It is generally accepted that developing countries have a competitive advantage in labour-intensive production. Because of the relatively high costs of labour in the OECD countries, and rising wages in newly industrialized economies, a window of opportunity exists for low-labour-cost developing countries to enter international markets in the production of labour-intensive products. Niche markets for these countries exist, for instance, as we have seen, in specialized garments, leather-based goods, wood and rubber-based products, hand-made jewellery, electronics, precious stones and fruit juices.
The capability to fill niches in international markets is partly determined by technological developments, as consumers' preference is shifting towards quality rather than price. Within the technological choice, a question is whether the use of labour-intensive techniques in small enterprises is economically well-founded or whether more capital-intensive technologies are inevitable once enterprises export to more demanding markets. It seems that efforts to move up-market are increasing the demand for modern equipment, opening up job opportunities for higher-qualified installation and maintenance personnel, and therefore creating fewer jobs for poor and unskilled workers. Apart from subcontracting arrangements, such trends also imply a diminished role in exports for the small-scale sector, given the economies of scale inherent in larger enterprises.
Concern has been expressed that labour-intensive technologies may be too inefficient and cannot meet the quality requirements of importers, thus making it difficult to compete in international markets. Studies carried out by the ILO conclude, however, that some technologies requiring high labour inputs are cheaper than capital-intensive alternatives, while being efficient and producing goods of adequate quality. Both the objective of competitiveness and that of employment creation can be achieved with the use of such technologies.
However, there are factors that impede a broader proliferation of these labour-intensive yet efficient technologies. These include: (a) lack of information about possible technological choices; (b) misconceptions about labour-based methods, based on the belief that modern, capital-intensive techniques are the only means of improving quality and efficiency; and (c) lack of attention in research and development in developing countries to the development of suitable labour-intensive technologies. Technological change aiming at greater efficiency (and employment creation) ought therefore to be promoted to the utmost extent possible.
One possibility is to try to upgrade traditional technologies that are no longer efficient or competitive. Another is to promote research on alternative-employment-creating competitive technologies. Thirdly, it would help to improve the access of small enterprises to information about appropriate labour-intensive technologies in use in other parts of the world.
Labour-intensive technologies, however, cannot be advocated as a solution per se. They may often be unsuitable when goods are being made for an export market that requires a large volume of items of consistent quality within a short time-frame. In these situations, it may be necessary to import modern technologies in order to reduce costs and to achieve international standards of quality. As far as standardized labour-intensive production is concerned, the necessary technology is sometimes provided or suggested by foreign investors, which often supply technical assistance in quality control and in training personnel. This may be one of the reasons why modern small industries in developing countries are sometimes as capital intensive as larger manufacturers. By contrast, more labour-intensive technologies continue to prevail in handicrafts sectors where specific skills are not as easy to substitute for machines.
ILO assists governments to design and implement labour-intensive works schemes as a major means of employment promotion and income generation. These schemes are based on the development and effective use of local resources, in particular unemployed and underemployed labour, local materials and local technical, managerial and private sector capacities. Such schemes aim to strengthen the productive capacity of low-income groups during periods of rapid economic change and to mitigate the social consequences of structural adjustment. Local and national involvement in the design and implementation of such schemes tends to encourage the observance of certain international labour standards, and to improve the working and living conditions of low-income groups in rural and urban areas.
Perhaps the chief means by which public authorities can support labour-intensive methods is through their attitute towards small-scale enterprises and creating a favourable regulatory, legal and research environment.