It is a common occurrence: workers constantly demand higher wages and benefits. In reaction, governments mandate salary hikes or additional benefits. Labour-intensive firms, in turn, gravitate toward countries that offer lower minimum wage and benefit thresholds. As firms move out, workers face unemployment
This typical scenario is a cycle repeated many times in many places. Every time employees insist on better standards of living and governments grant higher pay, employers naturally seek ways to mitigate the effect, with layoffs and head-count reductions being the popular route. Firms, labourers, and politicians blame each other for the resulting unemployment while investors look for greener pastures elsewhere.
But there is a way to get out of this cycle.
Some leading organizations have abandoned the “pair-of-hands-worker” concept, i.e., the thinking that workers are paid for repetitive manual labour or simply for their brawn. This concept originated from the Industrial Revolution at the turn of the 20th century and has been the core of employment policy for many firms up to today. But as mass production becomes a thing of the past thanks to market-driven demand for more product variety and shorter life-cycles, firms have instilled greater flexibility and customization into their operations. This requires workers to adapt to a modern factory that is versatile and agile. Managers, thus, have recognized that there is value to have “thinking workers,” ones who can quickly analyse and improve their jobs to meet fast-changing market conditions.
In one case in point, a multi-national corporation decided to hire college graduates with engineering degrees to operate its manufacturing lines. The firm oriented the new employees with assignments that laid down expectations for job productivity. More importantly, the firm encouraged workers to openly question current work practices and educated them on various techniques to improve operations. The result: the manufacturing facility continues to be competitive despite cheaper wages in other countries.
In another case, a company in the electronics industry also hired college-level graduates to staff its assembly facility. The result, however, was the opposite: the facility experienced more than thirty (30%) percent labour turnover annually. Workers felt under-utilized as they were merely given assignments to repeatedly put together electronic parts to assemble finished products. After some time, the assembly facility was shut down and operations were moved to another similarly designed facility in another country.
The success of the multi-national corporation with its thinking workers versus the electronics company that failed was due not only to the manner of planning and execution but also to the willingness of management to change its mind-set. The electronics company viewed its workers as “pairs-of-hands” automatons and assumed productivity would improve automatically by hiring college-level graduates. The multi-national corporation, however, recognized that hiring engineering graduates required broad changes in their placement and orientation into the manufacturing line. The multinational shifted from treating workers as “pairs-of-hands” to one that sees them as sources of continuous improvement.
Many labour-intensive firms, especially in the garment industry, continue to rigidly stick to the “worker-as-a-pair-of-hands” policy. Some managers believe their operations only require manual labour and low-tech equipment at the most. Paying workers to think, analyse, and improve, would be outweighed by cheaper labour in other countries. Hence, as minimum-wage levels climb in countries such as in China and the Philippines, garment companies have moved operations to places such as Myanmar and Bangladesh.
Meanwhile, some American garment companies have reversed off-shoring of their production and instead, have returned their manufacturing work to their home bases in the USA, despite the higher labour costs. The reasons range from increasing logistics expenses from overseas operations to the US government’s tightening of tax loopholes for firms outsourcing abroad. But the most important cause is that these firms have realized that their home-based workers produce better quality products at less waste and at better value for customers. This stemmed from the recognition that their home-based employees have a higher sense of ownership and are willing to contribute to improvement.
Firms, therefore, are challenged to adopt the culture of “thinking workers,” workers who are equipped with skills to question the current ways of doing things and are motivated to improve overall company productivity. It is a win-win context: firms earn from their employees’ motivation and contributions, and reward their workers handsomely. Nations reap the benefit of having a skilled labour force that makes them attractive to investors.