Understanding worker productivity (GS Paper 3, Economy)
Why in news?
- Infosys founder N.R. Narayana Murthy recently sparked a debate by urging young Indians to work 70 hours per week, citing Japan and Germany as examples of countries that grew because their citizens worked harder and for longer hours to rebuild their nations in the aftermath of the Second World War.
- He further noted that India’s worker productivity is one of the lowest in the world.
What is worker productivity? Is it the same as labour productivity?
- The only conceptual difference between the two is that the ‘work’ in worker productivity describes mental activities while the ‘work’ in labour productivity is mostly associated with manual 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 or change in Net Domestic Product (NDP) per worker in each sector (where working hours are assumed to be 8 hours per day).
- However, in certain types of services, especially ones involving intellectual labour, measuring the value of the output independently is very difficult, so the income of workers is usually taken as proxies to suggest productivity.
Productivity attribute of skill:
- Human capital (a more reductionist version of Human Development) including education, training, nutrition, health etc., enhances the ability of labour to become more productive, or churn out greater quantum of value within the same number of working hours.
- Based on this understanding, the reduction 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, while the value added to the economy could still be increasing, nominal wages remaining the same.
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, the relationship between the two could be quite complex.
- In 1980, India’s Gross Domestic Product was about $200 billion, which by 2015 exceeded $2,000 billion. However, 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%.
- 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 (he called this patrimonial capitalism) or to the ‘super managerial’ class who seem to be deciding their own exorbitant pay packages, quite arbitrarily, not related in any way to their productivity.
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.
- The question as to why over the years, beginning with the 1980s, the share of wages and salaries have declined while the share of profits has increased, perhaps is linked to the informalisation of employment, labour laws and the development and regulation regime becoming unfavourable to workers.
- Kronos Incorporated, a U.S based multi-national workforce management firm, has in fact observed that Indians are among the most hard working employees in the world.
- On the other hand, Picodi.com an international ecommerce platform has observed that India ranks one of the lowest in terms of average wages per month globally.
- 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 creating a false narrative.
Does having a high informal labour pool complicate the calculation of worker productivity and its correlation to GDP?
- Yes. 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 one find 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.
- However, 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.
Are the comparisons of India’s economy with those of Japan and Germany economies apt?
- 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 or their socio-cultural and political structures.
- India presents a unique case and any arbitrary comparison would only lead to dubious analytical inferences and fallacious policy prescripts.
- Enhancing social investments, focusing on exploring domestic consumption potential for increased productivity with a human centric assessment of development achievements is the way to a more sustainable and desirable outcome.
Adaptation Gap Report 2023
(GS Paper 3, Environment)
Why in news?
- Climate adaptation finance flows from public multilateral (like the World Bank) and bilateral sources (from a developed to a developing nation) declined by 15 per cent to around $21 billion in 2021, according to the 2023 Adaptation Gap Report.
- This dip, according to the United Nations Environment Programme (UNEP), is despite pledges that were made at the 26th Conference of Parties to the United Nations Framework Convention on Climate Change in Glasgow to double 2019 adaptation finance support to around $40 billion per year by 2025.
Key Highlights:
- Domestic budgets seem to be the largest source of funding for adaptation in many developing countries. They shell out between 0.2 per cent to over 5 per cent of their government budgets.
- Neither domestic nor private funding sources could help bridge the adaptation finance gaps, especially in low-income countries including Least Developing Countries and Small Island Developing Nations.
- Moreover, 85 per cent of countries have at least one national-level adaptation planning instrument such as a policy, strategy, or plan in place to cope with climate change.
- The current global adaptation finance gap (difference between needs and actual financial flows) is $194-366 billion per year.
Need of developing countries:
- The finance needs of developing countries are now 10-18 times as big as international public finance flows.
Source: Adaptation Gap Report 2023, UNEP
- For developing countries, the total cost of adaptation amounts to $215 billion per year. The cost of adaptation is the amount needed for planning, preparing for, facilitating and implementing measures to reduce harm or exploit beneficial opportunities arising from climate change.
- Adaptation measures such as river flood protection, infrastructure and coastal protection demand the highest adaptation costs in regions of East Asia and the Pacific as well as Latin America and the Caribbean.
Modelled adaptation costs:
- Though absolute costs in upper and lower-middle-income countries are much higher, adaptation costs expressed as a percentage of Gross Domestic Product are much greater for low-income countries (3.5 per cent of GDP) compared to lower-middle (0.7 per cent) and upper-middle (0.5 per cent).
- Modelled adaptation costs for Least Developing Countries and Small Island Developed nations are estimated at $25 billion per year (2 per cent of GDP) and $4.7 billion per year (0.7 per cent of GDP), respectively.
Way Forward:
- With extreme weather events battering countries across the world, adaptation financing is the need of the hour.
- Studies have estimated that every billion invested in adaptation against coastal flooding leads to a $14 billion reduction in economic damages.
- Similarly, when $16 billion per year is pumped into agriculture, the world can bring 78 million people from starvation or chronic hunger because of climate impacts.
ECI signs MoU with the Ministry of Education to bring Electoral Literacy to Classrooms
(GS Paper 2, Education)
Why in news?
- Recently, a Memorandum of Understanding (MoU) on electoral literacy was signed between the Election Commission of India (ECI) and the Ministry of Education.
Details:
- The MoU underscores the development of an institutional framework that seeks to incorporate electoral literacy formally into the school and college education system.
- This includes structured curricular, co-curricular, and extracurricular activities, all of which will help in preparing future and new voters for greater electoral participation and in effect strengthening democracy.
Salient features:
- Systematically integrating voter education and electoral literacy into the curriculum, starting from classes 6 to 12 in all schools.
- This integration will also extend to the curricular framework for all colleges and universities, tailored to suit different disciplines and credited accordingly.
- NCERT will introduce and update textbooks to include content on electoral literacy and will advise State Education Boards and other Boards to follow suit.
- Emphasises the orientation and training of teachers in effectively imparting electoral literacy in classrooms.
- Fosters a sense of responsibility within State Education Departments for establishing Electoral Literacy Clubs (ELCs) in schools and colleges.
- Encourages various activities to promote voter awareness among students, ensuring they are well-versed with the country's electoral system and encouraging them to register as voters and participate enthusiastically, with a well-informed and ethical approach, in every election.
- Seeks to evolve a robust mechanism to fulfil the aspirational goal of ECI to handover the voter ID card to every student immediately after their attaining the age of 18 years: an institutional framework to be created for online registration of eligible and prospective students who have attained 17+ years of age (after every qualifying date (1st January, 1st April, 1st July and 1st October of every calendar year) and during the annual summary revision of electoral rolls.
- Include electoral literacy in the curriculum for adult literacy and basic education, creating educational content focused on electoral processes for lifelong learning.
- Designate one of the rooms in every senior secondary school as the 'Democracy Room' for the regular display of voter education materials and the conduct of Continuous Electoral and Democracy Education (CEDE) activities throughout the year. A dedicated 'Democracy Room' will offer a platform for students to learn, discuss, and participate in various aspects of our democratic processes throughout the year.
- Developing critical thinking, communication, and leadership skills amongst university students to actively participate in university-level politics, including engaging in informed debates and discussions.
- Devise a system of credits for students taking part in CEDE to pursue higher studies;
- Providing standard ramps, accessible toilets, proper lighting and electricity on a permanent basis.
Background:
- The MoU is aimed at extending the ECI’s flagship Systematic Voters’ Education and Electoral Participation (SVEEP) in schools and colleges. The objective is to encourage universal and enlightened participation of future voters in elections.
- The MoU also aims to address the issues like apathy among urban and young voters, as a crucial aspect of Continuous Electoral and Democracy Education.
- This integration seeks to motivate future voters to participate more actively in elections, fostering responsible citizenship, and reinforcing our democratic system with informed and dutiful citizens.
- There were almost 297 million electors (out of 910 million) who did not cast their votes in General Election to Lok Sabha - 2019. The voting percentage was 67.4%. The Commission has taken this as a challenge to improve upon.
