03 September, 2009

Importing Efficiency While Neglecting Education

I find this headline, "Egypt keen for Indian expertise to increase labour efficiency,"  slightly ironic considering the recent labour unrest in some QIZ areas and the Indian-owned Shebeen el-Kom spinning mill. It is also very revealing of the economic thinking that prevails within the Egyptian government. 

In recent years there has been significant Indian investments in the Egyptian ready-made garments industry, especially in the QIZ areas. There, as in Shebeen al-Kom, workers from South Asia are often employed as supervisors and technicians, for several reasons. One is that although these foreign sub-managers and technicians earn way more than the unskilled workers in the production line, they often make less than Egyptian workers with equivalent skills. Another is that their loyalty is easier to guarantee, especially when they enter the country on a work-visa tied to a specific company. To some extent it might also be because creating ethnic divisions in the labour force is a good way to prevent unionizing (but in some cases it may also trigger labour unrest by creating a sense of being discriminated among the lower paid Egyptian workers - this happened in Shebeen el-Kom).

As this article points out, Egypt is wasting a lot of value and potential for industrial development by exporting high-quality cotton as a raw material while its textile industry is mostly focused on low-end products made from lower quality cotton. And this report argues that one of the major obstacles to shifting to higher-value production and increasing labour productivity in general is the lack of an educated workforce. 

So what to do about this? Bring in more foreign experts and supervisors - hoping their skills will somehow "trickle down" to illiterate Egyptian workers that work for a pittance - or dealing with the root of the problem and investing in the education of your own people?

The same report identifies another important obstacle to low labour efficiency in the textile sector: poor working conditions, which can lead to "a number of productivity problems, such as worker injuries, production errors, poor quality products, absenteeism, lack of machine maintenance, haphazard inventory systems, and lack of respect and loyalty to the enterprise..."

This is a major factor in the Egyptian ready-made garments sector, where the turnover of the workforce is 8-15 percent per month, which is not surprising considering that wages often range from 150 to 200 pounds a month. Absenteeism amounts to 10-12 percent on a daily basis, equivalent to 100-120 out of 1000 workers in a given factory not showing up to work on any given day. This could be for several legitimate reasons: they may be sick or injured, or they may find occasional employment on the side that offers better pay (as we all know, it's very common for Egyptians to have two jobs).

Conclusion: if you want to improve labour efficiency, you should improve basic education and work conditions. But of course, unless you are a neoliberal or market fundamentalist, those seem like pretty desirable aims in their own right...

Pic above: "inefficient" non-unionized and expendable workers in a QIZ-zone ready garments factory.

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