Wages, unions, and labour productivity: evidence from Indian cotton mills

Abstract

Clark and Wolcott attribute the low productivity of Indian cotton textile workers to their preference for low work effort, and suggest that unions resisted an increase in work intensity. This article argues that low wages were due to surplus labour in agriculture. Low wages allowed the persistence of managerial inefficiencies and resulted in low productivity and work effort. It uses firm‐level data from all the textile producing regions in India to examine the relationship between unions and labour productivity. The findings show that fewer workers were employed per machine in the unionized mills in Bombay and Ahmedabad, compared to the mills in less unionized regions. These findings suggest that unionization increased wages and compelled managers to raise productivity