Performance ranks introduce a trade-off for workers. They have to choose between signaling high productivity or signaling social compatibility to peers. Using a long-term experiment at a sweater factory, this paper disentangles the incentives underlying performance ranks. Treated workers receive either private or public ranks. In response, intrinsic incentives from private ranks do not affect productivity. But publicly-ranked workers reduce productivity to conform to their social groups in the workplace. Additionally, cooperation decreases among the workers, although with limited effect on productivity. The paper shows how inducing competition among workers may be counterproductive for firms.
(with R. Akerlof, R. Macchiavello, and A. Rabbani); CESifo Working Paper No. 8492
Conflicts between management and workers are common and can have significant impacts on productivity. We study how workers in the manual knitting section of a large Bangladeshi sweater factory responded to management’s decision to lay off about a quarter of the workers following a period of labor unrest. Our main finding is that the mass layoff resulted in a large and persistent reduction in the productivity of surviving workers. It is specifically the firing of peers with whom workers had social connections – friends – that matters. We document evidence consistent with deliberate shading of performance by workers in order to punish the factory’s management, and a corresponding deliberate attempt by the factory to win the angry workers back by selectively giving them tasks that are more rewarding. By combining ethnographic and survey data on the socialization process with the factory’s internal records, the paper provides a rare glimpse into the aftermath of an episode of labor unrest. A portrait of the firm emerges as a web of interconnected relational agreements supported by social connections.
(with R. Macchiavello, A. Rabbani, and C. Woodruff); IGC Working Paper
This paper examines the effects of political strikes and labour unrest on production in 33 large ready-made garment factories in Bangladesh. We find that the political strikes (hartals) lasting one or two days have very little effect on productivity or worker absenteeism. We see some negative effects on factories for strikes lasting five days or more. The main channel for negative effects appears to be supply chain disruptions rather than worker absenteeism. Labour unrest has a more immediate negative effect, increasing absenteeism and quality defect rates, and decreasing output. Where protests extend to a second day, we find that production falls by around 10 percent among factories in the affected area. We also compare the magnitude of hartals and labour unrest with the effects of temperature on production.
Research in Progress
Change of Plans: How Firms Adapt to Shocks in a Developing Country
(with R. Macchiavello and C. Woodruff)
Firms in developing countries are vulnerable to frequent shocks and uncertainties resulting from political and industrial instabilities. Using data from 19 Bangladeshi garment factories, in this paper we check how they change their operation plans to adapt to two different kinds of shocks - (a) political strikes, and (b) industrial unrest.