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Employment and Promoting Ecology - How a service culture could put people back to work (1998)

Dec., 1998
(Source: Co-op Dialogue, Vol. 8, No. 3, Oct.-Dec., 1998, pp. 27-29)

We are facing two big and urgent social problems: employment and ecology. Both the unemployment of millions of people and the progressive destruction of the ecosphere are alarming. But they are linked with each other. The 'greening' of industrial products, processes and services could provide many more jobs.

Unemployment has many causes, including:

But joblessness is by far due mostly to the high efficiency of industrial machinery, which produces ever more, ever faster, with ever fewer workers.

Waste of Resources
The extremely high productive use of human labour and the extremely low productive use of resources is manifested by gigantic mountains of waste. Already today, the junked cars on scrap heaps alone would form a line that would form a line that would reach to the moon. The scene is the same with discarded electrical and electronic appliances. Every year, millions of tons of ovens, washing machines, refrigerators, dishwashers, TV sets, entertainment electronics equipment and small appliances are being wasted.

If we throw always all these things after a relatively short time we are not only being wasteful and irresponsible with resources, but equally so with people's work. For with the products and materials we discard, we also dispose of the human labour they contain. It is imperative that we radically reduce the enormous turnovers of material and energy. In other words, the productivity of raw materials and energy must be remarkably increased.

Specifically, that means we must draw as many services as possible from one kilogram of material or 1kWh of energy. Reducing the enormous flows of materials into the industrial system, as well as developing cycles of materials and responsibility (the manufacturer taken back and repairing and/or remanufacturing used products and materials) are the main pillars of a sustainable development that can cope with the future.

The industrialized nations must cut their consumption of raw materials by a factor of about 10 by 2050 if they are to be able to handle the challenges of the future. To achieve that reduction, innovation efforts must be directed at increasing resource productivity and/or ecological efficiency. In particular, strategies to extend the useful life of goods and intensify their use could result in reducing both the speed and volume of the flows of resources to industry.

Increasing resource productivity
In dealing with nature, we and industry are facing radical change. This is the transition from environmental protection (preservation of nature and health) to greater resource productivity (which at the same time means greater competitiveness). As a rule, environmental protection costs money, while higher resource productivity usually cuts manufacturing costs and/or increases a company's profitability.

If the company can sell the same utility or benefits while using fewer resources, it saves twofold: in buying raw materials and on waste disposal. Thereby the rules is that goods and components cycles are more profitable than resources cycles, and that the company which is first in the market gains an additional competitive advantage in terms of a lead in knowledge and image.

If a service, or benefits in the form of services, can be sold instead of products, the decoupling of company success and materials flows is even greater.

Impacts on employment
The two social problem areas of work and ecology have to date been perceived and treated separately in politics, in industry and in our own minds. And, I believe, with little result. The link between the two must be established. The strategies to boost resource productivity would have considerable impacts on the change in industrial structures, and on employment. In particular, the strategies would lead to a switch of focal point from a raw materials-intensive and use-value-related service economy.

This is where another view of profitability comes in. Business management would no longer focus on value added, but on maintenance value over longer periods based on the intrinsic value of a product. Expressed as a question, the value factor, which would move to the centre of business thinking and dealing, means: how can the utilization value be improved and sold? How can products be made with as few raw materials and as little energy as possible and create a high benefit as pollutant-free as possible for as long as possible during their life-cycle?

With regard to employment, the production of long-life goods would appear at first sight to lead to a reduction in the need for work. In fact, however, the strategies to increase resource productivity have positive net employment impacts. The reason is that saving resources is based in principle on substituting energy by work, rather than the reverse as has been customary to date.

If the useful life of products is extended, that will not only preserve most of the materials and energy they contain as well as the work invested in them, the products will also require a considerable amount of mostly skilled work input. Reconditioning products is as a rule more labour intensive than manufacturing them. So large-scale reconditioning and repair work increase the number of skilled jobs and at the same time reduces the inflows of materials and energy.

Comparing a car with a life-cycle of 20 years with two others that each have useful lives of 10 years gives a good example. The first car causes an increase in employment per life-year of about 50 percent in terms of total work input in manufacture, service, repairs and reconditioning while at the same time reducing the energy consumption by half.

Regionalization of Industry
Extending product service life would also mean replacing energy and/or capital by skilled work, helping to save money to boot. But not only rising costs of disposal, materials and energy would reduce consumption. Increasing transport costs would also mean that carrying all kinds of freight halfway around the world would make less and less business sense.

That would result in ever more products and materials being circulated, reconditioned, and recycled or reduced on a regional basis. In turn, that would create additional jobs, and be more profitable as well as promote technology not only from ecological aspects.

In addition, a way of doing business which encompassed material and responsibility cycles would no longer differentiate between manufacturing and reconditioning, or between marketing and remarketing.

The structure of such an economy would be predominantly decentralized and regionalized so that it could adapt itself to the new cycles. It would also benefit from the greater efficiency of the new working practices.

True, jobs would be lost in the sectors of central production, and raw materials extraction and processing. But at the same time, more and higher-skilled jobs would emerge. These would not only be better qualified jobs, but also decentralized because reconditioning, repairs and maintenance must be done nearer the customer. And that, in turn, would also reduce goods traffic.

In addition, skilled workers would be needed because in many cases of small production runs it makes sense and is also more economical to hire such people. They can work faster and more flexibly , and mostly cheaper , than fully-automated production lines.

There also would be a growing need for maintenance, repairs and reconditioning. More and more people would be wanted for reconditioning, that is, the remanufacturing of old products.

As reconditioning involves far more craft work than highly rationalized new production, there would be a positive impact on the labour market if there were more of the former and correspondingly less of the latter.

From production to services
Switching to long-life products and changing from selling products to selling use values would strengthen the current trend of jobs shifting from industrial production to the service sector. For example, if the service of individual transport were to be sold instead of the product car, the company with the competitive advantage would be the one that had a service center in every town and village, with appropriately staffed workshops and sales or rental facilities.

Enduring change towards a knowledge-intensive and use-value-related service economy would not only mean that more people would be needed to fill jobs. It would offer more opportunities for part-time work, as well as possibilities of employment for older people and the handicapped. People who earlier could not keep up with the pace of working life would be more inclined to return to it.

Another impact would be that many companies would reduce their dependence on the world market. They would no longer switch to certain tasks abroad, but assign them to their part-time employees, helping them to meet their commitments as self-employed entrepreneurs.

The latter would be accommodated by an ecology driven fiscal reform which would make massive cuts or changes in subsidies and raise the cost of energy and raw materials consumption. This move would be accompanied by a reduction in income tax and non-wage costs such as social security contributions. The market would thus be more efficient, energy and material-intensive; new production more expensive, labour-intensive repair work and reconditioning cheaper, and jobs would remain in the home country or region.

A number of more recent studies show that an ecological tax reform would help create jobs, and thereby could make a decisive contribution to reducing employment.


* Prof. Lakshmi Narasaiah is the Head of Department of Economics at the Post Graduate Centre, Kurnool of the Krishnadevaraya University and a regular contributor to Co-op Dialogue.