By ‘efficiency of labour’ , we mean the productive capacity of a worker to do more work or better work or both during a specified period of time. We know that all workers are not equally efficient. It is usually observed that the labourers working in the same occupation with similar types of tools and types of equipment with the same type of raw materials, with the similar type of working conditions and for the same period of time produce not only different quantities of output but also different qualities of output.

Factors Affecting Efficiency of Labour: 

Efficiency of labour depends upon a large number of factors. Chief of them are as follows: 

1. Racial Characters: People of some races are superior to others in physical strength and are capable of prolonged physical exertion. Take for example the case of those living in Punjab or Haryana who are taller, stronger and hardworking than the rest of the people of the country.

2. Hereditary Characters: Hereditary traits of father and mother also influence the efficiency of the workers. For example, the children of educated parents are also usually educated and efficient.

3. Moral Qualities: An honest and sincere worker is regarded as an efficient worker. Moral quantities include the way a child is brought up, his family background, educational, religious and social upbringing etc. 

4. Food, Health and Standard of Living: The efficiency of labour to a great extent is determined by the type of food eaten and the kind of physique maintained by a labourer. A large part of the labour force will go waste if a reasonable standard of living for the working class is not provided. 

5. General Education: General education enables a person to develop his intellect and widen his knowledge. This knowledge makes a worker intelligent and enlarges his power to distinguish what is right and what is wrong? 

6. Technical Education: Technical education trains the worker in a particular  trade or profession and develops in him certain specific qualities and makes him a specialist. 

7. Climate: Extreme climatic conditions do not favour hard labour. For example, high rugged mountains and hot deserts impose tremendous handicaps upon the density of population, economic activities, transportation facilities etc. which directly influence the efficiency of labour. 

8. Social Conditions: Some people are compelled to continue in the business or trade carried out by their ancestors. Under such conditions, the workers are not in a position to select their profession according to their qualification and taste. When this is the case, they cannot perform according to their efficiency.