Labour Productivity

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Labour Productivity

GS- III >> Economy >> Employment

Context: Recently, Infosys founder N.R. Narayana Murthy suggested that young Indians should work 70 hours a week to boost the country’s development.

Debate sparked by Narayana Murthy’s views:

• It delves into the concepts of worker productivity and labor productivity, the complexities of measuring productivity, and the relationship between worker productivity and economic growth.

Worker Productivity v/s Labour Productivity:

• Difference:
• Worker productivity, which differs from labour productivity only in the types of work involved, measures the output value per unit of labour time at a micro level.
• At the macro level, it’s evaluated through the labour-output ratio or changes in Net Domestic Product (NDP) per worker in each sector.
• However, in some services, especially those requiring intellectual labour, measuring output independently is challenging, so workers’ income often acts as proxies for productivity.
• Increasing working hours to enhance productivity implies that the additional work and output value produced don’t receive commensurate pay, which may benefit profits but adversely affect workers.
• Complexities of measuring productivity:
• Measuring productivity, especially in services involving intellectual labor, can be challenging.
• In such cases, workers’ income is often used as a proxy for productivity.
• Murthy’s assertion that increasing working hours enhances productivity can be flawed.
• Link between worker productivity and economic growth:
• The connection between worker productivity and economic growth is intricate.
• While enhanced productivity influences economic growth, it may not necessarily lead to improved prosperity for workers.
• Income disparities and skewed income distribution within India are highlighted.

Current working hours status in India:

• Current working hours of young Indians: According to data from the Time Use Survey conducted in India in 2019, young Indians aged 15-29 presently work an average of 7.2 hours a day in rural areas and 5 hours a day in urban areas.
• High working hours in Uttarakhand: In the context of urban areas, a state-wise comparison reveals that Uttarakhand leads the way, with its young population working an average of 9.6 hours a day.

Comparing India with Japan and Germany:

• Link between work productivity and longer hours:
• Murthy asserts that India’s low work productivity necessitates longer working hours to compete with countries like Germany and Japan.
• This is due to stark differences in labour force, technological development, and sociopolitical structures.
• After World War II, both these nations temporarily increased their average annual working hours to 2,200-2,400 hours (8.3 to 9 hours per day), but later, as labour productivity improved.
• They reduced working hours to about 1,400-1,600 hours (5.3 to 6 hours per day) by 2020.
• Comparing work hours and labor productivity:
• India, on the other hand, maintained annual working hours above 2,000 but experienced only a marginal increase in labor productivity, from $2 per hour to $9 in the same period.

• Implications of longer work hours:
• Longer work hours mean less time for sports and leisure activities.
• When compared to Germany and Japan, Indians allocate less time to sports and leisure.
• They spend more time on sleep and household chores.

Challenges in India:

• Income distribution disparities and productivity gains:
• Income inequality within India is explored, showcasing how the top income groups have disproportionately benefited from economic growth compared to the lower-income segments.
• It indicates that a considerable portion of society’s gains have disproportionately benefitted the top income groups, rather than the workers.
• Factors like labour laws and informal employment contribute to this phenomenon.
• The link between worker productivity and economic growth is intricate.
• While increased productivity contributes to economic growth, its impact on workers’ prosperity is less certain.
• Worker productivity and labor conditions:
• The rise in informal employment and the exploitation of workers in sectors like manufacturing and IT are linked to India’s low wages.
• Despite high labour productivity, low wages persist due to profit motives.
• Challenges in comparing labor productivity:
• Considering that 89% of the Indian workforce is engaged in informal employment, while Germany has only 4.2% and Japan around 8% in informal employment, challenges arise in comparing these nations’ labor differences in the nature of their labor force.

Way forward:

• Balancing work and life:
• Enhance productivity through technology adoption and technical education.
• Focus on output and invest in the right tools and resources.
• Promote growth and a promising future to motivate the youth.
• Prioritize self-care, including exercise, hobbies, quality sleep, and spending time with loved ones.
• Government schemes to enhance productivity:
• Skill development initiatives such as Skill India.
• Digital India.
• Make in India.
• Startup India.
• Ease of Doing Business reforms.
• National Industrial Corridor Development.
• Incentives for research and innovation.
• Tax reforms like the Goods and Services Tax (GST).

Source: Understanding worker productivity and how it relates to economic growth