Economy

Longer Working Hours, Employee Productivity and the COVID-19 Economic Slump

Are longer working days necessary in our current situation?

Already buckling under the effects of the pandemic, working classes in India face an additional burden, that of the lengthening of the working day. Four state governments have passed orders that allow for the increase in working hours from 8 hours to 12 hours a day, a controversial order as global norms mandate an 8-hour working day – or a 48-hour work week. This move, as claimed in a notification by the Rajasthan labour department, will allow for firms to operate at full capacity while “…ensuring minimal presence of people in manufacturing and distribution.”

This idea, that longer working days are necessary in the current situation, finds a proponent in Infosys co-founder Narayana Murthy, who believes that workers would need to put in 60-hour work-weeks – 10 hours a day, 6 days of the week – for the next 2-3 years to help revive economic growth.

There’s no doubt that in some cases, but not all, longer working hours would increase labour productivity and output growth. But it is a move that shifts the burden disproportionately onto workers. Unless wages increase in proportion, it would worsen distribution by reducing the wage share. Moreover, unless investment rises, and businesses decide to create more jobs, having workers work longer hours might just lead to a reduction in employment.

A more suitable alternative is for the government to expand investment in the economy, which could be financed through measures such as a wealth tax.

Also Read: COVID-19 Will Usher in a New Normal. We Must Invest Accordingly.

Conditions of work

An increase in the working day would mean increasing productivity – measured in total output produced per worker – relative to a situation where working hours are not changed. Higher levels of productivity are essential for economies to generate larger output. Narayana Murthy’s proposal would imply faster rates of growth and larger output relative to one where workers see no increase in their working hours.

But what would this entail for workers? If workers are to be expected to work for longer hours, then they must be paid higher wages. While states like Rajasthan have mandated that workers who work longer hours must be paid overtime – which is substantially higher than regular wages – some states like Gujarat have not done so. In Gujarat, factories can pay for the extra hours at the same rate as before. Not paying overtime simply amounts to extracting more output and profits on the back of overworked labour without fair recompense.

If wages do not rise in proportion to the rise in productivity, it would imply a fall in the share of wages. This has actually been the case in most developed economies; since 1980, wages have largely remained stagnant, while productivity has been constantly rising, leading to rising inequality and falling wage shares.  

Even if wages were to increase relative to productivity, a situation where workers are expected to work longer hours for economic revival only entails an increase in growth and output, but not welfare. The human body is not a machine that can be replaced if it breaks down. Working longer hours will mean greater stress and lower quality of life for workers.

True development entails a productive economy that produces a high level of output, thereby generating high wages for workers, while also ensuring adequate leisure time. Policies that call for increasing working hours see workers as means to an end of increasing output and profits, and not as ends in themselves.

A worker pours molten iron from a ladle to make automobile spare parts inside an iron casting factory in Ahmedabad, January 31, 2019. Photo: REUTERS/Amit Dave/Files

Longer working hours and employment

In fact, there would be very little benefits to working classes from an economy of longer working hours. A basic economic identity states that the rate of growth of employment equals the output growth minus productivity growth. The implication is that if longer working hours result in workers producing more, then for a given amount of output that has to be produced, fewer workers would be required. An increase in working hours could mean a reduction in employment, if such a policy is institutionalised for the coming years.

Of course, the argument above assumes that output growth will not rise substantially. A counter-argument could be made that if workers work longer, and the economy is more productive, there would be new economic opportunities, businesses would invest more, and employment generation will be raised even as productivity and working hours have increased.

Such an argument is flawed. Output growth depends on how much investment is being carried out, and the amount of investment undertaken depends on the expectations of future profits to be made. With growth rates already falling prior to the pandemic, there is nothing to believe that investment and output growth will be high in the months and years to come.

During a recession, businesses make lesser profits and workers face unemployment. But the situation is not the same. Workers want to work longer hours, since they cannot survive without an income. But businesses make the amount of profits they expect to make. They would only undertake investments if they expect to make profits. In an economy with high unemployment and low demand, and under the persistent threat of a pandemic, businesses would never undertake large investments because they do not foresee the ability to make increased profits. They would be perfectly happy with the increased profits being made through the extension of the working day. And this brings the essential unfairness of such a policy into stark relief. Businesses earn greater profits than in a situation where working hours are limited, while labour would not see an increase in employment.

Even with normal working hours, the Indian economy could barely generate adequate employment. The years of high economic growth – from 2005-06 to 2010-11 – were a period of “jobless growth”, where output growth was high, but overall employment growth was negligible.

Following the twin shocks of demonetisation and GST, unemployment rose to a 45-year high in 2018. In such an economy, where informal work looms large and decent employment is hard to come by, where unemployment was at record levels even before the pandemic, extending working hours as a way to revive the economy would be disastrous for workers.

Also Read: COVID-19 Lockdown: In April, MGNREGA Work Crashed to Lowest in 7 Years

What’s the solution?

To truly revive the economy – assuming the pandemic is brought under control – government investment on a large scale is required to stimulate demand and increase the purchasing power of workers. Falling tax revenues indicate the limited ability of governments to rely on their own incomes, but resources could be generated through either borrowing, getting the Reserve Bank to print money, or by taxing wealth and using it for investment.

The wealth tax has been put forward by many economists as an important way for an economy to raise valuable resources. Wealth that lies idle – such as second or third homes, money in bank accounts, equity shares etc – do not contribute to the generation of demand and employment. If a certain part of this wealth is taxed, it can easily allow for the government to raise a substantial amount of resources. This can be used to expand government investment, raise aggregate demand, and generate output growth as well as employment. This would imply the burden of reviving the economy is borne by those who can truly bear the costs – wealth owners – as opposed to a labouring class that has already been battered by the effects of the pandemic.

Labour in India today suffers under multiple axes: low pay, bad working conditions, no job security etc. Outside of the protected formal sector, workers in the informal sector anyways work for more than 8 hours a day.

The idea that economic revival can only come about through extending the working day is a disconcerting idea that reduces working conditions across the board, when the task should be one of improving standards everywhere. Business cannot be practised as usual on the other side of the pandemic, and we certainly must not allow for hard-won rights to be sacrificed without compensation at the altar of output growth. 

Rahul Menon is assistant professor, School of Livelihoods and Development, Tata Institute of Social Sciences, Hyderabad.