Human Productivity Index (HPI) - One-Page Calculation Standard
Estimate how much human labor demand is displaced by AI, expressed as full-time-equivalent (FTE) jobs, over a defined time window.
Core definition contractor reductions).
Backbone conversion:
HPI (FTE) = estimated FTE roles eliminated or not-backfilled due to AI (includes layoffs, hiring freezes/backfills avoided, and
HPI (FTE) = AI-Displaced Labor Cost ÷ Fully Loaded Cost per FTE
AI-Displaced Labor Cost (comprehensive numerator)
AI-Displaced Labor Cost = Σ(∆Hours × Blended Hourly Cost) × Realization × AI Attribution
∆Hours: hours no longer required due to AI (before->after). Blended hourly cost: fully loaded $/hour for affected roles.
Realization∈[0,1]: share of time saved that becomes reduced labor spend. AI Attribution∈[0,1]: share of change credited to AI vs.
other causes.
Fully Loaded Cost per FTE (denominator)
Fully Loaded Cost per FTE = Cash Comp + Benefits + Employer Taxes + Allocated Overhead
If you only have hourly costs: Fully Loaded Cost per FTE = Fully Loaded Hourly Cost × Annual Work Hours (e.g., 2,080).
Reporting rules (to keep HPI defensible)
• Specify time window (Q, FY, TTM). • Report Gross HPI and optionally Net HPI (Gross - new AI-related hires). • Publish
Low/Base/High scenarios by varying Realization & Attribution (and/or ∆Hours). • Label evidence tier: A=internal metrics, B=public
disclosures, C=industry proxies. • Avoid double counting (don't add the same function's layoffs and time-saved again).
Minimal algorithm
1) Pick window; list AI-touched workflows. 2) Estimate ∆Hours from volume×cycle-time, automation rate, or before/after throughput.
3) Assign blended hourly costs. 4) Set Realization & Attribution with documented evidence/assumptions. 5) Compute AI-Displaced
Labor Cost; convert to HPI (FTE). 6) Optional impact: Payroll Removed = HPI×Avg Cash Comp; Tax ≈ Payroll Removed×Effective
Tax Rate.
Recommended output format: "HPI = X FTE displaced (Low-Base-High), window, evidence tier, key assumptions for
∆Hours/Realization/Attribution."