Statistics Denmark monitors the development of economic variables and measures e.g. productivity development. In general, it is one of the laws of economics that employee productivity determines the ability of employers to pay employees wages. The higher the productivity (per capita output), the higher the wages that can be paid. In a recession, such as Covid, companies are generally reducing their use of labor. The latest statistics show the following: In the third quarter of 2020, labor productivity growth in Denmark was 2%. This increase alone does not say much, but is considered to be able to reflect an increase in productivity following a contraction in labor input. a. Show the relationship between production and labor use in the short term and at the same time explain with a picture what can cause the growth of productivity. b. What is happening to marginal production at the same time? c. Show how wages develop if companies keep marginal costs fixed in the above circumstances (tips: wage relationship, marginal production and costs).
Statistics Denmark monitors the development of economic variables and measures e.g. productivity development.
In general, it is one of the laws of economics that employee productivity determines the ability of employers to pay employees wages. The higher the productivity (per capita output), the higher the wages that can be paid. In a recession, such as Covid, companies are generally reducing their use of labor. The latest statistics show the following: In the third quarter of 2020, labor productivity growth in Denmark was 2%. This increase alone does not say much, but is considered to be able to reflect an increase in productivity following a contraction in labor input.
a. Show the relationship between production and labor use in the short term and at the same time explain with a picture what can cause the growth of productivity.
b. What is happening to marginal production at the same time?
c. Show how wages develop if companies keep marginal costs fixed in the above circumstances (tips: wage relationship, marginal production and costs).
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