How Does Productivity Growth Affect The Economy?

How Does Productivity Growth Affect The Economy?

Productivity growth, by definition, is the increase in the value of goods and services produced by the average worker. How does productivity growth affect the economy? Productivity growth can accelerate economic growth. That is, the economy grows because the output per worker increases. Productivity growth can also boost real wages and improve standards of living. However, productivity growth can also result in inflation and unemployment because output will increase faster than workers’ ability to produce it..