Why productivity is not enough

“We are very aware that productivity is part, but only part, of the answer.” - New Look

Most of the pilot projects that companies told us about focused on improving productivity in factories. It's easy to see why this idea is attractive: if workers can produce more clothes in the same amount of time, the factory can take on more business, earn more money, and pay workers more, while reducing their overtime. The buyers don't need to adjust the prices they pay to suppliers, and they may even get their orders turned around more quickly, so it's a win-win situation.

Yet productivity is not quite the panacea that it seems to be viewed as in some industry circles. There are a number of reasons why this is the case.

Stepping up the pressure

Garment workers have a hard time, not only because of their long hours, but also because of the high pressure environment in which they work. Workers from all over the world report that this pressure is increasing year on year: we commonly hear stories of workers skipping lunch to meet production targets, not drinking any water so they don't need the toilet, and being subject to verbal and physical abuse if they fall short of targets.

Productivity improvements that correct this situation by making targets more realistic are welcome, but if instead targets are increased, the pressure may stay the same or even intensify. Indeed, a focus on productivity alone could turn so-called living wage projects into cost-cutting initiatives by the back door.

This danger is especially significant where workers are shifted to piece rate systems (paid per garment, not per hour) as part of the productivity programme: if the piece rate is too low, it only adds to the stress and pressure faced by workers. Piece rates need to be calculated based on realistic targets within a normal working week of 48 hours maximum.

No guarantee that workers benefit

Another concern is ensuring that any financial benefits from productivity improvements are passed on to workers. There is a real possibility that factory managers will keep on paying workers a pittance and pocket all or most of the difference. Yet there is no win-win situation if workers do not receive the lion's share of the benefits from productivity improvements.

That's why worker organising must be an integral part of designing a productivity programme. Workers need bargaining power and clear information to be sure that they are receiving the gains created by productivity improvements.

The impact of restructuring

Increased productivity may well lead to fewer jobs, or to different jobs. Campaigners would not automatically oppose such a move, if it led to a higher quality of employment. But there are some conditions that should be attached to any changes in the structure of the workforce or the terms of employment:

• Such changes should be negotiated, meaningfully, with workers' representatives. Negotiations should ensure that changes are justified and reasonable, that any job losses are distributed fairly, and that any workers who lose their jobs are properly compensated.

• They should be gender sensitive. Women often do the most precarious kinds of work and have most difficulty accessing their rights. They are most likely to be at the end of supply chains, on short term contracts or taken on as ‘trainees’. Women earn less than men and because in many countries men are still considered to be the main breadwinners, women tend to be the first to lose their jobs. Evidence shows that as jobs become more highly valued, both in terms of wages and status, the proportion of men in the workforce is likely to increase. It is vital that, if productivity gains lead to job losses, care is taken to ensure that women are not disproportionately disadvantaged.

• The impact of changes to the way factories work on the informal sector must be considered. An emphasis on productivity is likely to influence informal sector workers: either factories might decide that informal work is inefficient and bring it back in house, or they might increase their use of subcontracting and home work to make up for the loss in flexibility and reduced size of the workforce.

• The trend should be towards more permanent employment, not towards greater casualisation of the workforce. An holistic approach to the living wage should encompass more than just the salary figure: it also needs to include job security, social security, maternity pay, and other benefits to which workers are legally entitled. Any analysis that equates productivity with increased flexible working should be treated with severe scepticism.

Losing sight of the goal

Finally, and most importantly, the main reason for our scepticism of projects focused on productivity is that they set the bar too low. It is unlikely that improved productivity alone can deliver a living wage for workers. That's why we went back to some companies to ask them quite specifically what they would do if productivity improvements did not deliver living wages. Companies need to look at the terms of trade with suppliers – the prices they are paid and the length of contracts – at the same time as they look at productivity.