Journal of Economics and Development Studies

Notes on Productivity
Dr. Z. (Gene) Kane

Abstract
It is normally accepted that productivity is the key driver of growth. What could be more obvious than with increasing productivity we produce more goods and services and that makes the whole society richer and each of its member? Therefore, it is expected that members of society getting richer should receive fatter paychecks. However, the dynamics of productivity and compensation (wages and benefits) for American full-time workers for the last 16 years demonstrates that compensation grew 13% while productivity grew 38% (three times more). It would be interesting to support this empiric evidence with some theoretical construct. These NOTES demonstrate that continuous growth in productivity does not guarantee corresponding growth in public utility and that some productivityp* exists, which is most beneficial for society as a whole. In general, the technique used in these NOTES is inspired by considerations of Laffer Curve, which shows that there some taxation rate t* exists (between 0% and 100%) which delivers maximum for the Government Revenue. The subject matter of these NOTES –existence of an unknown optimal productivity p* is based on considerations of productivity p = 0 and p = ∞ (infinity). Intuitively we understand the zero productivity p = 0 as a situation of no production/no individual earnings: a non-producing individual earns no wages and benefits. The condition of the infinite productivity p = ∞ requires some considerations.

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