GENEVA (ILO News) - Flexible labour practices can boost the competitiveness and employment prospects of firms in the mechanical and electrical machinery industries, according to a new ILO report ¹ . However the process of engineering change often proves wrenching for the workforce coming, as it does, at the expense of long-established workplace practices with unwelcome consequences for the personal lives of many employees.

Among the benefits due to flexible labour market arrangements, the ILO report cites "companies doing better, productivity rising and wage costs falling," as well as a trend to shorter working hours. Among the labour market negatives, the report highlights increased part-time work, reduced overtime pay, higher job instability and "unsocial hours" (i.e. night work, weekend work and long shifts during peak periods).

Another critical issue is linked to how changes in work methods are implemented. The report highlights the value of negotiating with the workforce in light of existing collective bargaining agreements in order to smooth the way and to accommodate the needs of workers.

Workers in Germany, Japan and the United States are among the most affected by the re-engineering of production, with those countries' industries accounting for, respectively, 15, 25 and 27% of world output in machinery industries. But increasing numbers of workers in developing countries are feeling the effects as well.

The ILO report indicates that total world employment in the sector increased since 1980 by 12%, adding some 4.5 million jobs worldwide as production grew by 113%. Most of the employment increase came as a result of a shift in production to low-income countries, which now account for 32% of the workforce, versus only 22% in 1980. So great has the shift been, that by 1992, China alone accounted for nearly 30% of world employment in the sector as opposed to the United States which accounts for only 8% of the total workforce.

During the period 1980-92, nearly a million jobs in the machinery industry were lost in high income OECD countries, but the combination of industrial restructuring and the strong economy since then has contributed to stabilising and in some cases even reversing the pattern of job losses. Between 1992-97, the United States added 411,000 jobs, bringing the total of workers employed in the sector to nearly 4 million. The Republic of Korea added 117,000 jobs, the UK 85,000 jobs and Canada 14,600 jobs during the same period.

Though the employment numbers may be smaller in OECD countries, they nonetheless account for the overwhelming volume of production at the high-value added end of the engineering spectrum. In 1997, seven of the ten leading machinery and electrical manufacturers in the world were US companies (General Electric, Intel, IBM, Hewlett Packard, Compaq, Cisco and Motorola). Sweden's Ericsson, Japan's Matsushita, and Germany's Siemens also ranked among the top ten. In the global marketplace, these and other industrial giants are all engaged in relentless efforts to increase profitability and productivity in what are among the most capital-intensive, hi-tech manufacturing activities in the world, notably via re-engineering their own workplace operations.

The report, prepared for the tripartite meeting, says that in the global market the driving force in the industry is to stay competitive, which means searching for greater flexibility and lower labour costs. The workers' concerns focus on preserving jobs, dealing with problems of coordinating flexible production systems and coming to terms with the long-term social implications of flexibility. "Employment preservation and creation is a main objective of unions in demanding reductions in working hours in exchange for more flexible arrangements," the report says.

The report notes that flexibility is not just about how work is organized, but about how it is scheduled and remunerated.

In Germany, the report notes that while industry-wide collective agreements have long permitted firms to tailor operating hours, there is increasing recourse to in-plant agreements in order to maximize work time in peak seasons: specifically, by reducing the work week to 35 hours (versus 40 before) in exchange for more flexible scheduling. In some cases, the reduction in working hours was greater for older workers.

In France, collective agreements have led to the development of "time-saving accounts" which "enable workers to save up overtime premiums, bonuses and up to three weeks annual leave" and to use them at their own discretion."

Other innovations in this area include such developments as annualized hours, in which workers have an annual quota of hours to work [a so-called time account, similar to a bank account], rather than the traditional daily or weekly quota of 40 hours. Under an annualized scheme, workers may be called upon to work 50-60 hours per week during peak seasons (without receiving overtime pay) while working only 25-30 hours during low season (and receiving full pay). Such schemes are in place in many European countries such as Austria, France and Germany and are under study in others.

Another example is weekend only work, in which employees work two long shifts (12 hours each) on Saturday and Sunday in exchange for 38 hours worth of pay (i.e. equal to that the other workers get from Monday to Friday) and with time off during the rest of the week. This system allows the employers to keep the machines running seven days a week, and compensates financially and with time off, those workers who agree to forgo any kind of social life on weekends.

Another innovation is known as the rolling two-shift system in which employers can increase the operating time of machines to over 92 hours a week while guaranteeing the individual worker a 35 hour work week on average. The scheme requires five workers over a five week period and provides for one long weekend and random days off within the week, in exchange for workers being willing to alternate between an early and a late shift and sacrificing the occasional Saturday morning.

Temporary, casual work and part-time work, although rare in these industries, are nevertheless on the rise. While indicators of increased flexibility, these forms of employment provide entry vehicles for the unemployed youth, or re-entry to the labour market for the long-term unemployed.

Proposals to reconcile the industry's demand for flexibility and innovation with workers' requirements for job security and satisfactory working conditions will be debated at the Tripartite Meeting on the Impact of Flexible Labour Market Arrangements in the Machinery, Electrical and Electronic Industries, which convenes on Monday, 26 October and runs to Friday, 30 October at ILO headquarters in Geneva. The meeting will be attended by representatives from 24 Governments ² and 24 employer and worker representatives.

However, in spite of the challenges these developments present to companies and the workforce, the report says "it is evident that countries that have adopted more flexible labour practices either at the national level or at the organizational level have tended to experience overall improvements in the competitiveness of the electrical and non-electrical machinery industries". The need to sustain high rates of capacity utilization in the capital-intensive machinery, electronics and electronical sectors means that the trend toward innovation and flexibility is likely to accelerate in coming years.

The report identifies the countries that have made the largest gains in competiveness in recent years as Canada, the United States, the United Kingdom, the Netherlands, Japan and the Republic of Korea. It says that the picture for France and Germany is "mixed". Among relative newcomers to the industry, the report identifies Ireland, Malaysia and the Philippines as experiencing the fastest growth in the manufacturing of electrical machinery, seeing increases in output, employment, productivity and real wages, though the current crisis in Asia may have wiped out some of the accomplishments of the Asian countries.

Many different sorts of working arrangements are lumped together under the rubric of "flexible", but the common goal is usually to devise a system that can make maximum use of machinery and provide manufacturers with the highest degree of elasticity in responding to the cycle of demand, which is often seasonal. Well known innovations include such high-performance work methods as multi-skilling, multi-tasking and organization of quality circles. In practice, this means that employees or teams of employees can be called upon to carry out a number of different tasks on the production line, whereas responsibilities were traditionally narrowly defined. These new methods have been broadly introduced into machinery, electronics and electrical manufacturing, particularly in high wage countries in response to the challenge of imports from low-wage countries.

1 Impact of Flexible Labour Market Arrangements in the Machinery, Electrical and Electronic Industries. Report for discussion at the Tripartite Meeting on the Impact of Flexible Labour Market Arrangements in the Machinery, Electrical and Electronic Industries. International Labour Office, Geneva, 1998. ISBN 92-2-111108-3. Price: 25 Swiss francs.

2 Brazil, Bulgaria, Canada, China, Czech Republic, France, Germany, India, Indonesia, Israel, Italy, Japan, Republic of Korea, Malaysia, Mexico, Portugal, Singapore, Slovenia, Spain, Sweden, Switzerland, Thailand, United Kingdom, and United States.