Can higher productivity support higher wages?
Separate output per worker, total output, wages, and revenue available to cover other costs.
A fictional workshop sells every item for $5. Each worker produces the same selected number of items per day. Choose the workforce and daily wage. Revenue less the wage bill must still cover materials, equipment, rent, and other costs. It is not profit.
Print creates the fixed example worksheet below. “Print with teacher answers” adds a separate answer page. Use your browser’s Save as PDF option to download it.
Change one assumption.
Predict what will happen, adjust an input, then use the results to check your reasoning. Sliders work with arrow keys.
What the numbers mean
Each worker produces 8 items worth $40 in sales each day. $100 remains to pay materials, equipment, and other costs. This is not profit. Changing productivity does not automatically change the wage you selected.
Show calculation table
| Daily measure | Value |
|---|---|
| Items per worker | 8 |
| Total items | 80 |
| Revenue ($) | 400 |
| Wage bill ($) | 300 |
| Revenue after wages ($) | 100 |
Use the terms precisely.
Open a term to read its meaning, then use it in your explanation.
Labor productivity
Output per unit of labor input. Here it is items per worker per day.
Human capital
Knowledge and skills that can improve a worker’s productive capacity. Equipment and organization can also change output.
Wage bill
The total paid to workers, equal here to workers × daily wage.
Derived demand for labor
Employers’ demand for workers depends partly on demand for what workers produce. This exercise holds sales prices fixed and does not estimate a labor-demand curve.
- Labor productivity
- Output per unit of labor input. Here it is items per worker per day.
- Human capital
- Knowledge and skills that can improve a worker’s productive capacity. Equipment and organization can also change output.
- Wage bill
- The total paid to workers, equal here to workers × daily wage.
- Derived demand for labor
- Employers’ demand for workers depends partly on demand for what workers produce. This exercise holds sales prices fixed and does not estimate a labor-demand curve.
Work through the starting example.
These questions use the default settings, even if you changed the interactive lab. Show your calculations and explain one assumption behind your answer.
Starting inputs: Workers: 10 people; Items per worker per day: 8 items; Daily wage per worker: $30.
Name: __________________________ Date: ______________
- At the defaults, calculate output, revenue, the wage bill, and the amount left for other costs.
- Raise productivity to 10 and wages to $40, keeping 10 workers. Compare the amount left with the starting case. Did higher productivity force wages to rise?
- Reset, then double workers to 20 without changing productivity or wages. Explain total output versus productivity.
Try a new case
Hold workers at 10 and wages at $30. Find the productivity at which revenue just covers wages. Explain why the workshop would still need more revenue to cover other costs.
Exit ticket
What changed, what stayed fixed, and which term helps explain the result?
A 35 minute teaching plan
Use 5 minutes to introduce the question and vocabulary, 10 to predict and test inputs in pairs, 12 for the worksheet, 5 to compare explanations, and 3 for the exit ticket. Without devices, use the printed starting case and calculate changes by hand.
Look for a correct calculation, precise terminology, and an explanation that respects the model’s limits. For the open challenge, accept different cases when the arithmetic and reasoning support them.
Open teacher answer key
- Output = 10 × 8 = 80 items. Revenue = 80 × $5 = $400. Wage bill = 10 × $30 = $300. $100 remains for other costs, not necessarily profit.
- Output is 100, revenue $500, and the wage bill $400. $100 remains. Productivity creates room for this wage increase within the model, but the wage rose because you chose it; bargaining and market conditions also matter.
- Output rises from 80 to 160 items. Productivity remains 8 items per worker per day. Revenue and wage bills double; increasing employment is not itself a productivity improvement.
Teacher answer key: Jobs, wages & productivity
- Output = 10 × 8 = 80 items. Revenue = 80 × $5 = $400. Wage bill = 10 × $30 = $300. $100 remains for other costs, not necessarily profit.
- Output is 100, revenue $500, and the wage bill $400. $100 remains. Productivity creates room for this wage increase within the model, but the wage rose because you chose it; bargaining and market conditions also matter.
- Output rises from 80 to 160 items. Productivity remains 8 items per worker per day. Revenue and wage bills double; increasing employment is not itself a productivity improvement.
For the challenge and exit ticket, credit correct calculations, a clearly stated assumption, and precise use of a relevant term. Different supported examples are acceptable.
Where the model stops
All output sells at a fixed price, workers are identical, and productivity does not fall as employment grows. There is no hiring response, unemployment forecast, or full profit calculation.
Further reading: OpenStax: labor productivity. These fictional activities are original to World Economy. Reference links do not imply endorsement.
World Economy · losttofound.org/classroom/labs/jobs-wages. An adult educator may print or privately share this free activity with their own learners. Keep the source attached. No resale or public rehosting.