|
Thursday, October 07, 2004
Ng: Hiring and firing workers
By Wilson Ng
Meanwhile
BUSINESS COSTS. The World Bank funds a study every year on Business Indicators (http://rru.worldbank. org/DoingBusiness/) which compares the regulatory costs of business, and its regulations and enforcement across 145 economies worldwide.
The study provides matrices and comparisons on how easy it is to start a new business, how it protects investors, how good it is in enforcing contracts, in registering property, in getting credit, as well as in closing a business. These are, by the way, topics that you hear often from businessmen and executives in many forums. Rightly or wrongly, many businessmen have their own perceptions of these. It might be a good idea also to take a look at what the formal study says.
One of the matrices is on the system that many countries and economies place to protect the interests of workers and a guarantee of minimum standard of living. This has to do with regulation, specifically on the hiring and firing of workers and the rigidity of the working hours.
While this protects labor on paper, it increases the cost of doing business and sometimes harms the thing that it purports to protect. It is somewhat like putting a high price tag on a product, which is aimed at getting a higher profit. But when the price tag is too high, consumers shun it, and it actually turns away business.
HIGH EUROPE UNEMPLOYMENT. The high unemployment rates of various countries in Europe and the slow economic growth is traceable in part to the state’s overzealous protection of the workers’ rights.
In a world which is increasingly getting globalized, this indicator is studied by companies carefully, and could well be one of the more carefully studied in a nation’s competitiveness index. Nations should study this and work out policies with the eye to not only benefiting a certain pool or segment, but maximizing the total impact on their economy.
As a businessman, I certainly know the principles of optimization—price a good that will have the greatest total returns. But many governments are just keen on continually increasing the price to a point when it is so hard to sell already, which benefits no one.
When it becomes politicized, the argument becomes only when to increase, and how much. Sometimes, more competitive economies also understand that occasionally, when things are tough, you have to decrease your prices too.
COST OF FIRING. The World Bank Methodology, which is used, studies the detailed employment laws and regulations. The cost of firing indicator measures the cost of advance notice requirements, severance payments and penalties due when firing a worker. The methodology is presented in a paper by Juan Botero in the Quarterly Journal of Economics.
In an index, Singapore and Hong Kong both got zero. The United States got a score of 3, Canada, 4; Australia 17 and the United Kingdom 20. Economies with a high cost of hiring and firing include Sweden 43, India 48, and Mexico 72. The Philippines got 41.
It is somewhat ironic that Africa, which has the lowest growth, also has the most rigid laws on protecting labor. For a complete comparison, check out
(http://rru.worldbank.org/DoingBusiness/ExploreTopics/HiringFiringWorkers/CompareAll.aspx) (www.bizdrivenlife.net)
(October 7, 2004 issue)
Write letter to the editor.Click here.
Join the Sun.Star message board.Click here. |
|
[return to top]
[home]
[network page]
|
LOCAL NEWS
BUSINESS
OPINION
SPORTS
LIFESTYLE
FEATURE
SUPERBALITA
WEEKEND
|
