What the pandemic has taught us about labour productivity

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Mthunzi Mdwaba

IOE Vice-President to the ILO

Following World Productivity Day on 20 June, Professor Mthunzi Mdwaba, IOE Vice President to the International Labour Organisation and Chairperson of the Board of Productivity South Africa, calls for more ambitious work-related reforms to strengthen global productivity.

A surprising piece of good news emerged as economists and human resource professionals in several countries assessed the fiscal and employment fall-out following lockdowns. They found that labour productivity was increasing as the world coped with the pandemic. Labour productivity is one of the primary measures of overall productivity. In the simplest terms, it is the measure of output per unit of labour input.

In a YouGov, LinkedIn, USA Today survey in May 2020, 54% of the American respondents said the pandemic has had a positive effect on their productivity. The reasons for this, they said, were time saved from commuting (71%), fewer distractions from co-workers (61%) and fewer meetings (39%). Unproductive meetings lead to work productivity loss and employee disengagement. There are also reports that employees are also happier working from home.

The Swiss Trade Association (SGV) reported a 16% increase during the lockdown. The normal productivity gain for Switzerland is less than 1% annually. The trade group explained that this striking jump was a result of increased focus and flexibility. According to their analysis, employees explained they were able to focus on the most essential tasks; and that by avoiding daily commutes, they were able to streamline work habits at home.

A survey by Deloitte India found that although businesses suffered in terms of reduced revenues due to the pandemic, individual productivity has increased. It observed that 60% of the companies have reported an increase in individual employee productivity.

Unfortunately, there is not much data on productivity in emerging economies. It would be important for the Bretton Woods Institutions to help collect data on productivity through research, and this would greatly help policymakers make better-informed decisions. In addition, we need to be cautious about over-estimating productivity increases and engage in further analysis to better assess if this is a result of increased performance  or it is due to a Covid-19 reduction of employment or both.

While this news cannot overshadow the devastating human and economic cost the coronavirus has had on the global community, it should provoke some serious reflection by employers, workers and governments too slow to implement radical reform on how we work and redress global stagnant labour productivity.

Flat global productivity

The 2019 Global Competitiveness Report by the World Economic Forum pointed out in advanced, emerging and developing economies, productivity growth –encompassing labour– started slowing in 2000 and decelerated further after the 2008 financial crisis. "Between 2011 and 2016, ‘total factor productivity growth’ –or the combined growth of inputs, like resources and labour, and outputs– grew by 0.3% in advanced economies and 1.3% in emerging and developing economies."

This low productivity growth –including weak labour productivity– should be seen as an alarm bell for the world economy. Productivity plays a vital role in economic growth, job creation, global competitiveness, raising standards of living and national development and prosperity. Flat or sagging growth is bad news.

Despite an ongoing global reflection this past decade, identifying concrete ways to increase labour productivity by maximising the benefits of digitalisation and increased connectivity have remained more theoretical than real. Then the pandemic happened, setting off in a matter of days or hours a global experiment on transforming the modern workplace. 

Setting the course for a new world of work

The International Organisation of Employers (IOE) has been promoting an outline for strengthening sustainable businesses and labour productivity through a strategy of social dialogue, workplace flexibility and skills development.

We know that effective collaboration and dialogue between international organisations, governments, industry and trade unions is critical to improving productivity. We have seen first-hand the benefits of social dialogue for creating a conducive environment for business growth and job creation.

This recent crisis is showing that a more agile and flexible working environment can also bring about productivity growth. Measuring employee performance less on the number of hours worked each day, and more on achieving key deliverables or performance indicators is proving to be not just popular both with business and employees but a critical contributor to rises in productivity. Adapting a more decentralised working environment is showing the potential to boost productivity, as well.

Skills development is also an important driver of productivity. It has been confirmed that employees get motivated and engaged as they develop new skills, engage in peer learning and work towards better career prospects. For employers, workplace training can improve business performance and a more satisfied team.

As a recent strategic report from the South African productivity entity, ProductivitySA, explains "this crisis presents an unrivalled opportunity to re-imagine and re-design the world of work, find innovative ways and initiatives to improve the productivity and competitiveness of our enterprises, specifically small businesses, and safeguard citizens’ well-being."

There is a need for more ambitious work-related reforms to strengthen global productivity.

And anyway, who’s in favour of unproductive meetings?