Productivity: An urgent matter of political concern?
By Simon Potter
JAKARTA (JP): In my home country, the United Kingdom, simply mentioning the word "productivity" is enough to raise the hackles of many individuals. The history of productivity in the UK is inextricably bound up with that of the trade unions and their often bitter labor disputes.
Even today, many working men and women regard productivity improvement with suspicion. They think that it will take away their jobs, or only be of benefit to the bosses, that it will mean more work for less money, or that it will reduce job satisfaction. Still others believe that productivity belongs only on the shop floor and that it has no place in an office or in the boardroom.
The bitter experience of trying to improve productivity in industry in the 1970's and 1980's has meant that even today, productivity has many negative overtones in British society, and efforts at improvement are often met stiff opposition.
The situation in developing nations however, is somewhat different. In Indonesia for example, the main difficulty is lack of information about the subject. Despite the efforts of bodies such as the Indonesian Institute for Productivity, many decision makers are woefully ill-informed about productivity and how to improve it.
Currently, productivity improvement cannot be described as a priority, simply because Indonesia, with about a 7-percent economic growth rate over the past decade, is doing so well.
But in the future, things are set to change. At present, Indonesian goods are competitive on the world market primarily because of cheap labor. Yet with the continuing development of China, Vietnam and others, Indonesia will see this competitive advantage wither away, and will need to be well-versed in productivity improvement techniques if it is to continue to compete.
The Indonesian government has recognized the importance of productivity by making November of each year "National Quality and Productivity Month", but there needs to be concerted effort to disseminate information and train and educated people, if the country's economic success is to continue.
Countries which are currently leading the field economically, have usually placed a high priority on productivity. Japan for example, under the auspices of W. Edwards Deming, based its' recovery program after World War II on the twin principles of quality and productivity, and as everyone knows, it has been raping the benefits every since.
For others, especially developing countries and those nations who have seen their competitiveness decline in recent years, productivity needs to become an urgent matter of political concern.
More and more, analysts are identifying productivity as the single most important progenitor of socio-economic growth. Without policies to actively encourage improvements in productivity, governments will increasingly face mounting difficulties.
Take the U.S. as an example. Productivity needs to be dramatically improved if the government is to cut the federal deficit which is currently running at some US$8,000 for each of its' citizens, men, women and children. To make matters worse, the nations's infrastructure, so long deteriorating is requiring more and more funds to maintain and repair, and the population is aging fast. Currently 3.4 workers support each retired person. This figure could well drop to below two workers per retiree once the baby boomers start retiring around 2010. Pay awards in excess of productivity improvements have not helped matters; on the contrary, they have contributed to greater inflation and unemployment.
If the U.S. does not find a way to alleviate this situation, intolerable political pressures will build up.
Traditionally, governments have sought a fiscal answer to such problems. But the U.S. government appears to have reached its taxing limit, and many businesses and industries seem to have reached their tax paying limits. What is in fact needed is less fiscal intervention and more incentives to increase and improve goods and services by improving productivity.
The situations in the U.S. is more or less reflected in other developed nations, and as a consequence we will see productivity moving more and more to the top of the political agenda, as traditional methods for dealing with a nation's problems are increasingly seen to be ineffective.
It is one thing however to decide that improvements in productivity ought to take place. It is quite another to realize them. Even with the best will in the world, most governments will face innumerable difficulties in implementing productivity programs.
There are two approaches available; at the macro and the micro levels.
On the macro level, there is strong evidence that the following variables affect productivity: the changing composition of the workforce, investments in human and physical resources, technological advances and economies of scale. Governments need to implement programs directed towards making full use of these factors in order to improve productivity. All such programs should be government by the following principles:
1. Facilitate the transition from an agricultural economy to an industrial economy to an information economy.
2. Facilitate the movement of women into the workforce.
3. Provide education, training and re-training.
4. Encourage the free movement of labor.
5. Provide specific incentives for investment.
6. Provide low-interest loans for small and medium sized businesses.
7. Provide research and development funds to encourage innovation and the development of new technology.
8. Encourage the dissemination and application of new technology as widely as possible.
9. Encourage mergers, consolidations and strategic alliances.
10. Establish export assistance, especially for companies that benefit most from economies of scale.
11. Aid economic restructuring to best benefit from the nation's comparative advantages.
12. Create new jobs by improving competitive position and market share.
Regardless of the type of economy, the basic problem remains the same: How to make the most of often limited resources. Many governments however, often find it hard to think of their programs in such a way, and consequently have difficulty in identifying what it is exactly they wish to achieve, and then doing it.
On the micro level, that is at the level of the firm, certain basic conditions must exist before a company can operate productively. There must be effective control of crime and corruption. A company cannot operate productively if it has to bribe the police, the local government, the military, the manpower department and so on.
There must also be minimal labor relations problems. A company cannot function effectively if its staff are disaffected or openly hostile.
There must be competent managers and dedicated employees and a minimum amount of red tape and bureaucracy.
Above all, for a program of productivity improvement to succeed, there must be a mood within the company which is acceptable to change.
Only when these conditions exist can a company begin to think about improving productivity. This can be done in a number of ways, ranging from top-down management directives, to bottom-up, grass-roots efforts. The guiding principle should always be how to make them most from existing resources, be they capital, technology or people. For many companies, its employees represent the biggest portion of its' underutilized resources. Among measures to make better use of a company's people are:
1. Make jobs more secure in order to encourage employee loyalty.
2. Pay more to employees (without hurting competitiveness).
3. Reduce job stress, improve job satisfaction.
4. Promote an employee's sense of self-worth.
5. Invest in training and education.
Productivity permeates every aspect of our lives, at work at school and at play. The human urge to create, to produce, has been recognized in the world of the arts for centuries, and has been described as being inextricably bound to what human life itself stands for.
And in this era of globalization, productivity is more and more becoming, not simply one aspect of human existence, but an increasingly important economic and political priority.
The writer works at the Lembaga Produktivitas Indonesia (Indonesian Productivity Institute) in Jakarta.