Who will be the next Global Leader of Cheap Labour?

There is a unique kick in Unboxing something new, a new gadget, a new parcel because it has a sense of surprise in it. India is a country of festivals and we absolutely love to shop but have you ever wondered how these goods are made ? How do they land in the package ready to be used ? How are we able to get dreamy-deals that save us money ? There is a lot of behind the scenes of making a product, packaging the value in a box.

In a world as fast as ours, we tend to forget the process and focus mainly on the outcome. This article talks about a product process and how a brand manages to save costs with countries with cheap labour. We will also discuss Pakistan as an emerging nation with cheap labour.

What is Labour?
Global sourcing of Labour
Cheap Labour and its History
China: The world’s factory
Cheapest Countries in Asia
The land of Pakistan
Is Pakistan the new heir?
Digital or Online Labour
Pakistan and Digital Labour
FAQ

What is Labour?

It is said that Labour is handicapped without capital, and our capital is handicapped without labour. The word labour has direct relations with inputs that we put in to get some final product.

Labour can have many dynamics like mental, physical or social efforts that are required to manufacture something. Essentially on the basis of skillset, labour are of two types - Skilled, Unskilled and in some cases even Semi-skilled.

As the name suggests they are categorised on the basis of skills and training required to make them work effectively. Unskilled labour is the cheapest form of labour and is required to do work that does not require any sort of training.

Global sourcing of Labour

The initial motive of global sourcing of labour is cost savings. With the progress of globalisation, product differentiation in contemporary markets is not that remarkable anymore, to some extent, which leads to a greater emphasis being placed on price competition.

This has especially been the case with consumer products. Besides cost savings, plenty of studies have also identified quality and availability as critical aspects for global sourcing

Cheap Labour and its History

In every society around the globe, employers try to follow the downward trend of cost of labour. Thus, saving themselves the most capital. They pinpoint some stratum of people who are the most vulnerable and employ them with low wages.

This topic can go further to the ‘apartheid’ faced by the South Africans in contrast to white population. Their wages were as low as one-fourteenth of white counterparts even when they comprised around 80 percent of the total population.

Government implementing racist policies, commended employers with greater power over this section of workers. Which in turn employed discrimination among the general public.

Another method employers follow is ‘De-Skilling’ which means to eliminate a skill that is required for a job. Making it easy for a worker to be replaced. This drives down labour cost.

New technologies are also a way to increase competition among workers resulting in less wages. This makes the labour cheap and employers end up with more surplus. These are the usual cases in the world of manufacturing but there are some more natural ways on how labour can be cheap.

Factors like economic development, growth of a nation and per capita income of citizens of the country matters in determining the cost of labour. China has been a global player.

China: The world’s factory

China is considered as a factory for the whole world, the reason being the huge population and cheap availability of labour. This trend was followed for a long time and now it is up for a spin. The world demographics are changing and we are witnessing a downward trend in the employability of labour, the prime reason is rising labour costs.

Due to rising demands of people and rising cost of goods, China is not prized as the ‘cheapest’ country to produce goods anymore. Moreover this phenomenon has led some foreign countries to exit the country and find their nest somewhere else. There are several reports on how the trend is moving.

According to one Report, it is observed that hourly rates in Mexico are lower than that of China. This might not be good news for monopolist China but it is surely good for developing countries where labour is relatively low.

Cheapest Countries in Asia

When the world’s factories are becoming a little expensive, the biggest players in the manufacturing sector are looking for a shift. The new home should obviously be cost effective. To answer this question satisfactorily, we will have to look through a lens of cost. The cheapest countries in the largest continent of the world i.e. Asia are listed below -

• India
• Pakistan
• Nepal
• Sri Lanka

Included a Forbes article. This essentially shows where the manufacturing giants could move their base to. The list coincides with the trends that we see every other day, like Tesla coming to India, Apple pondering over ideas to start a manufacturing unit in India, Pakistan becoming the next hub for cheap labour in the world and much more. These are the hotspots where new industries are eyeing for better sustainability.

The land of Pakistan

Pakistan is the fifth most populous country in the world with a population of over 200 million. These statistics make it an important player in the world. Several studies have concluded that the country entails a good number of workers and manpower. With these numbers we can safely say that the country is rich in workforce.

Is Pakistan the new heir?

A populous country as Pakistan with abundance of labour seems a good choice for industries all over the world. The abundance can be a signal of cheap labour that can be used to produce goods and services with ease and with better efficiency.

Salman Shah of ‘Taskforce on Textile’ during the TEXPO-2019 seminar mentioned that a recent survey concluded that the labour unit in their work in this domain is much cheaper than that of the dominant China. The textile expo (TEXPO) also witnessed clothing brands' total presence and active participation during the event.

Moreover, rather than dismissing it as an impediment, we can use this unique aspect as a benefit for our nation. He also mentioned that this trait can become very useful when we talk about China-Pakistan economic corridor projects. Cheap labour in Pakistan can help build a soft spot for the country in the world where it already faces other economic and relational issues.

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Digital or Online Labour

What is digital labour? How is it different from online labour ? these questions might be popping in your head. The funny thing is that it is easier to understand. There is a famous quote that goes like this - “Software is eating the world”

Almost all people on this planet are witnessing this (Except fewest of third world places) phenomena. We live in a digital era and we work digitally. You are reading this blog on a mobile or other device digitally. So you can easily see the blanket of technology that the world is wearing right now. It's beautiful and gives us a sense of abundance.

Examples of digital labor might include on-demand platforms, micro level of working and data generated by users of digital platforms like our favourite, social media. Digital labor generally describes work that entails a variety of online tasks. If a country has the structure to maintain this kind of digital economy, then this form of labour can incubate income for citizens without the limits of physical obstacles.

Christian Fuchs cites that of the world’s 2,000 largest transnational corporations 11.6% fell under the umbrella of communications and digital media. Tech companies like Google, Amazon, etc. are shaping the economy in exciting ways.

Pakistan and Digital Labour

A report by the International labour organisation concluded that Pakistan already is the third largest provider of labour for digital or online platforms globally. The report also mentioned that India is the biggest labour supplier. Digital labour can be categorised in two types, location based and online web based.

The web-based platforms are defined in which tasks are performed online or remotely by workers without being physically present. “These tasks may include translation, legal work, financial and patent services, designing and software and freelancing.

Location-based platforms on the other hand are those done in person in specified physical locations by employees. These can include taxi driving, delivery services and home improvement (plumber or electrician), domestic labour and caretakers.

Conclusion

We are witnessing a decline in the Chinese empire of cheap labour. This is true for sure. While companies search for alternatives for meeting their manufacturing demands, Pakistan is going to be seen.

On the other hand, India is a big player and it will shine in the search of  manufacturers to find a better place. However, the filter of cheap labour is sharp enough to cut India from the picture and put Pakistan in the spotlight. Who will rule this industry is hard to say because there are a lot of variables involved.

Variables like globe conditions, Pakistan’s relations with the world and need shifts of brands. We live in a beautiful world of change and numerous probabilities. We can study numbers to tell a story but the reality may unfold in its own fashion.

FAQ

Is China still the Low Labour cost country?

No, due to the rising demands of people and the increase in the cost of goods, China is no longer regarded as the 'cheapest' country to manufacture goods anymore.

Is Indian Labour cheaper than China?

The hourly wages in India are five times less than in China.

Can Pakistan become the next cheap labour country for the world?

Yes, Cheap labour force in Pakistan can help attract foreign industrialists.