Labour productivity (LP) is a crucial economic indicator that measures the output produced, typically represented as GDP, per hour worked or per worker. It serves as a reflection of how efficiently the workforce contributes to the overall economy.
Higher labour productivity signifies increased economic output with the same or fewer workforce numbers. This contributes to sustainable economic growth, elevates income levels, and enhances living standards. For instance, even a modest 10% increase in productivity can lead to a significant rise in per capita GDP and a reduction in poverty levels.
When comparing globally, India's LP ranks among the lowest. The capital stock available per worker in India is approximately 15% of that in China and less than one-third of Eastern Europe's. Notably, about 70% of India's productivity is derived from capital stock rather than workforce skills, indicating a heavy reliance on investments rather than efficient labor.
The formalization of employment is critical for enhancing productivity. Formal jobs often provide structure, legal protection, and better wages, which contribute to improved staffing systems and greater labor mobility. They also ensure fair working conditions and access to skill development programs.
Developing organized staffing systems is essential. These systems facilitate the alignment of skilled workers with suitable job opportunities, reducing friction in the job market. This leads to improved workforce utilization and stability.
To foster a productive workforce, three core capabilities are necessary:
While capital investment in infrastructure and technology is vital, it must be paired with skilled and efficient human capital to yield positive outcomes. Without skilled workers, machines and tools may remain underutilized and ineffective.
For India to enhance labour productivity sustainably, it must develop a future-ready, formalized, and skilled workforce. This requires comprehensive reform in education, structured staffing solutions, and stronger alignment of skills with market demands. The ultimate objective is to elevate productivity without relying solely on capital or labor expansion.
Q1. What is labour productivity and why is it important?
Answer: Labour productivity measures the output produced per hour worked or per worker. It is vital for economic growth, as higher productivity means increased output and improved living standards.
Q2. How does India's labour productivity compare to other countries?
Answer: India's labour productivity is among the lowest globally, with its capital stock per worker significantly lagging behind countries like China and those in Eastern Europe.
Q3. What factors slow down labour productivity in India?
Answer: Key factors include low job formalization, inadequate skills training, underemployment, and limited access to education and digital resources.
Q4. Why is formal employment crucial for productivity?
Answer: Formal employment provides structure, legal protections, and better wages, which contribute to improved staffing systems and working conditions.
Q5. What are the steps India is taking to improve productivity?
Answer: India is implementing initiatives like the National Education Policy and Skill India Mission to enhance skills and formalize employment, which are crucial for boosting productivity.
Question 1: What is the primary measure of labour productivity?
A) Output per hour worked
B) Number of workers
C) Total capital investment
D) Government policies
Correct Answer: A
Question 2: Which initiative aims to promote vocational training in India?
A) PM Vishwakarma
B) Skill India Mission
C) National Education Policy
D) Kaushal Vikas Yojana
Correct Answer: B
Question 3: What is a significant barrier to improving labour productivity in India?
A) High wages
B) Job security
C) Low formalization of jobs
D) Abundant skilled workers
Correct Answer: C
Question 4: Which of the following is NOT a component of job-specific expertise?
A) Technical knowledge
B) Vocational skills
C) Literacy
D) Industry-specific practices
Correct Answer: C
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