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Workers Productivity UPSC NOTE

 What is workers productivity

  • In worker productivity describes mental activities.

  • Productivity of an activity is usually measured as the quantum of output value per unit of labour (time) cost at a micro level. 

  • At a macro level, it is measured in terms of the labour-output ratio.

  •  Also it can be states as,  change in Net Domestic Product (NDP) per worker in each sector (8 hours per day).

  • Especially ones involving intellectual labour, measuring the value of the output independently is very difficult.

  • The income of workers is usually taken as proxies to suggest productivity. 

  • By increasing the total number of working hours, productivity or the value of the quantum of work done per unit of labour (time) can increase. 

  • The only way this can happen is if the additional quantum of work done and output value produced has no commensurate pay. 

  • While this may seem normal for someone who wishes to maximise profits.

  •  it can otherwise be seen as a repulsively crude appetite for increasing profits at the expense of the workers.

Is there a direct link between worker productivity and economic growth?

  • While an increase in productivity made through any sector is likely to affect the value added and the accumulation or growth in the economy.

  • In 1980, India’s GDP was about $200 billion, which by 2015 exceeded $2,000 billion

  • In terms of the distribution of income across groups in India, Lucas Chancel and Thomas Piketty have shown that during 1980-2015.

  • Where the share in the national income of 40% of the middle income group and 50% of the low income group in India had decreased from 48% to 29% and 23% to 14% respectively.

  • The top 10% income groups share had increased from 30% to 58%.

  • 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%. 

  • Chancel and Piketty note that the increase in incomes or the prosperity of the richest people is not quite explained by their productivity. 

  • On the contrary, this prosperity is either linked to hereditary transfers of wealth upon which the rich are earning yields ,this is patrimonial capitalism.

  • General class seems to be holding a value, which in no way is either linked to productivity or value contributions based on skill and effort. 

  • This delinking of productivity and rewards is in fact one of the worries about the legitimacy of the capitalist class order in contemporary times which Piketty expresses.

Does India have one of the ‘lowest worker productivity’ in the world?

  • As incomes are seen as a proxy for productivity, there is a fallacious inference about productivity of workers in India being low. 

  • Beginning with the 1980s, the share of wages and salaries have declined while the share of profits has increased.

  • Perhaps this linked to the informalisation of employment, labour laws and the development and regulation regime becoming unfavourable to workers.

  • Indians are among the most hard working employees in the world. 

  • On the other hand, India ranks one of the lowest in terms of average wages per month globally.

  • While the Chinese are producing steel and selling them at a 40% lower cost, Indian entrepreneurs in this sector, are choosing to move out of higher end activities of manufacturing to the back-end activities of mining and smelting. 

  • Here it is the entrepreneurs who must take the blame for low productivity.

A high informal labour pool complicate the calculation of worker productivity and its correlation to GDP?

  • Yes is the one word answer.

  • 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.

  • Even in the formal manufacturing sector you find an overwhelming presence of MSME which are labour intensive. 

  • Studies have also found that there is a systematic process of cost cutting through wage cutting in these enterprises. 

  • Since high labour productivity combined with low wages fetch high profits, there can be no other explanation.

  • But for exploitation of the workers, for why this segment becomes the preferred mode of investment. 

  • In fact, large 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.

Comparisons of India’s economy

  • These comparisons don’t seem to enable serious analysis. 

  • Japan and Germany are neither comparable in terms of the size and quality of labour force nor in terms of the nature of their technological trajectories.

  • India presents a unique case and any arbitrary comparison would only lead to dubious analytical inferences.


  • Enhancing social investments, focusing on exploring domestic consumption potential for increased productivity.

  • A human centric assessment of development achievements is the way to a more sustainable and desirable outcome. 



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Learnerz IAS | Concept oriented UPSC Classes in Malayalam: Workers Productivity UPSC NOTE
Workers Productivity UPSC NOTE
Learnerz IAS | Concept oriented UPSC Classes in Malayalam
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