Higher wages lead to higher productivity

Productivity is one of the very rare concepts of the world on which there is a consensus on even a broad base. You could be a policymaker, an investor, a corporate executive, or just a random person talking to his friends about the needs and wants for a better future, and in all cases, you would agree that increasing productivity is essential for a prosperous future that has the potential for growth and competitiveness.

Interestingly, this concept happens to be correct at all economic levels of life ranging from an individual level, the company level and then all the way to the national level. It is agreed that productivity enhancement is necessary but how to raise productivity remains debatable.

Economists are often laughed at for complicating the simplest of things, so it comes as shock when they give a simple suggestion on how to raise productivity that is to increase wages.

Productivity can be defined as the output per each person. In the field of economics, the output can be measured as the Growth Domestic Product i.e. GDP; and the GDP, in turn, can be defined as the number of working people multiplied by the number of wages that they receive, i.e. GDP is the product of persons and wages. So recalling the definition of productivity (i.e. GDP divided by persons) we get: Productivity (i.e. persons times wages) is equivalent to the wages. Now speaking in mathematical terms, as persons are both in the numerator as well as the denominator, hence they cancel out leaving with the result declared by the economists that productivity depends on wages. Greater the wages, greater will be the productivity. And since the result is proved mathematically, it is simple and cannot be doubted.