Methodology for assessing labor productivity in agricultural production

Why labor productivity is becoming increasingly important on the farm

Labor productivity is the ability to produce a certain amount of output per unit of time. There is an objective law: as technologies develop and workers' skills improve, the labor time required to produce a unit of goods decreases. In agriculture, this indicator directly affects the economic sustainability of the enterprise.

• Increasing production volumes under conditions of staff shortages.
• Reducing the cost of production and operations, increasing the competitiveness of goods.
• The ability to systematically increase wages for employees.
• Freeing up labor resources and providing employees with additional personal time.

The production of any product involves not only the live labor of employees, but also past labor, embodied in machinery, fuel, and equipment. The economic essence of technical progress is that the share of manual (live) labor decreases, while the share of past (embodied) labor increases. At the same time, the total sum of combined labor costs per unit of production should decrease. It is the combined costs of live and embodied labor that determine the real cost of your products.

Assessment methods and specifics of calculations in the agricultural sector

To assess the level of labor productivity, natural and value-based indicators are used. Natural indicators are measured in kilograms, centners, tons, hectares, or units. They are indispensable when analyzing specific types of products, such as grain, potatoes, or milk. If it is necessary to evaluate the work of a multidisciplinary farm as a whole, different products are brought to a single value expression.

For the value-based assessment of production volume, current selling prices are usually used. If it is necessary to track productivity dynamics over several years, comparable prices of a base year are used. This eliminates the influence of price fluctuations and shows the real growth of physical volume of products. Also, in calculations, instead of gross output, gross income can be used — the newly created value excluding the cost of consumed means. The entire system of indicators used on the farm can be divided according to four main criteria.

• By units of product measurement — natural and value-based.
• By the form of indicator construction — direct (output per unit of labor cost) and indirect (time costs per unit of product).
• By the specifics of accounting for working time — gross time, net time, or average annual workers.
• By the completeness of accounting for labor costs — full and partial indicators.

Calculations take into account the direct working time costs of immediate executors in man-hours. Indirect labor costs are distributed in proportion to direct ones. Due to seasonality in agriculture, partial indicators are often used, which assess intermediate stages of work. This can be the volume of work performed per shift, day, or time spent on performing a technological operation even before the final harvest is obtained.

How to calculate labor intensity and avoid falling into a financial trap

To quickly manage field work, allocate machinery, and adjust daily output rates in a timely manner, economists use partial productivity indicators. They incorporate either only the volume of produced output or only the labor time costs. Without this data, it is impossible to calculate the real need for labor force by type of work in crop production and livestock farming. They are also necessary for monitoring the fulfillment of plans throughout the year and making quick management decisions.

The main indicator for assessing production efficiency remains labor intensity — the cost of man-hours per unit of production. Reducing labor intensity directly cuts costs and makes products more competitive in the market compared to analogs from other manufacturers. To assess this parameter, the labor intensity competitiveness coefficient (Cc) is used. It is calculated as the ratio of the labor intensity of your product (Tl) to the labor intensity of a competitor's product (Tc): Cc = Tl / Tc. The lower the resulting coefficient, the higher the competitiveness of the enterprise.

Planning the total labor input on a farm requires following a clear algorithm. First, economists calculate standards for each individual process. Only after that is it possible to proceed to general calculations for the entire enterprise.

1. Determine the labor intensity of a unit of work for each category of employees.
2. Multiply the estimated hourly rate of workers by the calculated number of working hours.
3. Calculate the planned total labor intensity as the product of standard labor costs and the planned production volume by product type, followed by summation.

In practice, there is always an opportunity to reduce labor intensity and associated costs by improving labor organization and eliminating downtime. However, it is important to remember that a reduction in labor intensity alone does not always mean an automatic increase in productivity. Time saved on performing technological operations must work for the business. Any reduction in time for cultivating a hectare or tending to one livestock animal should lead to an increase in production volumes.

Main factors and priorities for productivity growth

The level of labor productivity in agriculture depends on a complex set of external and internal factors. Some of them allow for reducing working time through mechanization and advanced organization of processes. Other factors work towards increasing crop yield and the productivity of livestock animals, reducing the specific share of labor costs in finished products. The significance of these factors changes during different periods of the industry's development.

The following key factors influence labor productivity on a farm:

• natural and climatic conditions;
• factors that increase crop yields and the productivity of livestock animals (fertilizer application, seed quality, provision of balanced feed);
• factors that reduce specific labor costs per 1 ha, 1 head, 1 centner, or 1 sq. m through the availability of machinery, its quality, and the nature of its use;
• educational and cultural level of workers, as well as the efficiency of their utilization in the enterprise;
• external economic and social factors;
• system of material labor incentives;
• level of specialization and production cooperation.

Historical experience confirms a direct connection between these factors and the final result. For example, after 1991, technical equipment in domestic agriculture decreased sharply, the condition of infrastructure and the quality of the herd deteriorated, and the volumes of fertilizer application and the level of wages decreased. This led to a prolonged decline in productivity. The situation was successfully reversed only with the start of active government support, including during the implementation period of the State Program for the Development of Agriculture for 2008–2012.

For stable efficiency growth, a modern agricultural enterprise needs to focus on key modernization areas. This requires a comprehensive approach — from technical renewal to changing the personnel motivation system. Six main priorities are identified for increasing labor productivity on a farm.

• Growth of capital-labor ratio and renewal of the agricultural machinery fleet.
• Improvement of the educational level and qualifications of personnel.
• Strengthening material incentives to increase worker motivation for high-productivity labor.
• Improvement of labor organization and elimination of unproductive time losses.
• Use of progressive energy- and labor-saving technologies.
• Increase in output per 1 ha and per 1 head of livestock or poultry.

When analyzing the level of labor productivity, growth reserves are identified — existing but yet unused opportunities. In terms of usage time, reserves are divided into current, realized within a year and not requiring significant additional costs, and prospective, associated with radical changes in technology, machinery, and organization, realized over a long period through capital investments.

Furthermore, there is a distinction between growth reserves for labor productivity by location (levels) of its use (workplace, department, industry, enterprise). The implementation of identified labor productivity growth reserves is carried out by a system of measures requiring both current and capital investments.

What types of labor are distinguished by economic theory? 2. What features of labor in agricultural production must be taken into account? 3. What do labor resources and the labor force have in common, and what is the difference between them? 4. What indicators characterize the use of labor resources?

How is the possible annual working time fund determined? 6. How is the average headcount of employees determined per month? Per year? 7. What is a labor balance, and for what purposes is it used? 8. Which indicator characterizes the seasonality of labor? 9. What are the main factors and ways for the rational use of agricultural labor resources? 10. What types of unemployment manifest in the labor market? 11. Provide the formula for determining the unemployment rate. 12. What determines supply and demand in the labor market? 13. How is the labor market segmented? 14. What condition for ensuring employee employment should be considered primary? 15. How is the efficiency of labor resource use increased? 16. What is the essence of the objective law of labor productivity growth? 17. How does the concept of "labor productivity" differ from the concept of

"labor productivity level"? 18. According to what criteria can labor productivity indicators be classified? 19. How is the labor productivity level determined? 20. How is labor intensity determined? 21. How are labor intensity and product competitiveness related? 22. What factors does labor productivity in agriculture depend on? 23. Name the priority directions for increasing labor productivity. 24. What is understood by reserves for labor productivity growth?