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UNDERSTANDING WORKER PRODUCTIVITY AND

IT’S RELATION TO ECONOMIC GROWTH
THE CONTEXT: Infosys chairman N.R.Narayan Murthy sparked a debate by urging Indians to work 70
hours per work for economic development of the country. He cited Japan and Germany as examples
of countries that grew because their ci zens worked for longer hours to rebuild their na ons in the
a ermath of the second world war. This ar cle provides a comprehensive analysis of worker
produc vity and its intricate connec ons to economic growth from the UPSC PERSPECTIVE.

DEMYSTIFYING PRODUCTIVITY
 Produc vity of an ac vity is usually measured as the quantum of output value per unit of labour
( me) cost at a micro level. At a macro level, produc vity is measured in terms of the labour-
output ra o or change in Net Domes c Product (NDP) per worker in each sector (where working
hours are assumed to be 8 hours per day).
 The only conceptual difference between the worker produc vity and labour produc vity is that
the ‘work’ in worker produc vity describes mental ac vi es while the ‘work’ in labour
produc vity is mostly associated with manual ac vi es.
 In certain sectors, par cularly those involving intellectual labour, evalua ng the value of output
can be inherently challenging. As a result, worker produc vity is o en approximated based on
worker income, which can create complica ons when a emp ng to correlate increased working
hours with higher produc vity.
 Also, produc vity is not just about me but it is about skill and inves ng in educa on, training,
health, and other aspects of Human Capital, workers can become more efficient and create more
value in the same amount of me.
 So, working fewer hours doesn't necessarily reduce output but it can actually improve workers'
quality of life. The economy can s ll grow, even if nominal wages remain the same, as long as
workers become more skilled and produc ve.

THE FALLACY OF INCREASED WORKING HOURS

 In the era of technology, where a host of tools are available to enhance work produc vity, Mr.
Narayana Murthy proposal seems like slavery in today’s career context.
 Research suggests increasing workload can s mulate a person to be more decisive, crea ve and
effec ve up to a certain point. But, if the workload increases further, the person’s efficiency at
work begins declining and the person feels overburdened and eventually burns out.
 In certain types of services, especially ones involving intellectual labour, measuring the value of
the output independently is very difficult.
 Here, the income of workers is usually taken as proxies to suggest produc vity. Therefore, the
statement by Mr. Murthy, which conveys that by increasing the total number of working hours,
produc vity can increase, looks fallacious.

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 The Yerkes and Dodson curve, popularly known as the Stress curve, demonstrates
that when there is no pressure or no stress, a person tends to get frustrated, bored
and has less mo va on to do any work.
 The person’s performance will be poor, and produc vity will be low but as the
pressure, workload or the demand on the person increases, the person becomes
s mulated, alert and as the demand increases further, the person becomes
decisive, crea ve and effec ve.
 If the demand increases further, however, the person’s efficiency at work starts
declining and the person feels overburdened.
 The person would then have difficulty concentra ng, become indecisive, irritable,
anxious and fa gued. If the demand remains high for many days, the person
becomes exhausted and gets burned out.

 High labour produc vity combined with low wages fetch high profits, which can lead to
exploita on of workers. Hence, this increasing working hours seems only as crude appe te for
increasing profits at the expense of the workers.
 It is only a thinly veiled endorsement of more inhuman exploita on of the Indian working class.
Forcing employees to work longer hours would not only lead to physical and mental exhaus on
but also infringe upon their fundamental rights.
 Hence, it can be concluded that produc vity in a more sophis cated usage is an a ribute not of
me but of skill. Human capital including educa on, training, nutri on, health etc., enhances
the ability of labour to become more produc ve within the same number of working hours.
 Based on this understanding, the reduc on in the number of working hours does not hamper
the value of output produced, but in turn enhances the leisure and quality of life of workers in
real terms.

WORKER PRODUCTIVITY AS AN ECONOMIC

CATALYST AND INCOME INEQUALITY

 While an increase in productivity made through any sector is likely to affect the value added
and the accumulation or growth in the economy, the relationship between the two could be
quite complex.
 Broadly speaking, produc vity is a measure of the efficiency with which resources, both human
and material, are converted into goods and services. Besides land and capital, labour
produc vity plays a crucial role in deciding the rate of economic growth.
 If growth of economy is taken in the context of prosperity of workers, there seems to be
paradox. For example, in 1980, India’s GDP was about $200 billion, which by 2015 exceeded
$2,000 billion.
 An analysis shows that from 1980 to 2015, the share of the na onal income for the middle-
income group (40%) decreased from 48% to 29%. The share of the na onal income for the low-
income group (50%) decreased from 23% to 14%. The top 10% income group's share increased
from 30% to 58%.

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 This effectively means that the income groups in the bottom 50% in India experienced an
increase in their income from 1980 to 2015 by 90%, whereas income groups in the top 10%
experienced an increase in income by 435%. The top 0.01% has had an increase of 1699%
percent from 1980 to 2015 and the top 0.001% have had an increase of 2040%.
 This income inequality and skewed distribu on of prosperity among different income groups is
not explained by produc vity but by poor labour laws, hereditary transfer of wealth, and
exorbitant pay packages.

THE INDIAN PRODUCTIVITY PARADOX

 As incomes are seen as a proxy for produc vity, there is a fallacious inference about produc vity
of workers in India being low.
 Interna onal Labour Organiza on (ILO) reveals that Indians are already among the hardest
workers globally, dedica ng an average of 47.7 hours per week per employed individual as of
2023. But, India ranks one of the lowest in terms of average wages per month globally.
 Also, 70-hour work weeks are not en rely uncommon in certain sectors. Though, stretch hours
are not so much of a norm in the IT industry, whereas, in specific roles such as sales within
banking, financial services and insurance, fast-moving consumer goods, and pharma sectors
these stretch hours are seen more like a norm.
 As the debate rages on, it's worth no ng that an analysis of ILO data alongside corresponding
GDP (Purchasing Power Parity) per capita figures reveals an intriguing pa ern.
 There seems to be an inverse correla on between prosperity and weekly working hours,
meaning that countries with higher per capita GDP tend to have shorter working hours.
 Take, for instance, India, which boasts the highest weekly working hours among the top ten
global economies but holds the lowest per capita GDP. On the flip side, France, with the shortest
working week among these economies at 30.1 hours, enjoys one of the highest per capita GDP
figures at $55,493.
 Therefore, Mr. Murthy’s statement does not seem to be backed by facts. It seems to be part of
an effort to push further labour reforms unfavourable to the workers by crea ng a false
narra ve.
 Beginning with the 1980s, the share of wages and salaries have declined while the share of
profits has increased. It is linked to the informalisa on of employment, labour laws and the
development and regula on regime becoming unfavourable to workers.
 India is also grappled with complex land and labour laws. Workers in unorganized sector are not
covered by labour regula ons and social security.
 There is a need to encourage formaliza on of the labour force by reforming labour laws, easing
of industrial rela ons and ensuring of fair working condi ons and social security. States should
ease labour and land regula ons par cularly speedily implemen ng Fixed Term Employment
(FTE).

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THE INFORMAL LABOUR CONUNDRUM

 Informal employment in both the unorganised as well as the organised sectors has been on the
rise through the course of economic reforms. The dubious claim of increased formalisation has
been limited only to bringing activities under the tax net. This has however had no impact on
improving labour standards or working conditions.
 For example, Gig workers, who are not even considered “employees” by the platform
companies they work for, do not even have defined “work-hour” rules. Most gig workers to
make ends meet, routinely work over 12 hours a day.

 Tanveer Pasha, president, Ola and Uber Drivers and Owners’ Association, said on
average most cab drivers work over 14 hours every day.
 Many work even over 18 to 20 hours. Hundreds of cab drivers sleep in cabs for a
few hours and resume working again.
 We are considered self-employed as we do have the freedom to turn down a ride
or a delivery. But that freedom is very notional, as we are forced to take up
assignments beyond 12 hours a day in our struggle to make ends meet,” he said.

 Ethnographic studies of India’s informal sector show that in some of its segments, unorganised
workers are already working long hours at very low wages and without any such protection.
 The high informal labour pool in India complicates the calcula on of worker produc vity and its
correla on to GDP. Informal workers are not covered by official sta s cs, making it difficult to
measure their contribu on to the economy. Informal workers are o en employed in low-
produc vity jobs, which can drag down the overall produc vity figures.
 Here, the challenge is to activate the long arm of the law to ensure acceptable working
conditions that encompass fewer hours, higher wages, and more equipment to lessen the
physical burden of labouring.
 Even in the formal manufacturing sector there is an overwhelming presence of Micro-Small-
Medium Enterprises (MSME) which are labour intensive.
 Studies have also found that there is a systematic process of cost cutting through wage cutting
in these enterprises. Here, high labour productivity is combined with low wages fetch high
profits led to exploitation of the workers.
 In fact, number of large-scale corporations have been found to outsource and sub-contract
production to these smaller units, in India as well as globally. This is true with the IT sector as
well.

ANALYZING INDIA’S POSITION AGAINST GLOBAL BENCHMARKS

 Germany and Japan had experienced a decline in their workforces due to greater mortality, both
from combat and the bombing a er second world war. So, when it came to rebuilding these
economies, the demand for labour was abnormally high. In the case of west Germany, there was
the Marshall Plan by which the United States had assisted the country’s revival.

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 South Korea too was recovering from a war, though a different one, and its resurgence was
supported by considerable foreign aid received from the U.S.
 Prior to the resump on of produc on, these ci es would have had to be cleared of rubble, a
task requiring massive deployment of labour given the scale of the devasta on.
 However, a poli cal aspect beyond finance, common to all these three countries, is a strong
na onalis c element that is likely to have accompanied their post-war reconstruc on.
 There is insufficient recogni on of the fact that the manufacturing success of the east is
underpinned by prior success in agriculture.
 The paths of technological development in these countries vary greatly. Japan and Germany are
known for their advanced technology and innova on, while India may have a different focus,
including IT services and so ware development. These differences can lead to varia ons in
economic performance.
 India, Japan, and Germany have their own unique socio-cultural and poli cal structures. These
differences influence economic policies, regula ons, and societal expecta ons, making direct
comparisons challenging.
 India presents a unique case and any arbitrary comparison with others would only lead to
dubious analy cal inferences and fallacious policy prescrip ons.
 For example, Japan and Germany are neither comparable in terms of the size and quality of the
labour force nor in terms of the nature of their technological trajectories or their socio-cultural
and poli cal structures.
 India's labor force, in terms of size and quality, is dis nct from that of Japan and Germany. India
has a large and diverse workforce, but there are issues related to skills, educa on, and
employability that set it apart. Japan and Germany have more specialized and highly skilled labor
forces, which can affect their economic dynamics.
 India should avoid simply adop ng the Western model of a 35-hour workweek. Instead, there is
need of finding a golden middle ground of 48 hours per week while ensuring the health and
fitness of employees are taken into account.

ARGUMENTS AGAINST 70 HOURS WORKWEEKWEE

INFORMAL  In India, major segment of economy is informal in nature which is
EMPLOYMENT another hurdle in reaping the benefits of increasing worker
produc vity.
 India's informal sector already experiences long hours; legal
interven on is essen al for be er condi ons, higher wages, and
improved labor rights.
EXPLOITATION OF  A prolonged work week can lead to the exploita on of the working
WORKERS class and deprives their rights and benefits.
 It can nega vely impact mental and physical health, resul ng in
stress, burnout, fa gue, sleep depriva on and other health
problems.
ISSUE OF  Worker produc vity depends on the amount of capital and the
PRODUCTIVITY quality of ins tu ons that support investment and innova on,
hence just increasing working hours will have no impact on
produc vity.
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 India’s average annual working hours stayed above 2,000 from 1970
to 2020, while the labour produc vity increased marginally from 2
dollars per hour to 9 dollars in the same period.
WORK-LIFE  Extended working hours can result in poor work-life balance,
BALANCE causing stress-related health problems for individuals.
 Long working hours limit the me individuals can spend on personal
and family life, poten ally straining rela onships.
 Extended work hours leave individuals with limited me for
educa on, hobbies, and self-improvement, hindering personal
development.
AGAINST LAW OF  According to Keynesian law of economics, the output is determined
ECONOMICS by aggregate demand of goods, and the demand for labour is
en rely dependent upon this demand.
 Firms that employ more labour while aggregate demand has not
increased will find themselves with unsold goods.
 So, an offer by workers to work longer hours will not ensure that
they will find employment so long as firms are unwilling to hire
them.
NOT ALIGNED TO  The high working hours that contributed to
INDIAN CONDITIONS other countries are unlikely to serve the purpose in Indian
condi ons.
 In the economic rise of the men oned countries, it was post-war
reconstruc on that provided the demand for greater output.
 89% of the Indian workforce is engaged in informal employment,
compared to just 4.2% in Germany and 8% in Japan. Hence
comparing these countries with India in labour produc vity in not
viable.
ASYMMETRIC  There is asymmetric growth of the working-age ra o in India as
DEMOGRAPHY major working popula on is likely to be concentrated in some of
India’s poorest states.
 The full economic growth can fully realized only if India is able to
create gainful employment opportuni es for this working-age
popula on.
LACK OF SKILLS AND  Most of the new jobs that will be created in the future will be highly
CAPITAL skilled and lack of skill in Indian workforce is a major challenge.
 India may not be able to take advantage of the opportuni es, due
to a low human capital base and lack of skills.
 Indian workers do not actually lag behind other countries when it
comes to clocking in long hours at work.
 But there is a lack of sufficient capital that can help boost their
produc vity. Among the top 10 biggest economies, India has the
highest weekly working hours and the lowest per capita GDP.

THE WAY FORWARD

 Employment genera on: The na on needs to create enormous jobs to absorb the addi on of
young people into the workforce. Promo ng business interests and entrepreneurship would
help in job crea on to provide employment to the large labour force.

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 Enhance human development parameters: India ranks 130 out of 189 countries in UNDP’s
Human Development Index, which is alarming. Therefore, health and educa on parameters
need to be improved substan ally to make the Indian workforce efficient and skilled.
 Use of global market to grow domes c economy: There is a need to use the global market
demand to grow the domes c economy for which India’s goods would have to be globally
compe ve. Here, the experience of South Korea is relevant. As most of the produced inputs
into produc on are available to all countries via trade, a country’s compe veness is
determined by the produc vity of its workforce. The strength of a workforce is related to its
health and skill.
 Expand the domes c market: There is a need to expand the domes c market which can
increase the aggregate demand. For example, there is need to cut cost of food produc on to
increase the real income of the Indian households. This would lead them to spend on non-
agricultural goods and services. This would generate the demand needed to spur produc on in
the rest of the economy.
 Skills Enhancement: There is a need to implement ini a ves like the Skill India Mission to
provide training and educa on to workers, enhancing their skill sets and adaptability to changing
job requirements.
 Enhance Produc vity through technology: There is a need to adopt digital technologies and
ar ficial intelligence to streamline processes, reduce manual work, and improve efficiency.
Invest in technical educa on to equip the workforce with the skills needed to leverage advanced
tools and systems.
 Strengthen Labour Rights: With the developed world veering towards strict enforcement of
labour standards across global supply chains, India needs to strengthen labour rights.
 Innova on and Infrastructure Upgrade: There is a need to develop be er transporta on
infrastructure to reduce commu ng me and increase accessibility to workplaces. For which,
there is a need to encourage research and development (R&D) ac vi es to drive innova on,
leading to improved products and services, and ul mately, increased produc vity.
 Collabora ve Culture: There is a need to promote a collabora ve work culture that encourages
teamwork, problem-solving, and knowledge sharing among employees.

Global Scenario
 While India debates longer working hours, some developed countries have been
experimen ng with four-day work weeks.
 In 2022, Belgium changed laws to give workers the right to work four days a week without
a salary reduc on.
 Several companies in the UK recently par cipated in a six-month trial scheme, organised by
4 Day Week Global which campaigns for a shorter week.
 At the end of the trial, 56 of the 61 companies that took part said they would con nue with
the four-day week.
 A report assessing the scheme’s impact in the UK found that it had extensive benefits”,
par cularly for employees’ well-being. Its authors argued it could herald a shi in a tudes.

THE CONCLUSION: India represents a unique case and any arbitrary comparison with other countries
would only lead to irra onal policy prescrip ons. There is a need to enhance social investments with
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focusing on exploring domes c consump on poten al for increased produc vity. A human centric
assessment of development achievements is the way to a more sustainable and desirable outcome. To
foster sustainable and equitable development in India, it is impera ve to adopt a comprehensive
strategy to navigate complexi es of Indian situa on effec vely.

MAINS PRACTICE QUESTIONS

1. Can longer working hours help India to become an economic superpower? Discuss the
significance of increasing labour produc vity in achieving higher economic growth in India.
2. India’s work produc vity is one of the lowest in the world. India's work culture must undergo a
significant shi to achieve desired economic growth. Comment.

SOURCES
 h ps://indianexpress.com/ar cle/explained/explained-why-is-indias-labour-
produc vity-falling-6100998/
 h ps://www.thehindu.com/business/Economy/understanding-worker-
produc vity-and-how-it-relates-to-economic-growth-
explained/ar cle67490775.ece
 h ps://www.thehindu.com/opinion/lead/making-sense-of-the-employment-
challenge/ar cle67555366.ece
 h ps://www.thehindu.com/news/ci es/bangalore/narayana-murthys-sugges on-
of-70-hour-work-week-draws-flak-across-board/ar cle67470980.ece
 h ps://www.indiatoday.in/business/story/indians-hardest-workers-globally-
average-work-hours-narayana-murthy-low-produc vity-2456567-2023-11-01
 h ps://www.thehindu.com/business/working-long-hours-without-sufficient-rest-
destroys-produc vity/ar cle67489984.ece
 h ps://economic mes.india mes.com/news/india/debate-over-70-hour-
workweek-in-india-heats-up/ar cleshow/104758056.cms

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