Understanding Worker Productivity
Source: The Hindu, November 3, 2023
The co-founder of Infosys, N.R. Narayana Murthy, recently ignited discussions by suggesting that to foster economic growth, young Indians should consider emulating the post-World War II work ethic of countries like Japan and Germany, which involved laboring up to 70 hours a week. He underscored his point by referencing the low productivity rates of Indian workers in comparison to global standards.
Understanding Worker and Labor Productivity
Worker productivity involves mental tasks, while labor productivity typically refers to manual work. At a basic level, productivity measures the output value per unit of labor time. On a broader scale, it’s gauged by the labor-output ratio or by tracking changes in Net Domestic Product (NDP) per worker in various sectors, assuming a standard eight-hour workday.
- Measuring Productivity in Intellectual Services: When it comes to intellectual services, it’s tough to measure output value separately. In these cases, worker income often serves as a productivity indicator.
- Assessing Mr. Murthy’s Statement on Productivity: Mr. Murthy’s claim suggests that more working hours equate to higher productivity. However, this idea is questionable. Increased productivity is only valid without corresponding wage increases. Prioritizing profit over worker compensation can be seen as exploitative.
Enhancing Productivity
- Skill Over Time: Productivity is more about skill than the hours put in. When people learn more and take care of their health, they do better work without needing more time.
- Economic Benefits: Even with fewer work hours, well-trained people maintain or improve a company’s value. At the same time, they enjoy more free time and a better life.
- Wages and Value Creation: The economy can grow even if people work less. With the same pay, employees’ quality of life gets better, and the value they add to work does not decrease.
Also Read | Financial Stress: A Major Driver Of Female Labour Force Participation
Economic Growth and Income Inequality in India
- GDP Growth vs. Income Distribution: From 1980 to 2015, India’s Gross Domestic Product (GDP) grew from about $200 billion to over $2,000 billion. However, this economic growth did not benefit everyone equally.
- Disparity in Income Shares: The income share for India’s middle and lower classes fell significantly. The middle 40% saw their share drop from 48% to 29%. The lowest 50% experienced a decrease from 23% to 14%. In contrast, the top 10% saw their income share surge from 30% to 58%.
- The Wealth of the Richest: The increase in wealth was even more pronounced at the very top. Those in the top 0.01% saw their incomes skyrocket by 1699%. The top 0.001% had an astonishing 2040% increase.
- The Source of Wealth for the Richest: According to Chancel and Piketty, this wealth spike among the rich cannot be solely attributed to productivity. Instead, factors such as inheritance and the ‘super managerial’ class play roles. Some of this elite group appear to set their own high salaries without clear ties to their productivity.
Worker Productivity in India
- Misconceptions About Productivity: Income is often mistaken for worker productivity. This misconception implies that Indian workers are less productive. However, this link is flawed. The real issue may lie with changing laws and economies.
- Wages Versus Effort: Amidst these discussions, Kronos Incorporated highlights Indian employees as some of the most diligent globally. In contrast, Picodi.com notes that India’s average monthly wages are among the world’s lowest. Contrary to Mr. Murthy’s claim, hard data does not support the idea that Indian worker productivity is low.