Almost five years ago, Achyuta Adhvaryu (University of Michigan) and Anant Nyshadham (Boston College), development economists and professors, connected with Anant Ahuja, who heads organizational development at one of the biggest garment manufacturing firms in India – Shahi Exports. The three collaborated on a randomized controlled trial to evaluate the business impacts of P.A.C.E. by GAP Inc. (Personal Advancement and Career Enhancement) – a soft skills training program for female garment workers – being implemented in Shahi factories. This experiment revealed sizeable positive impacts, and proved the potential for groundbreaking interventions in the industry and labor market that can benefit both businesses and workers. Following this work, Adhvaryu, Ahuja, and Nyshadham came together to create the Good Business Lab.
The Good Business Lab (goodbusinesslab.org, GBL) aims to improve the lives of low-income workers by proving that better social welfare – both inside and outside the workplace – can deliver measurable financial returns to companies. We believe that building the business case to support better conditions for workers is the most sustainable way to transform labor markets and enable all workers to live dignified lives. The work covers the journey of employment — from freeing up rural women to take up paid work and maximizing technical and supplemental work skills to improving the quality of available jobs for low-income workers.
The research experiment on P.A.C.E. concluded that the net return on investment to the firm from training their female garments workers in soft-skills was an unprecedented 256% just 9 months after program completion, which went up to 420% after accounting for positive spillovers on the factory floor. Buoyed by our results, Shahi Exports set a target of training 70,000 FGWs by 2020 in soft skills and Gap Inc. decided to reach 1 million women and girls all over the world through P.A.C.E. by 2020.
The Lab is founded on the premise that shared problems require shared solutions. Our studies have identified these pressing problems common to firms and workers in the labor market in India, and equally relevant for most developing countries around the world, and tested solutions through rigorous gold-standard economic research. In addition to the P.A.C.E. study mentioned earlier, two other studies from the Lab to date have yielded results to incentivize businesses to invest in improved working conditions:
- The adoption of LED lights in place of fluorescent lighting in garment factories reduces energy consumption by roughly 85% and also produces 1/7th of the heat, reducing average indoor temperature by roughly 2.4 degree Celsius. Worker productivity rose significantly under these more comfortable working temperature, with additional profit from increased worker productivity being 5X larger than energy cost savings. Accounting for productivity gains shifts the break-even point of the investment in efficient lighting for the firm dramatically from three years to seven months.
- Exposure to high levels of air pollution reduces worker productivity measurably, but more attentive managers help to relieve the strain on impacted workers and are able to avoid losses to worker performance bonuses and firm profits from these air pollution induced negative productivity shocks.
- What further makes the Lab unique is the potential of research results to feedback into action-oriented follow-up. Most prominently, our learning from P.A.C.E. motivated us to test the impact of soft-skills training for personnel higher up in the production hierarchy than tailors: supervisors, floor-in-charges, and other upper level management on factory floors. This translated into our ongoing randomized controlled trial, which assesses the impacts of the training on changes in the overall work environment for workers (harassment and abuse), retention, attendance, and worker productivity.
Another ongoing project we are running is a randomized controlled trial to understand the impacts of the introduction of migrant employment opportunities on village economies and households’ welfare and resource sharing. This is being achieved through random placement of Rural Training Centers across 20 taluks of rural Karnataka. A first-of-its-kind, this project not only aims to utilize government opportunities to provide skilling, but also assures employment to the trained graduates and aims to track what determines their retention in the workforce. This can potentially change how skilling is viewed on a macroeconomic scale.
Access to a live testing environment also inspires us to experiment with disruptive ideas like higher wages to workers to increase engagement in the job and attachment to the firm, and structuring of shifts more optimally around women’s domestic work schedules to improve productivity, and welfare outcomes.
All stakeholders stand to be part of the solutions to the problems and challenges faced by the labor market in India and the workforce that constitutes the heart of it. We at the Good Business Lab research, experiment, and demonstrate what works, why and how. We hope to scale findings from our research by collaborating with like-minded people and firms in our pursuit of proving that worker welfare is good business.