Since labour is a requirement for the production of goods and services it is clear that a growth in the labour force increases the capacity of the economy to produce goods and services. Perhaps of greater interest however is not the growth in the overall capacity of the economy to produce goods and services but the growth in the per capita production capacity of the economy. Growth of the per capita production is then a measure of the growth of the standard of living of the people in the economy. It must be strongly emphasized that this does not mean that growth of per capita production is a flawless measure of the growth of the standard of living. Many other things go into determining people's standard of living besides measured per capita production of goods and services in the economy.
Productivity is the output of the economy per unit of labour input.
In other words, if something can be done to make labour more productive then the standard of living as measured by production per capita must increase. Most economists agree that the best way to increase labour productivity is to increase the amount of capital used in production per unit of labour input. Here, capital is defined broadly to include not only physical capital such as computers, farm equipment, buildings, communication networks, etc. Human capital is human ability and information that is embodied in humans as a result of their education and training. Thus the more physical and human capital that labour has to work with the higher should be its productivity.