The growth of productivity—output per unit of input—is the fundamental determinant of the growth of a country’s material standard of living. The most commonly cited measures are output per worker and output per hour—measures of labor productivity. One cannot have sustained growth in output per person—the most general measure of a country’s material standard of living—without sustained growth in output per worker.
In the United States, the Bureau of Labor Statistics calculates productivity measures for the private domestic economy and the private nonfarm economy, as well as for manufacturing, industries within manufacturing, and a few other subsectors. The private nonfarm economy accounts for about three-fourths of total GDP: it excludes agriculture,housing (which is entirely services and produced almost entirely by capital), and government. The private domestic economy includes agriculture. For subsectors of the economy, or for particular industries or firms, the measure of output is value added, not gross sales. The contribution to GDP (as well as gross domestic income) of any particular economic entity is gross receipts less purchased materials and contract services.
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