Labour laws and productivity

Labour laws should also spotlight on productivity rather than the dampening effects of archaic laws from the times of Industrial Revolution that have hampered rather than promoted productivity. Labour laws and labour relations that exist in Pakistan need review and transformation because of the changing environment of economic development and the use of digital technology and new systems in the working environment. Many countries have amended and modified their labour laws but status quo is being maintained in Pakistan despite advocacy and lobbying by employers.

A prime factor in the success of the Japanese economy after the Second World War was that the Japanese focused heavily on productivity and improvement through means that benefited companies, their employees and the public. Japan’s somewhat distinctive labour relations system, which concentrates on the workplace level, is geared to bring about consensus, dispute avoidance, and productivity gains that would benefit everyone and not just employers. Compare this system with the Pakistani labour laws where inefficiency is rewarded and not the productive employee. Consequently, there is a negative impact on cost of production as well as on the economy and the net result is unnecessary waste of time and effort in unproductive tasks.

Human resource management and human resource development are vital for higher productivity rather than just the dependence on labour laws or labour relations. At present, sustainable development including achieving SDGs does not seem to be of main relevance because of heavy dependence on these outmoded labour laws. It should be noted that SDG 8 “promotes sustained, inclusive and sustainable economic growth, full and productive employment, and decent work for all”. However, as a result of the by now obsolete legislation, employers are interpreting these laws to perpetuate their own agendas rather than fulfilling the intentions of such legislation. The UN Global Compact Network Pakistan (this writer is its president) is actively involved in mentoring, guiding, and advising enterprises to individually achieve the essential SDG Goals.

The industrial labour laws existing at present hamper industrialization and negatively impact on incentives to invest in Pakistan because they are immensely skewed in favour of non-productivity. Compliance of labour laws by both social partners, — workers and employers — should be an important factor to test the validity of labour laws and their significance to Pakistan. There should be a linkage between wages and performance with efficiency and productivity. Wherever there are unions, the Collective Bargaining Agreement is mostly focused on wages and privileges instead of productivity. This mindset needs to be changed. In fact, the difficulties created by unilateral announcements by Federal and Provincial governments regarding Minimum Wage can be better addressed if a pragmatic procedure is adopted. Basically, whatever the Minimum Wage, it should be linked to an agreed time frame with the proviso that it would be increased every year depending on efficiency and productivity.

Excessive number of statutory holidays, delays at all levels in litigation covering labour issues that impact adversely on employees and employers, and enforcement only against employers in breaches of the labour laws that sometimes result in violations of collective bargaining agreements, usually do not attract foreign investment. A vivid example of low productivity and efficiency is the present mindset (a popular belief of successive governments) that generating employment in the public sector means that various public institutions be the repository of people irrespective of their skills if at all. In fact, employment generation centers on investment, capital, human resource and recognition of matching skills to correlate to job functions and not to political patronage.

The Trade Unionists are right on the spot to some extent that outsourcing of jobs is being done widely more as a cost cutting exercise and in contravention of existing labour practices. In private, many Trade Union leaders agree that the employers’ right to hire and fire (or as employers call it ‘right to manage’) has not been revised and is now more a hindrance than a support to promote formal employment and economic growth. The proliferation of contract workers in formal as well as informal sector is also due to the fact that management is not keen to comply with various labour laws. Another poignant outcome has been the gradual fading away of plant level unions. This gives heartburns to the Trade Union hierarchy and is also routinely criticized in the ILO as well as by foreign social and labour related organizations.

A very vibrant example of linking wages with productivity is the Hinopak case. During the time it was a state-owned enterprise, it took 1500 hours to assemble a truck. On the first day after privatization, one truck was assembled in 1200 hours. After three years, productivity increased dramatically and one truck was assembled in 800 hours. All it took was an enlightened approach of workers and employers. Thus, both social partners benefitted and the cost per truck was reduced substantially. The vision was laid down by Fasihul Karim Siddiqi, who was Director of Human Resource and Administration and who later became the Secretary General of Employers Federation of Pakistan.

At the Employers Federation of Pakistan, the emphasis is on total compliance of eight core ILO International Labour Standards (ILS) because this compliance is mandatory for enterprises who want to take advantage of the EU GSP Plus status as well as certification under the ILO Better Work Programme that is being introduced in Pakistan this year. GIZ of Germany is actively involved under its Textiles initiative. Therefore, efficiency, productivity, and compliance of labour laws and ILO ILS are crucial if Pakistani products are to enhance their presence in the global markets.

What is immediately required is more investment in developing human resources and recognizing that people are a key and crucial competitive asset. At the same time, what is imperative in officialdom is good governance which means sound economic development policies, good environmental policies, rule of law and a climate free of corruption. All these are necessary to manifest to the world that Pakistan is a progressive nation, and positively impact on cost of production, and would ensure industrial peace and sustainable working environment. Dr A. P. J. Abdul Kalam, Indian aerospace scientist and 11th President of India, stated that “You cannot change your future, but you can change your habits, and surely your habits will change your future”.

(The writer is a former President Employers Federation of Pakistan)

Twitter: MajydAziz

Copyright Business Recorder, 2021