Factors influencing productivity in companies

Between 1993 and 2002, medium and large companies in Portugal underwent significant changes in the composition of the workforce and working conditions. In the face of significant positive and negative effects on productivity, non-permanent employment contracts became more popular, while company investment in human capital generally decreased.

A recent publication from the Statistics Department (DGEEP - Direcção-Geral de Estudos, Estatística e Planeamento - in Portuguese) of the Ministry for Labour and Social Solidarity (Ministério do Trabalho e da Solidariedade Social) outlines trends in employment and working conditions in medium and large companies between 1993 and 2002.

In the 10-year period, total employment in companies with over 100 workers grew at an average annual rate of 1.4%. The average company size grew slightly from 375 to 388 workers per company. This evolution is the result of a reduction in the average size of single-establishment companies and a growth in the average size of multi-establishment companies.

Rise in non-permanent contracts

A significant increase in the number of non-permanent employment contracts was also registered, rising by 11 percentage points to affect 26.8% of total workers in 2002. This type of contract generally corresponds to the lower wage bracket and is more common among men and women with less qualifications (since 1998, over 80% of trainees and apprentices have a non-permanent employment contract), and among women in the upper professional categories (mainly managers and middle managers).

However, the conversion rate from non-permanent to permanent contracts has remained stable: on average, 24.4% of non-permanent contracts were converted to permanent contracts every year. Nonetheless, this conversion rate is lower where the incidence of non-permanent contracts is higher (16.4% among non-qualified workers and 16.2% among trainees and apprentices).

Training

It is possible to identify an increase in the number of workers attending professional training sessions and, at the same time, a progressive reduction in the duration of these sessions. The proportion of company total costs given over to training for workers has diminished from 1.6%, in 1995, to 1%, in 2002.

Health and safety

While company expenditure in the area of health and safety at work remained stable in the intervening period (between 0.7% and 0.9% of total staff costs), the accidents per worker ratio decreased by four percentage points, down to 6.4% in 2002. However, two indicators for serious accidents remained constant during the 10-year period: the percentage of fatal accidents at around 0.1%, and the percentage of potential working hours lost at approximately 0.5% a year.

Social protection

Moreover, analysis shows that there is a trend towards reduced complementary social protection. This includes direct or indirect company costs for workers’ social protection, such as illness and old age complementary allowances, and other social assistance costs, such as support for children and older people. In 1994, these costs represented 15.2% of the total costs for workers, but since 2000 these have remained constant at around 9%.

Productivity

A model created to assess factors influencing productivity using the social audit data shows that greater stability in the workforce has a positive effect. It was found that seniority or length of service has a positive effect on the productivity growth rate, while the rising proportion of fixed-term contracts has a negative effect (an increase of one percentage point in the proportion of fixed-term contracts reduces the productivity growth rate by approximately 0.13%).

Company investment in professional training and social assistance is also positively associated with productivity - a one percentage point increase in expenditure generates an increase of 0.07% and 0.003%, respectively, in productivity. On the other hand, while health and safety costs also have a positive effect on productivity, this is not statistically significant. However, besides the obvious benefits of investing in health and safety at work, such investment also has a positive effect on productivity, reducing the incidence of serious labour conflicts such as strikes.

Methodology

This analysis is based on the Balanço Social (Social Audit) database, a mandatory survey covering all companies with over 100 workers, which is managed by DGEEP - Direcção-Geral de Estudos, Estatística e Planeamento. Each year, the Social Audit gathers data from about 2,000 companies, employing around 800,000 workers. More information can be found (in Portuguese) at: http://www.dgeep.mtss.gov.pt/estatistica/gerais/index.php.

Reference

Varejão, J.M., O Clima Social nas Empresas de Média e Grande Dimensão (Social climate in medium and large companies), Cogitum Collection, nº13, Direcção-Geral de Estudos, Estatística e Planeamento (DGEEP), Lisbon, 2005.

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