Productive and unproductive labour

Productive and unproductive labour were concepts used in classical political economy mainly in the 18th and 19th century, which survive today to some extent in modern management discussions, economic sociology and Marxist or Marxian economic analysis. The concepts strongly influenced the construction of national accounts in the Soviet Union and other Soviet-type societies (see Material Product System).

The classical political economists, such as Adam Smith and David Ricardo raised the economic question of which kinds of labour contributed to increasing society's wealth, as against activities which do not increase wealth. In the Introduction to The Wealth of Nations, Smith spoke of the "annual labour" and "the necessaries and conveniences" a nation "annually consumes" before explaining that one of the two steps to increase wealth is reducing the amount of "unproductive labour". "Annual" and "annually" refer to a cyclical reproduction process; "unproductive labour" are commodities and services which are not inputs to the next economic circle and are therefore lost to economic growth. In contrast, theories with no such time horizon tend to understand Smith's unproductive labour as referring to services, and productive labour as meaning vendible goods. Smith’s distinction between productive and unproductive labour corresponds to Sraffa’s (1960) distinction of basic and non-basic goods, as basic goods re-enter the productive process, whereas non-basic goods are destined for consumption, with no value for reproduction.

As Edwin Cannan observes, Smith’s view of annual reproduction and as a consequence the distinction of productive and unproductive labour stems from his meeting, and the influence of, the French economists known as the Physiocrats. Before his visit to France in his Theory of Moral Sentiments Adam Smith sees the gluttony of the landlords as an "invisible hand" which helps the poor to partake in the landlords wealth. In The Wealth of Nations it is seen as the consumption of unproductive labour, limiting the growth of wealth. Smith's view that human labour – but not unproductive labour – is the source of wealth reflects the classical position that all commodities can be reduced to actual labour and produced inputs which in turn resolve into labour and former inputs.

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