KEEPING with the international trend, the employment scene in Pakistan is changing. Focusing on core business and unable to provide lifetime careers to their employees, many companies are opting for a flexible labour policy, which combines cuts in the regular workforce with contract labour and outsourcing to the independent service providers.
While it sheds fat, makes the trimmed organizations lean and agile, cuts costs and improves profitability, the flexible labour policy has aggravated the unemployment problem, whenever and wherever it has been applied. In Pakistan the recent banking reforms were undertaken in a slow growing economy, creating fewer jobs and more unemployment.
The voluntary separation schemes for company employees did not offer any alternative jobs, nor were the facilities available to train redundant staff in skills required for new businesses or production activities.
The outcome has been a high unemployment rate. Since the turnaround in the economy, jobs generated have not been broad-based. The improvement shown in official figures has been obtained primarily by inclusion of unpaid female labour, which helps families on small farms.
The mismatch between the skills being taught in educational and poorly managed vocational institutions and the needs of a changing market are also stated to be partially responsible for the job situation.
Now, a leading bank has launched a scheme under which, while trimming its outfit, it would provide alternate jobs to its retrenched staff in independent service provider firms, whose shares would also be offered to the workers.
Habib Bank’s voluntary separation scheme for non-clerical staff would be applicable as on December 31, to all employees in this category irrespective of the length of service. In addition, the bank would acquire shares of service provider firms and transfer these shares to the separated staff. The option for quitting HBL and accepting new jobs and shares in the proposed employer’s company would rest well with the staff members.
Though a good move in the realm of corporate social responsibility, one would have to wait to see its outcome.
Under the flexible labour policy, lifetime permanent jobs as well as the wage-labour system are no longer seen as stable or reliable sources of livelihood.
In strategic decisions made by corporate giants for their survival and growth, the merit, efficiency and career of staff lose their relevance. A branch of business or the entire company may be sold (or closed down) often placing the fate of the staff in the hands of an unknown entity. It is the work culture and ethics of new owner-company — though not always in harmony with the acquired firm’s — that dominates. The staff needs the mindset of an entrepreneur to survive.
Even the bulk of jobs under development spending by the government are temporary. The official policy that “it is not the business of the state to be in business,” provides temporary jobs in infrastructural projects under the public sector development programme. Privatization of state units often leads to loss of permanent jobs. The voluntary separation schemes/golden handshake of HBL and UBL were financed by World Bank loans. And the concept of the welfare state and ”mixed economy” have become unworkable. The state intervention in favour of the poor is too weak to have any significant impact either on employment or poverty. Social sector spending is too low. The pro-poor growth strategy is in a stage of rhetoric.
And businesses are being re-organized in radically different ways, driven and facilitated by the latest technology. The new trend is networking among different companies, enabling the increasing number of service providers/producers to share value-addition in a productive chain.
Instead of carrying out diversified fields of activity under one roof with regular staff, many big and small firms are integrated by networking. But integration is also taking place in running businesses through mergers and acquisitions at a pace never seen before. Firms engaged in core activity enter into alliances with business rivals to obtain a better market share. With diversified fields of financial activity, commercial banks are moving towards universal banking. Co-operation among independent units in related businesses is picking up. And this tends to weaken competition in a market economy, as do cartels and oligopolies.
But the flexible labour policy also provides workers and professionals the opportunity to manage lifetime employment by changing jobs or opting for self-employment. The better the human skill, the more its mobility (recently, a leading American company tried, through legal action, to dissuade its chief executive from joining its rival firm but lost the case in the court). Like their corporate bosses, workers are learning to fend for themselves — to make a living in a changing environment.
And as some people anticipate, sooner or later, every worker will have to acquire a variety of trade skills, perhaps 4-5, to shift from one occupation to another.
While flexible labour policy helps cut costs, the job losses mean loss of customers and decline in retail business. It strengthens the trend towards a jobless growth rate in a capital-intensive industry and trade. And the development of small labour-intensive enterprises is also significantly linked to the large-scale business units. Finally, in the knowledge-intensive services based on high tech, a few professionals tend to replace many workers. What is being forgotten is that a worker is both a producer and a consumer.
And thus, despite 6-8 per cent growth over the past two years or more, to quote the State Bank’s annual report 2005, the unemployment rate is “still very high.”
Though the joblessness rate is stated to have declined to 7.7 per cent in 2004, SBP says “the fall in unemployment rate was not broad-based, being mainly confined to female unpaid helpers in rural areas.” The unpaid labour was included when the economy was re-based about two years back.
The problem is to manage a high economic growth rate through full employment. In 2004, dependency ratio (80 per cent) in Pakistan was the worst in the SAARC region, says the SBP report. It is one aspect of the living reality.
The other is that IT is changing the mode of business as well as the mindset of businessmen. Some view the ultimate outcome of IT in revamping business patterns along the lines of how a commercial film is produced. All participants like financiers, script-writers, producers, actors, cameramen, technicians etc, enter into a contract to produce a film. With the film completed, they look for new pastures and new contracts.
It would be interesting to see how the scheme for the workers of Habib Bank with the new employers (the service providers) would work. Would independent service providers share their profits with the workers? Or what say will the workers have in the management’s policies in declaring dividends.
So far, schemes for workers sharing ownership and management with employers have not proved to be very successful. In the recent past, Allied Bank has been a glaring example. But with changing times and the growing importance of human resources in the capital-labour equation, a new path may be opened up.
What the companies have to recognize is that human skills, at all levels, are playing an increasingly important role in business development, perhaps more than they ever did. Without a wide range of shared skills, the success of businesses cannot be fully guaranteed in a fast changing and complex environment. Moving from ‘seth’ to professional management is the first step and not the final destination.
KEEPING with the international trend, the employment scene in Pakistan is changing. Focusing on core business and unable to provide lifetime careers to their employees, many companies are opting for a flexible labour policy, which combines cuts in the regular workforce with contract labour and outsourcing to the independent service providers.
