield, animal productivity.

   When saturation of agriculture equipment, unfortunately, ignores the specificity of agricultural production: seasonality of many types of equipment, mobility workflows, moving equipment and cargo inside the farm, a large variety of machines, tools for the production of grain, potato and other crops, etc. . The practice of advanced economies and overseas experience suggests that capital-labor ratio in agriculture should not be lower, and about 2 times higher as compared with industry.

   One of the main ways of productivity growth is to accelerate the transition to the comprehensive mechanization and automation of manufacturing processes. Complex mechanization can dramatically reduce labor costs per unit of output.

   The main field work fully mechanized. Increased technical equipment of agriculture has contributed to the transition of processing a number of crops by intensive technologies. However, created by new technology does not always correspond to the proposed requirements is a result of disrupted production technology, allowed greater losses in crop harvesting. Slowly decreases the cost of manual labor.

   Accelerating of mechanization of labor-intensive processes – is one of the main socio-economic tasks for the near future. Must be to take actions to replace old equipment with new machines and more productive.

   In obtaining the maximum number of agricultural products at the lowest cost of labor at its unit plays an important role rational allocation of production across the country, especially in those natural areas where ceteris paribus offers higher productivity.

   The importance of agricultural production is increasing the intensity of labor that not only saves lives and public work, but also time.

With the growing intensity increases the value of agricultural minutes. Losing it in the hot period leads to greater losses that are not recompense for hours. It is therefore important to strive for a single minute of labor has not disappeared, gave additional products. [16, p.25]

   Among the factors of productivity growth is put strict observance of labor discipline. Each worker must keep production technology, complete plans, are set to standards, care for vehicles, equipment and material values ​​- food, seed, fuel, follow instructions from managers strictly adhere to the rules of safety, observe safety precautions.

   Strict compliance with labor discipline is especially important in large specialized firms that operate in cooperation, when arrhythmia in one chain can build the entire system, lead to huge losses. Providing autonomy involves increasing the responsibility of workers and employees for being late, absences and other misconduct, the lack of work, the demand of officials for the organization of production, working conditions and lives of people.

   Prerequisite efficient use of time during the day – it is science-based regulation. It promotes better utilization of manpower, fixed and current assets are an important factor in strengthening discipline. No rules can not be properly resolve the issue of cooperation and distribution, labor allocation and wages.

   Scientific organization of work involves the application of the most modern techniques and methods of operations, modern forms of cooperation and division of labor, the most rational allocation of people in the production process. One promising forms is the introduction of group methods, the use of various forms of contract for the lease conditions, etc. [17, p.370]

   Rent describes the economic relationship in which the tenant receives a fee for use for a certain period in the leased land, capital goods and other property.

   In groups that work on occupational prime contract, successfully combines the personal interests of employees with the general objectives of management.

   Singular importance in the improvement of productivity has a material interest in the results of labor. In the agricultural enterprises pay and financial incentives should be built, depending on quantity and product quality, reduce costs of its unit.

   Wages of workers must take hold in the final results of production.

   More important for increasing productivity along with the material has a moral incentive. For labor achievements in the development of agriculture exemplary award orders, medals, diplomas, and emphasis on other forms of promotion.

   Under conditions of continuous improvement and strengthening material-technical base of agriculture importance of having skilled workforce able to provide highly efficient use of complex machines and the introduction of other scientific and technical progress. Education, for example, with machine-III to class I increases productivity by 25-30%. [7]

   Greater role in reproduction and rational use of skilled labor plays better cultural and living conditions in rural areas. Fixing the people in the village, saving many villages connected with ensuring their stable, vibrant development solutions to many interrelated issues. Urgent practical terms is approaching the conditions of life in the village to the city, improve the social infrastructure. Decision housing problem should focus on building individual houses to suit the conditions, traditions, social and demographic features. It is very important to the development of roads and transport links, to enhance the ability of rural population and social and cultural potential of adjacent towns. Improved living conditions and life in rural areas requires considerable means, but they quickly recovered and are providing farm labor force, increasing the interest of workers in more productive use of resources.