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Africa’s labour productivity problem
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|Africa’s labour productivity problem by Kenyans247(1): Thu 18, February, 2021 01:12pm|
In today’s world, the labour market is being disrupted by high cases of unemployment, technology and innovation and the Covid-19 pandemic. Despite all these challenges, we seem to be stuck with our old system of work.
I think time has come for us to have a moment of reflection on how we might have got it wrong when it comes to wages, productivity and competitiveness in our labour market.
Talking about the connectivity between wages, productivity and competitiveness, Adam Smith in his 1776 book, The Wealth of Nations, argues passionately that the laws of demand and supply could determine the wages. He emphasised that higher wages always encourage higher productivity (output per worker). According to him, “where wages are high, we shall always find the workmen more active, diligent, and expeditious, than where they are low.”
Karl Marx in his Economic and Philosophic Manuscripts of 1844, titled Wages of Labour seems to have rejected Smith’s philosophy by arguing that “wages are determined through the antagonistic struggle between capitalist and worker.” He was less concerned about labour productivity as Smith was.
Even though the slave labour was abundant at the time of these philosophers, their views were almost similar but from two different perspectives. Whilst Marx saw slavery as a continued form of violence and as a general exploitation of labour, Smith thought of it as an economic irrationality.
The slave labour discourse progressed to deal with employment discrimination and new concepts like “equal pay for equal work” in many countries. Several centuries later, the ideas of Smith and Marx still continue to influence the wages and salaries debate at all levels.
Empirical studies from East Asia link productivity to their competitiveness and wealth creation. Although some of these countries were communist, they abandoned Marxian theories to focus on productivity.
For example, Chinese Labour Laws, Chapter 4 Article 36 states that, “the State shall practise a working hour system wherein labourers shall work for no more than eight hours a day and no more than 44 hours a week on the average.” However, most Chinese are used to a 45-hour work week with some averaging 12 hours a day.
Although some African countries were largely capitalist, productivity was never emphasised. Instead, strong labour laws dictate the pace of development. They failed to weave in productivity into their culture. The result, most African countries’ wages are higher than competing countries in Asia like Bangladesh or India.
In Kenya, the multiple increases of salaries and wages of teachers without corresponding productivity improvements has led to a worse situation than it was at independence. Under the concept of “equal work for equal pay” a majority of workers seek more wages on the basis of number of years served rather than outcomes. The demand for high wages that are not coupled with productivity has undermined manufacturing, leading to importation of mundane products from Asia. This is because unions always want higher pay for the same things produced in an hour as opposed to higher wages for the same time that can lead to greater profits.
Technology can enhance productivity to create room for higher wages but it is often resisted. If, for example, tea farmers invested in technology, they will realise greater output per worker and perhaps utilise excess labour in production of other new products.
When productivity leads to higher wages, several things happen. First employees tend to feel appreciated and in return show greater loyalty and trust to the organisation. They also start to fear that there is greater to lose if they were to lose the job.
The rise of wages does not always translate to loss of competitiveness, if there is a matching rise in labour productivity. What is clear is that economic growth arises from productivity and competitiveness.
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