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INFORMATION TECHNOLOGY, PRODUCTIVITY GROWTH, AND REDUCED LEISURE: REVISITING “END OF HISTORY”

Debdas Banerjee

The highly productive Information and Communications Technology industry has sharply divided the opinions between those who believe that it represents a radical transformation of the capitalist order and those who believe that it is just more of the same. This study draws attention to a critical indicator: The balance of work and leisure in the daily life of a worker that has gradually evolved in the course of capitalist development is now tilting significantly against leisure despite productivity growth. Here, this paradox is explained by the quality composition of knowledge workers as well as—in contrast to what neoliberalism makes us believe—the growing hegemony of business organizations over that of market.

With the coming of the Industrial Revolution, work became separated from the home and the resolution of the work–leisure dichotomy a social agenda. The labor movement, in part, arose to battle against the long, rigid workdays imposed by the factory–system production. Their goal was to reduce the stan- dard workweek in order both to increase time for leisure and to prevent the feared technological unemployment. The shorter-hours crusade eventually led the governments to reform, establishing maximum hours of work, beginning with the English Factory Act of 1802 and more particularly the Factory Act of 1850. However, capitals accepted it as rise in labor productivity, or in other words increase in per-hour productivity, compensated for fewer hours of work in a day or week. During the so-called “Progressive Era” (1890–1913), several American states limited the work hours for women and children. The shorter- hours movement in the U.S. culminated in the passage of the Fair Labor Standards Act in 1938, establishing forty hours as a standard workweek as well as overtime pay premium to deter employers from exceeding it. Hence, as industrial capitalism matured over time, work hours became shorter, leaving more time for leisure, social interaction, and cultural pursuits. Workers earlier required fewer hours to spend at the workplace to earn the decent livelihood as their marginal value product increased.

To a great extent, technological progress has determined the trade-off point between leisure and income or work. As income reaches the level required for a comfortable standard of living, workers put forward greater demands (in labor

negotiations) for more holidays, longer vacations, shorter work weeks, fewer hours per working day rather than demanding ever higher wage rates associated with longer working hours.1 Following productivity growth, output market demand was met with increased employment. If a firm wanted more hours of work from its existing workforce it had to pay a higher hourly rate than the normal wage in order to give an incentive to the individual worker to reduce the leisure time. With higher overtime payment, the individual is motivated to give up some of the leisure time because in this way she will reach a higher utility. However, after a critical point, the incentives do not work; relatively low income no longer deters absenteeism of the workers. Scandinavian countries provide the best examples of this. This went on from the days of Industrial Revolution in Britain until the end of the “golden age” of capitalism in the 1970s, or until the beginning of the Information Age of capitalism, so to say.

The information and communications technology (ICT) was initially expected to take the work–leisure balance farther in favor of the latter, as the new technology appeared to have endogenized higher productivity. However, gen- erally the opposite seems to be happening. As the first shift (at the workplace) takes more time, the second shift (at home) becomes more hurried and ratio- nalized. The longer the workday at the office or plant, the more the workers feel pressed at home to hurry, to delegate, to delay, to forgo, to segment, to hyper- organize the precious remains of family time. That engages them in a third shift: noticing, understanding, and coping with the emotional consequences of the compressed second shift. On the whole, a social organization of time that served to synchronize the hours of work and leisure for much of the twentieth century is gradually disintegrating. The remarkable decline of average hours of work per worker over more than a century has reversed in the last two or three decades in all of the sectors of the economy that use computers in one form or the other. It is not yet clear what configuration of hours will ultimately emerge to replace the erstwhile standard workweek.

In the U.S. in 1977, men worked an average of forty-seven hours and women an average of thirty-nine hours a week. By 2002, the numbers were at forty-nine hours a week for men and 43.5 hours a week for women (Bond 2002). Couples, it is found, are working longer and longer hours in the U.S., the heartland of the new technology. Combined work hours for dual-earner couples with children rose by ten hours from eighty-one hours a week in 1977 to ninety-one hours a week in 2002 (ibid.). Clearly, today’s working couples have less time for their lives off the job. Naturally, they ask: Live to work or work to live?

Two explanations may be offered. First, on the supply side, individuals might have redefined the work–leisure trade-off point because the level of income that was earlier considered as “fair” is no longer so. It is no longer fair because either the social inequality has increased, thereby shifting the reference point of com- parison, or the same amount of work no longer, unlike in yesteryears, fetches the same amount of income. This of course goes against the basic understanding that wage is determined by productivity. Alternatively, in the era of shrinking social security, individuals are trying—with extra time of work—to earn a decent

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livelihood after their final withdrawal from the labor market. Hence, “work- leisure” has become a lifetime choice of an individual, and no longer remains a social agenda. In which case, however, the amount of work that had been adequate to fetch a fair superannuating seems to be no longer so even if labor productivity has gone up considerably.

Second, on the demand-side, in response to increased productivity, employ- ers perhaps prefer longer hours of work by the existing workforce—those that are specially trained on-the-job—as opposed to keeping working hours intact and increasing employment. To them, additional employment implies additional costs of training for the new recruits and other transactions costs. This however inadequately explains the ten to twelve hours of daily work in the call centers, or in the data-entry jobs requiring average skills. Perhaps the lack of legislation or institutional measures of the type that protected the stipulated working hours in the shops and commercial establishments explains the phenomenon.

Many scholars identify neoliberalism with casualization of the workforce. By overt as well as clandestine reforms in the existing labor laws, the workers have been stripped of job security, and even occupational status. Production as well as service organizations have been redesigning the occupations and designations that best suit the flexibilization program. This, in turn, takes away many stipu- lated rights designed for specific categories of workers. For example, the earlier “office clerk” is now designated as “junior management executive,” “supervisor” as “production executive,” “worker” as “knowledge technologist,” and so on, and eventually lose many of the rights the worker was entitled to so long as the worker was covered by the definition of “workman” under the Industrial Disputes Act in India, or similar other Acts elsewhere in the world.

It is also important to recognize the changes in the interface between market and organization. Regulated markets were thought by the neoliberals to have encouraged the dominance of organization over market. In other words, as argued, the increase in monopoly or oligopoly during the “golden age of capi- talism” was an offshoot of markets regulated by various institutional rules in most of the countries. Deregulation has made the world flat, as the argument goes. However, the supremacy of the production or service organization over the state has been gaining more solid ground despite the theoretical hypocrisy of neoliberalism. The employers are now armed with renewed sovereign powers over their employees to deprive them of productivity gains.

Our main inquiry is focused on the paradox: new innovations based on microchips have unleashed immense power for productivity growth yet the squeeze of leisure time, increased work hours especially of the knowledge workers and, more significantly, reduced pay are the dominant features of the economy cutting across developed and developing countries.

It is argued, in this article, that (1) transition from “disembodied” to “embodied” technology, and (2) the changing quality of workers, together tend to increase the bargaining power of the knowledge workers. However, the reforms in the existing labor laws have engaged them in a work condition that is only comparable to that in the premodern industrial society. In Section 2, the

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distinguishing features of the skills that isolated the knowledge workers from the rest have been classified. The emerging relationships between the state and the knowledge workers are analyzed in Section 3. The paradox is probed in Section 4. This is followed by a few concluding remarks in Section 5.

Skills That Rupture Solidarity

There are certain distinguishing characteristics of the new technology. First, since 1965, the power of computers as measured by the number of transistors per microchip has doubled every 18 months—a stupendous increase in the process- ing power. By the same exponential formula, a laptop that cost US$3,000 in 1990 could cost US$6 today (Negroponte 2004, 6). But, one would not find any US$6 laptop in the market. The problem is that the hardware in the computer is nonfunctional without the “logic structure of functioning” ploughed by human “brains” into it. This is a rather radical departure from the logic of mechanics.

The emerging Knowledge Economy (KE) based on new technology is characterized by the recognition of knowledge as a source of competitiveness, the increasing importance of science, research, technology, and innovation in knowledge creation, and the use of computers and the Internet to generate, share, and apply knowledge. In brief, KE refers to the use of knowledge to produce economic benefits. A knowledge-based economy relies primarily on the use of ideas rather than physical abilities and on the application of technology rather than the transformation of raw materials. A large part of the KE is known as the information technology (IT) industry that encompasses the creation, production, distribution, purchase, and sale of IT components, products, acces- sories, and packaged solutions in the areas of communication, memory, multi- media, networking, storage and computer hardware, software, systems, and peripherals complemented by a host of supporting and electronic services. This includes software services and products, and IT-enabled services (ITES). The latter, in turn, includes human resource-related services such as customer interaction, like call centers, financial processing and accounting, and data management.

The use of IT assets in different sectors in the U.S., currently the most extensive IT user in the world, gives a fair idea of the KE—the economy within an economy (Table 1). Computers are, in fact, heavily concentrated in the services sector in the U.S., and hence the impact of IT on the economic performance is more visible in the latter than in other parts of the economy. The goods-producing sectors—agriculture, mining, manufacturing, and construction—are much less IT-intensive.

Thus, a knowledge worker is anyone who works for a living at the tasks of developing or using knowledge—someone who primarily produces, distributes or manipulates information rather than engages in the manufacture of physical products or the delivery of tangible services. In other words, a knowledge worker might be someone who works at any of the tasks of planning, acquiring, search- ing, analyzing, organizing, storing, programming, distributing, marketing, or

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otherwise contributing to the transformation and commerce of information and those (often the same people) who work at using the knowledge so produced. Knowledge workers include those in the IT fields, such as programmers, systems analysts, technical writers, academic professionals, researchers, and so on. The term is also frequently used to include people outside of IT, such as lawyers, teachers, scientists of all kinds, and also students of all kinds.

One approach is to define knowledge workers by their occupation. Knowl- edge workers can also be classified according to the industry they are employed in. For example, the software industry requires people having software skills such as programming, web development, coding, designing, etc. On the other hand, the skill profile requirement for the ITES industry is very different; employees require linguistic skills and appropriate domain/functional experience.

The most striking growth, however, is that of “knowledge technologists”: computer technicians, data-entry operators, software designers, and analysts in clinical labs, manufacturing technologists, and paralegals (Drucker 2001). These people are as much manual workers as they are knowledge workers. In fact, they usually spend far more time working with their hands than with their brains. But their manual work is based on a substantial amount of theoretical knowledge, which can be acquired only through formal education, and not through an apprenticeship. They are not, as a rule, much better paid than traditional skilled workers are, but they see themselves as “professionals.” Just as unskilled manual workers in manufacturing were the dominant social and political force in the twentieth century, knowledge technologists are likely to become the dominant social—and perhaps also political—force over the next decades.

As regards the gender distribution, the share of computing machine opera- tors among women IT-occupation workers is significantly higher than among male workers. The rapid growth of the ITES sector would see a rapid increase in the number of women computing machine operators—the ratio of males to females is 35:65 among the employees in India (Nasscom 2004a). This is perhaps

Table 1. Information Technology as a Percentage of Stock of All Equipment and Software in Respective Sectors in the U.S., 2001

Sector %

Legal services 37 Wholesale trade 31 Business services 30 Education 27 Printing and publishing 20 Finance, insurance, real estate 18 Instruments 19 Retail trade 12.5 Health 12 Manufacturing, agriculture, electricity, gas and power,

transportation 1 to 8

Source: OECD 2004.

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not a chance happening of the supply and demand cross, but rather a outcome of a deliberate decision.

The status of the knowledge workers, especially in the much-hyped upper ends of the IT job market, was brought to light during the IT bubble burst in Bangalore (India) in 2001–2002. The crash for the first time had turned the spotlight on labor relations and employment conditions as well as on more intricate aspects of the KE. The silicon-collared “professionals” did not even have the solace of a golden handshake like their blue-collared brethren. The “pink slip” phenomenon had rudely awakened them to the inhuman and ruthless management practices of capitalism, making them realize that they too are wage laborers. Some of them were forced to do hourly rated work depending on its availability, something worse than the condition of day laborers. Like construc- tion laborers, they got a job only when there was work. Job-hopping, a favorite pastime, was no longer the “in” thing. With every (forced) job switchover the wages decreased unlike before. Many workers worked in this stifling atmo- sphere, where every moment they were made to feel that they were no longer wanted. The much talked about employee stock options became a joke after the crash, when the shares were not worth the value of the paper they were printed on.

Bargaining Power of Knowledge Workers Dwarfed

Under the (Indian) Shops and Commercial Establishments Act of 1961— which covers IT establishments—the working hours are limited to nine per day and fifty-one per week. Overtime work up to 120 hours in a year is permissible, which is to be paid for at double the ordinary rates. No worker is to work for more than five hours in a day without a rest interval. The Act provides for one-and-a-half holidays with pay each week. According to Section 8 of the 1961 act,

Where an employee works in any establishment for more than nine hours in any day or for more than forty eight hours in any week he shall in respect of such overtime work be entitled to wages at twice the rate of normal wages (Shops and Commerical Establishments Act, 1961).

In 1998, the government of India constituted the Council on Trade and Industry to the prime minister (with the prime minister as its chairman). The council subsequently constituted six Special Subject Groups, one of which was the “Knowledge-based industries.”2 The recommendations (in April 2000) of the latter task force contained a great deal on fundamental reforms in the Shops and Commercial Establishments Act of 1961 and Rules 1963. The main targets of the task force were: (1) restrictions on working hours (Section 7 of the act); (2) restrictions on period of work (Sections 9 and 10); (3) extra wages for overtime (Section 8); and (4) provisions of earned leave and sick leave (Section 15).

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The argument of the task force against Section 8 of the 1961 act was: “In view of flexi-time the payment at double the wage rates is not only inappropriate but also wholly unreasonable. It is, therefore, essential that the rule be made not applicable to KBCs [Knowledge-based companies]” (Council on Trade and Industry Subject Group 2000).

This initiative by the government of India unleashed the possibility of exploiting the employees beyond the hours of work defined by the 1961 act. It also allowed or gave “official” sanctions to bypass the obligatory payments for overtime work. Many of the Indian states subsequently amended their labor laws in that spirit. The Shops and Commercial Establishments Act became a passive instrument once the ITES in most of the states were granted the status of “public utility service” providers under the Industrial Disputes Act of 1947. In view of the understanding of 24/365 operations, various state governments have classified the ITES sector as “public utility service.” Most of the employees in ITES organizations have thus been pushed outside the purview of the regulating laws that are still applicable for the blue-collared workers.

Under Section 13 of the West Bengal Shops and Commercial Establish- ments Act of 1963, for example, the ITES companies now have an option of giving compensatory day off to an employee if the quantum of work exceeds forty-eight hours a week. Given the round-the-clock nature of work (which, strictly speaking, is not true in India) that is part of the ITES industry, the government exempts these establishments from the following provisions of the act: (1) Closing an establishment and granting of a weekly holiday under Section 5 (1) of the act, which would enable the ITES companies to run their operations on all seven days of the week; (2) Opening and closing hours under Section 7 (1) of the act. This exemption would enable the ITES indus- try to run a three-shift operation; and, (3) working hours’ stipulation under Section 7 (2) of the act, which will enable “flexitime” operations for its employees.

Moreover, many of the state governments in India have permitted self- certification, to the extent possible, of the IT industry in respect of the following Acts/Regulations: Payment of Wages Act, Minimum Wages Act, Contract Labor (regulation and abolition) Act, Workmen’s Compensation Act, Employ- ees State Insurance Act, and Payment of Gratuity Act, which so far protected workers against the whims of capitals. In other words, the IT firms have been allowed to remain outside the domain of regular and obligatory inspections by the government in matters relating to workers/employees.

In almost all of the countries having codified labor laws, it is obligatory for the employers to pay overtime pay premium for each hour beyond the stipulated hours of work. Of course, in most of the countries, this does not apply to an employee employed in a bonafide executive, administrative, or professional capacity. Being designated exempt from overtime protection generally requires meeting three tests: (1) the amount of salary paid must meet minimum specified amounts; (2) the employee must be paid a predetermined and fixed salary, not an hourly wage that is subject to reductions because of variations in the quality or

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quantity of work performed; and, (3) the employee’s job duties must primarily involve managerial, administrative, or professional skills.

Ironically, those days are over even though there is the euphoria “this is a wonderful time to be alive” (Gates 1995, 276). The U.S. Department of Labor adopted the regulatory changes in August 2004, which has almost taken away the rights of over six million workers to receive overtime pay for longer hours of work.

The labor force is lured into the IT-job market often by such designations as “administrative,” “professional,” “junior management” or “executive.” However, they are the first and easiest to fleece; they are made ineligible for overtime pay no matter how low their salaries are. Millions of these workers in the U.S. will work longer hours at reduced pay. Changes in the primary duty test and the redefi- nition of “executive”—in the changed regulation—will allow employers to deny overtime pay to workers who do very little supervision and a great deal of manual and routine work. An employee who can only recommend—but not carry out—the “change of status” of, say, the two employees that she “supervises” will become an “executive” and be stripped of entitlements to overtime pay even if she manages nothing more substantial than a team or grouping of employees.

Besides, it is estimated that, in the U.S., more than 900,000 employees without a graduate degree or even a college degree are designated as “profes- sional employees” and lose the right to overtime pay, even if their pay and status fall far below that of degreed employees. As many as 2.3 million team leaders redesignated as “administrative employees” with no supervisory authority will no longer be entitled to overtime pay even if they are line or production employees (Eisenbrey 2004). All in all, an estimated 1.4 million low-level, salaried supervisors will lose their overtime rights, along with 548,000 hourly supervisors, who could be switched to being paid on a salary basis and thus be denied overtime protection.

The final rule codifies the worst of the federal case law, which holds that a low-paid Burger King assistant manager, for example, with no authority to hire or fire subordinates, who spends 90 percent of her time running the cash register and serving customers, and does not have discretionary powers, can still be classified as an exempt executive and be denied any pay for her overtime hours. Many of the occupational categories in the IT sector, in particular, would in this way be deprived of their existing rights although they might not be earning enough for their family’s adequate nutrition.

It is important to recognize that lower salary groups are also increasingly being put outside the purview of overtime pay. Less-skilled employees are given the designation of “computer programmer” and are thus made gullible to their right to claim extra pay for extra work hours. In the U.S., there are about 288,700 programmers paid between US$455 a week and US$27.63 an hour who are affected by the changed rules. To note, a salary of US$455 per week means an annual salary of just US$23,660, which is about US$5,000 a year above the poverty level for a family of four in the U.S. Moreover, the exemption level is not indexed for inflation in the changed regulation; it will protect fewer and fewer workers over time.

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In India, unlike in the U.S., there is no official account available as to the occupational wage in the IT sector. However, a survey conducted among soft- ware professionals working in software firms and ITES in three representative cities, Bangalore, Delhi/Gurgaon, and Thiruvananthapuram (Abraham and Sharma 2005) reveals intriguing facts about the emerging labor market condi- tions such as high skill intensity, rapid skill obsolescence and continuous reskill- ing, and highly individualized and flexible nature of wage fixation.

The wage/salary per annum of more than 40 percent of the total workers/ employees in different occupations in the IT and ITES is less than or equal to that of a lower division clerk in a public office, while the minimum educational qualification required for the latter is substantially lower than that of the former. Moreover, while the office assistants in the government offices continue to enjoy the benefits of overtime pay, their brethren in the IT sector look to the elusive “future.” Further, the per capita annual income of about 12 percent of the software engineers was almost equal to that of a “traditional” jute mill worker, while 2.3 percent of them on the upper end earned more than 1.7 times the income earned annually by a senior professor in a postgraduate university department. In other words, the variability of salary/wage at the same level of skill and in the same production process is also enormous. This personalized character of the labor market is bound to happen when institutions shy away from setting the rules of the game in the market or fail to provide a level playing field for all the players.

What all these add up to is “longer hours and less pay” in those organi- zations that are exempt, by various ways, of many of the regulations that until recently gave protection to workers/employees against any unfair means of getting jobs done. Where has melted all those neoliberal sound bites of “open market”? In pure competition, the theory goes, wage is supposed to be equal to the marginal value product of labor (MVPL). The latter is the increase in the value of the firm’s output resulting from hiring one extra worker. In decid- ing about the level of employment, the firm compares the increase in costs from hiring one more worker with the increase in revenue, that is, it compares the wage with the MVPL. However, the basic assumption is that the firm can obtain as much labor as it wants at the current market wage (say, W0). So long as the MVPL exceeds W0, the firm should increase its employment level. If the MVPL is less than W0, the firm should reduce employment. Now, suppose the workers have acquired more skills, perhaps because of “learning by doing,” on-the-job training, or for some other reasons. So, there is a higher MVPL. Employment in the firm remaining the same, the MVPL curve will then move outward. So now the wage ought to be higher (say, W1), in which W0W1 is the economic rent (see Figure 1).

The central issue is the conflict in sharing this economic rent. The employer complains that the trade union and the conventional labor laws deter higher profits and thereby capital accumulation. Because, the union demands—as they are empowered to do so by the existing laws—a fair proportion of the produc- tivity gains. So, as a countermeasure, employment is no longer construed as a

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person engaged for a specific duration of time as dictated by labor laws. Follow- ing a positive economic rent, work hours increase instead of an increase in the number of workers. The hourly economic rent thus flattens out, so the claims of the workers are invalidated. This is simple arithmetic; the explanation is rather complex. Anyway, no one asks: What is there for the employers’ consortium like Nasscom (National Association of Software and Service Companies)?

Generally, the IT companies in India have a formal budget allocation for recruitment, which on an average is 7 percent of the total employee cost (Nasscom 2004a). However, a 7–14 percent reduction was reported in the allocated budget for recruitment, hiring, and orientation over the last couple of years. Further, 41 percent of the IT companies saw a significant workforce reduction (affecting 5 percent or more of the employees). In the ITES industry alone, 11.5 percent of the employees are affected (Nasscom 2004b). Neverthe- less, the rate of growth in the Indian IT industry continued to be positive (Nasscom 2004a). The conclusion is obvious: longer hours of work and less pay.

Moreover, there is infringement upon the freedom of the employees to move out for better pay and/or service conditions. The current attrition rate in the industry is estimated at about 25–40 percent (Nasscom 2004a). Because of the costs associated with attrition levels, including investment in employee training etc., as alleged, a number of Indian IT firms have colluded against workers and started taking measures to limit attrition. Some of these measures include: (1) nonhiring of applicants who spent less than a year at their previous workplace or those who have changed three jobs in two years; (2) blacklisting of agencies who are actively involved in poaching candidates; and, (3) ensuring that candidates produce official release letters from the previous employer at the time of their appointment (ibid.). The knowledge workers are thus made captive, a parallel of which one may find, so to say, in the tea or rubber plantations in the nineteenth and early twentieth centuries.

M V

P L

, w ag

W 0 E

MVPL

L* Employment

E' W 1

MVPL'

Figure 1. Wage, Productivity, and Employment.

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Decoding the Paradox

Information and Communication Technology-based network of computers, especially the personal computers (PCs), which was initially in the 1960s meant for the defense establishments in the U.S. to integrate the university research departments into a network, became available for mass use and application in the early 1980s. The ICT productivity-led resurgence has close similarities with the general-purpose technology that emerged in the 1920s in the form of the dynamo and the electrification of the industrial economy that drastically increased labor productivity and reduced fixed capital costs. It is important to recognize that, in the 1960s, ICT was not hailed as revolution. Thomas Savery (Britain) invented the steam engine in 1698. However, it very slowly came into industrial use only half a century later and became almost synonymous with the English Industrial Revolution. The productivity crisis of capitalism in the 1970s similarly unlocked tremendous economic possibilities for the ICT technology of the previous decades. The emergence of the microprocessor and the diffusion of the PC, with their immediate possibility of distributed information storage and processing, set the stage for a radical change under a set of economic and social preconditions. Semiconductors are getting faster, computer memories are expanding, and ICT prices are falling. Data transmission costs have fallen dramatically and continue to fall, bandwidth is growing, and Internet hosts are expanding and multiplying. Cellular phone usage is growing worldwide, adding to the pace and capacity for change and innovation.

The contribution of IT to aggregate productivity growth appeared to be disembodied initially.3 Rapid technological progress within the IT-producing industry itself raised the level of the general-purpose technology, and any firm could garner the benefits and make differences in competitiveness. Countries where the business sector has been quick in shifting resources toward the ICT industry and in adopting highly productive ICT equipment have been able to reap higher output and productivity growth rates (Cohen, Garibaldi, and Scarpetta 2004). In the latter half of the 1990s, things began to take new shapes. Productivity growth that embodies knowledge, know-how, and software assumed importance. Productivity improvement is no longer the property of just new capital invest- ment (cf. Solow 1960). And, market leadership rather depends to a great extent on developing distinguishing software and/or distinguishing computer programs.

Growth in labor productivity is an aggregate outcome of three factors, namely, capital deepening, increase in labor quality, and increase in total factor productivity (TFP) (i.e., that part of the output growth that cannot be explained by increase in either capital or labor but by technological change). Jorgenson and Stiroh (2000) show that TFP in the Information Age, especially during the latter half of the 1990s in the U.S., had been quite high and comparable to that during 1959–1973. Capitalism somehow has recovered from the crisis that it faced in the 1970s.

The repeat economic slowdown during 2000–2003, however, has challenged the emerging idea that the business cycle perhaps has come to an end, resulting

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from the spread of ICT. In the U.S., net stock (at current cost) of private fixed assets of the type “IT equipment and software”—in the nonresidential sector— increased at an annual average rate of 3.8 percent, from US$1,238 billion in 2000 to US$1,383 billion in 2003 (U.S. Department of Commerce, Bureau of Economic Analysis, Fixed Asset Table, 2005). Increase in “real” investments is particularly noteworthy in the context of rapidly falling ICT prices. The deep- ening of capital notwithstanding the economy experienced a slowdown.

There are two explanations to the investment–output “mismatch.” First, the distinguishing characteristic of investments in the IT sector is that it cannot be equated with the earlier manufacturing investments. The unrelenting require- ments of an increasingly short product–replacement cycle in the IT sector have complicated the productivity scenario. A large part of the outlays on fixed technology costs is written off quickly. The high rate of technological progress resulted in a corresponding high rate of obsolescence of fixed capital. For instance, in the year 1995 before Windows 95 was introduced to the market by Microsoft, a 486 PC with 4–8 MB of random access memory, much lower capacity hard disk drive than that required by Windows 95 operating system (OS), and a much lower color resolution of the video monitor, were the optimal mix of capital equipment. Within a span of just ten years, a series of changes in the OS—useful or useless—has been rendering the computer hardware includ- ing the video monitor obsolescent in quick succession. It is not that all those changes led to higher and higher productivity. But because the earlier software product support services are withdrawn, the consumers are rather forced to go in for the newer configuration of the hardware.

Those who expected miracles to happen out of this technology are at a loss. Although surging demands for new IT capital have boosted overall capital spending growth, the nation’s capital stock has not been growing at a similar rate. An estimate shows that 60 percent of annual corporate IT budgets go toward the replacement of outdated equipment and increasingly frequent product upgrades (Roach 1998). Besides, the underutilization of the capacity of IT capital stock in the economy has increased spectacularly.4

Second, in analyzing labor productivity, we have to go beyond the simple fact that the quality of labor (à la Gary Becker)—in the core IT sector—has vastly improved through formal education. The firm that tracks worker produc- tivity does so through fairly simple standards: hours per day or week on job, revenue or sales per employee, customer retention, and customer transactions per hour or day. Less popular, more industry-specific methods include measur- ing productivity by product cycles, net profit per employee, time from concept to working prototype, and factory output. The notion of comparing input with output is also pertinent for the software developer. The measure most com- monly used is: “size” as a ratio of “effort.” Size is normally measured using lines of code and effort per person days or months. Thus, productivity is equal to the lines of code per person months. The simplicity of the equation hides the problem of measuring effort. When a person states that they spent a day on the project it does not state whether this was 8, 12, or 16 hours. Many knowledge

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workers are now on the job much longer than the official data would suggest. The transition from industrial capitalism to “digital” capitalism, from the era of the dominating rule of the Factory Act to that of the Shops and Commercial Establishments Act, is also a passage from accounting for the work of the worker in terms of day(s) to hour(s)—the fearful broadening of the accountability of the knowledge workers.

However, increasing the productivity of knowledge workers is going to be far more difficult to achieve than previous productivity breakthroughs for blue- collar and agricultural workers. Revolutions were all about sustained productiv- ity growth in the creation of tangible products by improving the efficiency of tangible production techniques. “Increase the speed of the conveyor belt in the assembly shop, the productivity of the workers would automatically increase” is the bygone era. By contrast, the supposed breakthroughs of the Information Age hinge more on an intangible knowledge-based product that is largely the result of an equally intangible human thought process (Roach 1998).

The productivity growth in ICT manufacturing (say, computer hardware) is much faster than that in ICT using sectors (say, in computer software develop- ment) where labor input tends to be cerebral and much more difficult to replace with a machine. The Hicks–Marshall prototype of capital–labor substitution has thus become archaic in the KE. The limitations on boosting the cerebral effi- ciency of the knowledge worker have made it extremely difficult to raise their hourly productivity. At the point when ICT is introduced in an enterprise, one would find a leap forward in productivity, and then it flattens. The problem really is to sustain at least the initial rate of productivity increase. So, the rate of increase in output now depends on lengthening the working hours, given the number of employees. Thus, surfing the World Wide Web, performing after- hours banking, or hooking up to the office network from home, hotel, or airport waiting lounge have snatched larger time commitment from the knowledge workers. The latter has been legitimized by the reformed labor laws that bid farewell to the long-cherished democratic rights of the workers.

Conclusion

The specific nature of IT so far as the productivity part of it is considered has notionally strengthened the bargaining strength of the knowledge workers. But why the knowledge workers have not been able to resist the gradual erosion of the leisure time could be explained by (a) falling income per hour of work, and/or, (b) lack of State protection for the non-unionized workers.

In the U.S., the hourly wage rate in the IT sector is found to be highest among “Computer systems analyst and scientist” in the year 2003. However, the hourly wage rate for “Physics teacher, postsecondary,” “Lawyer and Judge,” “Sociology teacher, postsecondary,” “Teacher, college and university,” or “History teacher, postsecondary” was much higher than the “computer systems analyst” (USDOL 2003). If the hourly wage rate was proportional to hourly value addition in all the economic activities, the “computer systems analyst,” in particular, and the IT

211BANERJEE: PRODUCTIVITY AND LEISURE

occupations, in general, seem to be lagging behind many other knowledge workers as well as manufacturing occupations in terms of labor productivity. Based on the experience of the U.S. labor market, the disproportionality in the Indian labor market, especially in the IT sector, seems to have a converging trend and the wages afterwards would follow a downward curve as the supply situation of “specific skills” improve. Once the supply situation improves, which is very likely in the near future—which Nasscom predicts will take place in 2008—the wage differentials would automatically reduce and stabilize.

Further, Indian vendors are likely to face increased competition from global vendors. Some of the advantages global companies have over Indian companies include: established customer relationships, robust training models, security systems for data privacy, business continuity plans, and deeper understanding of client businesses and business environments, especially in the U.K. and U.S. (Nasscom 2004a, 75). Besides, the influx of new vendors in the Indian IT sector and the subsequent increase in competition, along with the shrinkage in the dollar-output market may cause significant price undercutting, leading to increasing pressure on margins, and, in turn, on the greatest source of added value in the industry, that is, the knowledge workers.

However, while many other knowledge (e.g., the teachers) as well as blue- collar workers would continue to enjoy many of the basic rights at work, the nonunionized IT workers including the knowledge technologists who see them- selves as “professionals” but not much better paid than traditional skilled workers, and the majority of whom are women, would remain deprived of collective representation. This whole situation reminds us of the plight of the factory workers in the early days of the English Industrial Revolution (Marx 1887, chap. 10, “The Working-Day”; Thompson 1963, chap. 6), and the his- torical path that the working class traversed over the last two centuries. Perhaps, there is no “End of History” (à la Francis Fukuyama 1992).

Debdas Banerjee is Professor of Economics at the Institute of Development Studies Kolkata, West Bengal, India. He is the author of Globalization, Industrial Restructuring and Labour Standards: Where India Meets the Global, published by Sage Publications in 2005. Address correspondence to Dr. Debdas Banerjee, Calcutta University Alipore Campus, Block A, 5th Floor, 1 Reformatory Street, Kolkata 700027, INDIA. Facsimile: +91 33 2448-1364. E-mail: debdas@ idsk.org.

Notes

1. There is the general agreement that the supply curve of labor by single individuals exhibits the backward- bending pattern, although economists disagree as to the shape of the aggregate supply of labor. The idea is that as the standard of living increases people find that unless they have the time to enjoy leisure activities, it is not worth their while to work harder in order to obtain the higher income required for more leisure.

2. Knowledge-based companies are typically engaged in the areas such as software development, consultancy, pharmaceuticals, financial services, engineering services, biotechnology, etc.

212 WORKINGUSA: THE JOURNAL OF LABOR AND SOCIETY

3. That is, acquisition of external technology in the form of patents, nonpatented inventions, licences, disclosure of know-how, trademarks, designs, patterns and computer and other scientific and technical services related to the implementation of technological product and process innovations, plus the acquisi- tion of packaged software.

4. Quite often very sophisticated high-performance PCs are used just for word processing or Internet surfing.

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