A new and unusual crisis is observed in the Indian corporate sector and labor market: employees are performing their duties but refusing to exert extra effort. According to a new 2026 study by 'Great Place to Work India,' this phenomenon has been named 'Effort Recession.'
Decline in Voluntary Effort
Data published in The Indian Express indicates that in 63% of the 380 companies surveyed (240 companies), the average level of employees' 'discretionary effort' has decreased by 5%. 'Discretionary effort' refers to the part of the job that the company cannot demand coercively from an employee, such as staying late to solve a problem without direct instruction, helping the team outside their area of responsibility, or taking on more duties than stipulated in the job description.
Sectoral Segmentation
Currently, the trend of such 'extra pushes' in Indian corporations shows a steady decline. The retail sector has been hit the hardest, with 88% of companies reporting reduced staff effort. The IT and professional services sectors have also faced this issue, noting a decrease in 77% of companies. The design and development industries are experiencing difficulties in 71% of cases. Meanwhile, the manufacturing sector proved to be the most resilient, showing a decrease in only 44% of companies, with an average reduction of just 3%.
Impact of Leadership and Skills
Experts explain the greater resilience of the manufacturing sector by stating that workers there possess 'niche skills' (specialized knowledge), which contributes to deeper engagement in work, whereas in IT and retail, job changes happen more easily. The study revealed a striking link between leadership and motivation: when employees feel genuine care from their leaders or managers, their desire to work overtime reaches 99%. In the absence of such care, this figure drops sharply to 29%. Furthermore, the presence of inspiring leadership maintains the effort level at 98%, while its absence results in a figure of 32%.
Education Versus Human Approach
Interestingly, companies investing significant funds in training, mentoring, or skill development (L&D) see only a moderate increase in work ethic—just 25 points. This suggests that the root of the problem lies not in a lack of skills, but in the absence of a human approach from managers towards their employees.
Influence of Generation Z and AI
One factor contributing to the 'Effort Recession' is the demographic shift in the workforce. The share of Generation Z in the Indian workforce has increased to 26%, nearly double compared to 2023, demonstrating an annual growth of 16% over the last four years. This transition occurs simultaneously with the growing adoption of artificial intelligence (AI) in the workplace. Approximately 58% of Chief Human Resources Officers (CHROs) report fighting on two fronts simultaneously: adapting to the generational gap and transforming under the influence of AI. Half of these executives admitted that they do not fully understand what motivates the current young generation.
Thus, the report clearly shows that the workforce is changing much faster than old management structures. Employees are not stopping working, but they are ceasing to exert extra effort because they feel their companies and managers are not paying due attention to them.

