There is considerable interest as well as difference of opinion about the effects of strikes on economic activities. The popular view is that hartals and blockades have a significant effect on the economy – the loss amounting about 3-4 per cent of gross domestic product (GDP). The ready-made garment sector (RMG) could be a suitable candidate for examining these effects, as the sector accounts for roughly one-eighth of the country’s GDP. Using very detailed production data from 33 large factories, a group of researchers of International Growth Center (IGC), Bangladesh has made some interesting observations on the subject. Titled as “The Effect of Political and Labour Unrest on Productivity: Evidence from Bangladeshi Garments”, the research was carried out by Anik Ashraf, Rocco Macchiavello, Atonu Rabbani and Christopher Woodruff. They find that factories adjust production fully in the face of a single isolated hartal. Production increases the day before and the day of hartal, and then falls back in two days after the hartal. But there is no net change in output. However, both extended hartals and workers’ protest programmes have substantial negative effects on production. Perhaps, surprisingly, even extended hartals have little effect on worker absenteeism. The authors seem to find significant effects on inputs delivered to production lines after three days of strikes, and significant negative effects on efficiency after five days of hartals. They find that workers’ protest programmes have larger and more immediate effects, and higher costs to the affected factories. A protest in the neighbourhood of a factory reduces both the total number of labour hours and the output per labour hour even during protests of a single day. Moreover, the data suggest that the protests have lingering effects. There is no reallocation of work around the period of strikes. The researchers are not aware of other estimates of the effect of protests of RMG workers on productivity in the sector. But the results that they obtained on political strikes, and particularly those for an isolated hartal, contrast with the estimates of more substantial costs from several sources. The results appear to be similar to those of other researches which find modest effects of hartals on large firms, though their analysis does not differentiate between one-off and sustained hartals. Combining these two types of events, data of the current research of IGC also suggest modest effects on the set of large RMG factories. Volatility in the external environment is a reality that firms in most low-income countries face. The data here suggest that firms have adapted to deal with these disruptions quite well. However, there is at least one characteristic of the setting which appears to be important. The fact that workers tend to live fairly close to the factories where they work may explain the lack of an effect on absenteeism and production on the day of hartal. The effects on transportation are caused through supply chains rather than labour, and show up only after several days of continuous strike activities. The analysis suggests that direct costs of hartals are negligible for all compared to those caused by hartlas spanning many consecutive days. But there may be other channels not addressed by present data through which production in the RMG sector is affected by hartals. For example, researchers are not able to say anything about costs to factories from delayed shipments out. Contracts with buyers typically call for buyers to pay shipment costs from the port of Chittagong, but sellers are liable for the much more expensive air freight charges when goods are not delivered to the port on time. Hence, transportation delays that they find affecting inputs may also result in substantial costs to factories due to delayed shipments out. Finally, hartals may have more substantial effects in other sectors of the economy, for example, the retail sector, and on smaller businesses. But, the data do suggest that the estimates of the effect of hartals which rely on the assumption of an across-the-board proportional decrease in output in all sectors are likely to overstate the costs of hartals. The researchers examined the effects of political strikes and labour unrest on production in large ready-made garment factories in Bangladesh. They apparently find that political strikes (hartals) lasting one or two days have very little effect on productivity or worker absenteeism but see some negative effects on factories for strikes lasting five days or more. The main channel for negative effects appears to be supply chain disruptions rather than worker absenteeism. These effects are much more modest than what is typically portrayed in the press, but are similar to other academic studies. Labour unrest has a more immediate negative effect, increasing absenteeism and quality defect rates and decreasing output. Where protests extend to a second day, we find that production falls by around 10 per cent in factories in the affected area. However, there is at least one characteristic of the setting which appears to be important. The fact that workers usually live fairly close to the factories where they work may explain the lack of an effect on absenteeism and production on the day of hartal. The effects of transportation operate through supply chains rather than labour, and show up only after several days of continuous strike activities.
