Managing Shocks: Worker’s Well-being and Firm Productivity in the Bangladeshi Garment Sector

We examine the interaction between worker well being and productivity in the ready-made garment sector in Bangladesh. A central characteristic of manufacturing in low-income countries is the need to adjust to continued and varied shocks. These shocks cause output to fall behind the production plan, leading to pressure to increase output and stress in factories. Individual workers also face shocks away from work.

The project is divided into two highly complementary parts. The first identifies how shocks faced by individual workers – “micro shocks” – affect work-level productivity. Workers in low income countries face frequent shocks in their lives – from sickness of children, health of parents, floods caused by a lack of infrastructure, and so forth. Workers in the Bangladeshi Garment sector – young, relatively uneducated migrant women – are likely to experience particularly limited access to mechanisms to cope with these shocks. These workers are often migrants from other regions, lacking dense local family networks, conditions which make dealing with shocks more difficult. The individual shocks may distract attention from work and lower productivity. We examine how these two types of shocks interact. Working with selected factories, we will survey a sample of workers to elicit information on shocks they face at home. The suveys are based on the “daily hassles” scale and the health / conflict inventory used in the Swiss household panel.

The second part of the project examines the interaction between micro-shocks and “macro shocks” faced by the factories themselves. At the macro level, our analysis combines data from two sources. First, we have begun collecting data on disruptions which might be expected to affect productivity at the factory level. These include incidences related to political or labour disputes – e.g., hartals and other strikes – and incidences related to infrastructure – e.g., road and port closures from inundations and accidents. Between February 2012 and January 2013, we find 92 events that had an impact on activity in the garment sector. These data on shocks are matched with a truly unique set of data containing detailed, line-level production data for roughly 65 factories, covering various periods of time from October 2011 to the present. These data come from on-going projects involving training of line supervisors. Combined with the shocks data, these detailed production data will allow us to understand how factories adjust production to shocks.

The effects on productivity of micro and macro shocks are each interesting, but we are also interested in the interaction between the two. If production pressure causes stress which is carried home, then production pressure may increase the incidents of shocks outside the factory, which may then result in a reduction of productivity in the factory and further production pressures. Studying the two in a combined fashion would allow us to examine the feedback channels. From a policy perspective, the results will shed light on which HR practices, if any, and aspects of social compliance programs have the potential to provide greatest improvements in well-being in an industry so prone to production shocks and disruptions.