The following points highlight the top nine factors determining efficiency of labour. The factors are: 1. Racial Qualities 2. Climate 3. Income and Standard of Living 4. Working Conditions 5. General and Technical Education 6. Efficiency of Other Factors 7. Welfare Services 8. Motivation and Incentives 9. Economy of High Wages.

Factor # 1. Racial Qualities:

It is sometimes said that physical strength and mental advancement are mainly racial characteristics. About the truth of this re­mark there is, however, much room for doubt. With proper education and a suitable environment people of all races can become efficient.

Factor # 2. Climate:

The climate of a country exerts considerable influence on the productivity of labour. A temperate climate is particularly favourable for prolonged work. In such climatic regions labourers become very efficient. Hot and humid climates, on the other hand, produce lethargy and weariness among the workers and lower their efficiency.

The climate of India is hot and humid and is therefore detrimental to hard work. However, due to scientific advance, climate is no longer an insurmountable handicap to efficiency. For example, by installing air-conditioning plants in factories and offices, extremes of temperature can be avoided.

Factor # 3. Income and Standard of Living:


The income of a worker is an important determination of his efficiency and the standard of living is determined by one’s income. If a person’s income is not sufficient for getting food, clothing, shelter and some entertainment, his productive capacity is bound to suffer. In most parts of India the incomes of labourers are not sufficient for healthy and comfortable living.

In recent years, however, some attention has been paid to this matter. Steps are being taken to raise the level of wages. The Government is also spending money on labour welfare, housing schemes, etc.

Factor # 4. Working Conditions:

The efficiency of a labourer depends on the environment in which he works. A dark, cold and cheerless workplace is unlikely to encourage industrious and carefree effort. By contrast, well-ventilated, clean and pleasant working place, absence of unusually long hours of work, satisfactory employer-employee relations all go a long way to­wards increasing the productivity of a worker.

So, factories and offices must provide the workers with adequate air, light, drinking water, bath­rooms, cheap canteens, medical aid and other amenities. In the post-Second World War period there has been, in most countries, continuous improve­ment in the conditions under which labour performs its daily tasks.


Greater attention is now paid in places of employment (factories and offices) to such matters as ventilation, lighting, temperature and medical care. Most of the things are now carefully regulated by the State through official inspectorate.

In India the Factories Act of 1948 lays down rules regarding conditions of work inside factories. There is compulsory provision for adequate ventila­tion, lighting, etc. There are laws regarding the settlement of industrial disputes, provision of minimum wages in certain industries, social (unem­ployment) insurance, etc.

Factor # 5. General and Technical Education:

The efficiency of a labourer depends on his level of education. General education broadens a labourer’s angle of vision and makes him more intelligent. But, in order to acquire technical skill one must get the right type of technical education. As a matter of fact, in a developing country like India, the spread of technical education is an essential pre-requisite of industrial expansion.

As G. F. Stanlake has put it, “An educated labour force which has the benefit of a sound technical training is more effective than one which lacks these benefits. Modern industrial techniques require highly skilled scientists, engineers, econo­mists, accountants, managers, administrators, and so on”.


No doubt eco­nomic progress depends, to a large extent, upon the institutions which provide such skills and knowledge. Technical training is provided by a firm itself. However, these establishments can only do their jobs properly if and only if there is a well-established system of general education provided by the schools.

Factor # 6. Efficiency of Other Factors:

The efficiency of a labourer will increase if the other factors of production are of good quality. If, for example, agricul­tural lands are fertile, production per head is large. Similarly, better equip­ment and raw materials increase output per man hour. It is anybody’s knowledge that the worker using modern equipment will produce a large output.

In fact, an important determinant of labour productivity is the quality of the factors (land and capital) with which labour has to work. But providing labour with bigger and better machinery and more fertile land is not enough. Organisation and motivation are equally, if not more, impor­tant in raising labour productivity.

It is possible to achieve substantial improvements in labour productivity, even with the same amount of ma­chinery and labour employed, by improving the existing methods of pro­duction and proper reorganisation of men and machines.

Two such techniques of increasing productivity are work study and method study. These two procedures are designed to increase output by carefree and systematic analysis of the existing methods of production. From this point of view, Indian workers are in a bad position. The machinery and equipment in most Indian factories are old and obsolate.

The efficiency of a labourer is also dependent upon the skill of the organiser. The per capita output of labour may be higher if the organiser is efficient, farsighted and liberal in his outlook. In the advanced countries of the West, skilful organ­isation is one of the main causes of high productivity.

Factor # 7. Welfare Services:

In most modern mixed economies, like the UK or Sweden, the State provides a comprehensive social security system like a national health service. This makes medical care and attention available to all irrespective of the ability to pay.

National insurance schemes provide unemployment compensation, sick­ness benefit and various other supplementary facilities so as to ensure that even in case of eventualities people get some minimum level of income. These benefits are provided to ensure economic and social justice; but, while helping to maintain the health and moral of the people, they do make a positive contribution to the efficiency of the labour force.

Factor # 8. Motivation and Incentives:

Efficiency of labour can be increased if the worker has prospects of promotion, honour and reward. The desire to work better and improve oneself must be stimulated by providing sufficient incentives to work.


It is also possible to raise productivity by motivating the workers prop­erly. The most important type of motivation in today’s highly specialised mass-production systems is a high degree of job satisfaction. By introducing various incentive and bonus schemes it is possible to relate monetary reward more closely to effort. This is often used as a means of stimulating output.

Two other schemes of motivating workers are:

(1) Worker partici­pation in management (which seeks to bring the worker more prominently into the decision making process), and

(2) Profit sharing schemes (i.e., giving stock options to employees). Although the second method seems to be economically feasible the first method may be difficult to apply or imple­ment in practice.

Factor # 9. Economy of High Wages:


Finally, as Alfred Marshall has pointed out “High wages may result in a high standard of efficiency”. This is true if high wages increase the physical welfare (i.e., comforts and pleasure) of workers. Low wages, as in India, generally retard efficiency. In advanced countries like the USA, high wages conduce to high standard of efficiency by improv­ing the living standards of people.


Most of the factors mentioned above are not present in India. This is why the productivity of an average Indian worker is much less than that of an average American or Japanese worker. The fact is that production is the result of cooperation of all the factors of production. And, the effi­ciency of labour does not just depend on the personal qualities of the workers.

The truth is that, an average Indian worker is comparatively less efficient not on account of some inherent deficiencies, but due to various natural and environmental factors. The Indian climate is not quite suitable for hard work. An average worker gets tired sooner or later.


Moreover, he does not get sufficient food or medical care which is so much important for maintaining his physique. Furthermore, most workers get low wages and maintain a miserable existence. Moreover, there is not much air or light inside most factories. Such conditions are very depressing. Moreover, en­trepreneurial skill and other complementary resources such as capital are of poor quality.

Workers are also forced to put efforts beyond certain hours. Most of them are illiterate, superstitious, conservative and tradition bound. For all these reasons, one should not be surprised that the productivity of an average Indian worker is so low.