Safety compliance in RMG firms increases labour productivity

Safety compliance taken in the country's readymade garment (RMG) factories, as prescribed by Accord and Alliance, has increased labour productivity while workers' efficiency is higher in big compliant units, according to a latest BIDS study.

It, however, also revealed that impacts of compliance on profit and market access are not 'significant'.

"[Though] a positive effect of compliance on real variables (labour productivity and profit) and market access was expected, results suggest an significant impact only on labour productivity," Bangladesh Institute of Development Studies (BIDS) research fellow Tahreen Tahrima Chowdhury said while presenting the study findings.

She was speaking at the second session of the two-day BIDS Research Almanac 2023 started on Wednesday at a city hotel.

Firms, which addressed a higher number of remediation measures, performed better in terms of increased labour productivity, she said, explaining that workers of the compliant firms feel safer at their factories compared to the workers of the non-compliant firms.

The compliant RMG firms might enjoy benefits of productivity enhancement in the future if they maintain the standard level of compliance, she suggested.

Since the study was done soon after implementation of compliance standards, it is unlikely to gauge the impact of safety compliance on firm performances, Ms Chowdhury said, suggesting that a several rounds of survey over time might help understand definitive impact of compliance standards on firm performances and profitability.

The study was conducted in 2019 to explore whether Accord-Alliance compliant RMG firms perform better compared to non-compliant ones, whether compliant ones with higher number of remediation measures gain more, and what the perception of workers was about the safety compliance during the period of 2014-2018.

A total of 322 firms located in Dhaka, Gazipur, Narayanganj and Chattogram were surveyed while some 179 firms participated in the compliance initiatives of any of the three initiatives, namely Accord, Alliance and National Initiative.

The rest 143 units were not inspected by any of the three initiatives.

At the same session, findings of two other reports - 'Impacts of the Russia-Ukraine War price shocks on the Bangladesh economy: a general equilibrium analysis', and 'Sustainable Financing Strategies for the SMEs: Two Alternative Models' - were shared.

Deen Islam, associate professor of the Department of Economics at Dhaka University, and Javed Hossain, assistant professor of the Department of Economics at North South University, were the discussants of the session, moderated by Sajjad Zohir, executive director of Economic Research Group.

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