4.4 Employment

On the level of the economy overall, increased productivity has, for the past two centuries, gone hand in hand with increased employment: the countries with the best rates and levels of productivity performance are those which have generated and sustained the best levels and rates of employment increase.

However, at the enterprise level what appears to be good labour productivity performance has often been achieved either through a reduced workforce doing the work of previously more numerous colleagues or — more frequently — through functions previously performed by the workforce now being carried out by units outside the enterprise (outsourcing to lower wage countries or companies). Furthermore, in the past two decades, low (by previous standards) economic growth and productivity performance have had negative impacts on employment — jobs disappear and there is under-employment of the available potential. In addition to this as innovation and customer value become more important factors for productivity in a globalised economy, an enterprise whose productivity strategy aims primarily or exclusively at cutting back on labour as an input may find itself less competitive. Recent research findings show that downsizing employees does not lead to long-term improvements in the quality of products or services, nor to sustainable productivity improvement.

Moreover, with the growth of the services’ society, the relationship between measured productivity development and employment has become less clear. The so-called ‘productivity paradox’ appears to indicate that the high rate of employment increase in services has been accompanied by a slowdown in the rate of productivity growth. However, some analysts claim that the problem is one of measurement: the tools available have been unable to capture the productivity advances which have been significant and have helped generate increased services’ employment.

What is clear for the future is that in order to combine the development of productivity and economic growth in such a way that they generate positive employment impacts, new approaches to sharing productivity advance must be developed and implemented in the economy. One important — albeit only one — aspect in this respect is the relationship between productivity development and financial rewards.

In the countries of the member organisations of the EANPC, unemployment is a considerable challenge for economic policy. Member organisations contribute to tackling this issue in two ways: on the one hand, through measures (already mentioned) to foster productivity, competition, growth and innovation aimed at strengthening enterprises and thereby to making jobs more secure, even in an era in which the percentage of those employed having lifelong employment is declining; and, on the other, they can develop and use innovative approaches to increasing employment, notably in the flexible management of the entire range of the factors of production: knowledge, labour, capital, materials, time, and space. However studies show that the productivity and the competitiveness achieved by all these measures is short lived if the restructuring is not managed properly. Socially sensitive enterprise restructuring could overcome this risk. Examples from practice show that there are enterprises which have successfully adopted socially sensitive enterprise restructuring principles.