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October 9, 2019

With economy in soup, kitchen cabinet remains empty of ideas

Business

October 9, 2019

LAHORE: Recession is a reality that’s tackled in various ways by businesses to cushion its impact on their operations as well as their fondly harnessed workforce as it goes without saying that the stabbing pains of recessionary spikes are felt across the board by both employees and employers.

To survive, manufacturing sector has reacted to the current recession with countermeasures like layoffs or sweeping salary cuts. Only a few got the opportunity to retain their staff by opting for product diversification through aggressive marketing.

In manufacturing processes the staff is generally recruited and trained on the basis of production capacity and the number of shifts an enterprise operates in 24 hours. In cases where the number of shifts is reduced from three to one the employers had no choice but to terminate two-third of their manufacturing labour force. In cases where the industries were operating in single shifts, there was a choice of either reducing the number of workers or reducing the salaries of all employees by a certain percentage to retain the entire workforce. Both choices are painful both for the workers and the employers.

The employers do not want to release any of their staff they trained for years. These workers adjusted themselves in the company culture and are considered an asset. But economics sometimes forces them to take this difficult decision.

They realise that by firing their workers they are tarnishing their image and it would be difficult for them to recruit competent workers whenever the economy revives.

Realising this they go on postponing their decision of reducing the number of workers as long as possible. This time around the manufacturers, service providers, and even the small entrepreneurs waited a little longer hoping the new government would be able to revive the productivity.

However after massive devaluation, double-digit inflation and very high bank markup they lost any hope of a revival anytime soon. They had no choice but to call it a day. The input costs have hit new highs; the power tariff is higher than ever, the energy rates are going up. On top of that the demand for products and services is waning in the market. Despite curtailing production they are sitting on huge unsold stocks. Recovery from the market has also come to a trickle. They are feeling financial crunch. Under these circumstances they are not even able to make timely payments to their truncated staff.

Most of the surviving industries adopted the first option of reducing their workforce as their productivity declined due to either absence of orders or increase in cost of production. The competition has decreased in the market after the closure of many industries and so has the demand so the survivors are still trying to dispose of their products at lowest margins.

Those industries that preferred not to cut job survived for a while but then became sick and ultimately were shut down. The decision of some entrepreneurs to stick with their entire workforce is understandable as they had past experience of recessions when their decision to lay off workers backfired as the recessions were short-lived. They rued parting with their reliable skilled workforce that has been engaged by others. Then they have to hire new faces with so-so skills. This time around it seems the recession has come to stay for a while.

The more worrying aspect of all this is there is no job creation. There may be some openings at executive stage but for the mid- or entry-level workers there are no job openings on manufacturing floors. In order to earn livelihood despite being skilled in their fields they are forced to join the huge unskilled labor force of daily wagers.

The competition to get some work has reduced the wages. Still only 30-40 percent of the available workers get engaged and rest hope to get some job the next day. While all this is happening, the economic planners are trumpeting about stabilising an economy that would go into growth mode after two years.

Realising this, the government has promised to open the soup kitchens for jobless and hungry. But the demand for such free meals will grow louder and louder if the job market remains hushed for too long.

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