Labor
productivity equals the amount of output produced per unit of labor (ie,
man-hour or man-month). If labor productivity differs between two plants of
equal capital input, firms are likely to favor the conditions (such as
location) of the more productive plant. However, these decisions can cause
considerable controversy.
In
competitive labor markets, the wage rate is equated to the marginal product of
labor. Different workers have different marginal products, depending on their
capability of contributing to output (ie, their skills). However, some people
have zero or near-zero marginal products. These people will not have jobs. Economics
bails out on answering questions like “is this right” or “is this fair” because
these problmens cannot be analyzed economically.