The Impact of Factory Housing on Worker Productivity and Welfare

Large-scale industrialisation is a key element of Ethiopia’s national growth strategy, as laid out in the 2015–20 Growth and Transformation Plan. This includes the development of over 20 special economic zones (“industrial parks”) as centres of export-oriented light manufacturing. Several research initiatives evaluate the economic and social impacts of these early-stage industrialisation policies. Initial lessons point to two crucial challenges: i) achieving worker retention and worker productivity, while at the same time ii) ensuring worker welfare. This project seeks to understand how the provision of factory housing and the development of social networks in the workplace can address these challenges.

The project is partnered with a large garment producer in Ethiopia that is introducing factory housing on its production ground for its exclusively female workforce. Given that workers will be randomly allocated to housing units and that housing is oversubscribed, a treatment and control group can be exogenoously selected. This will allow the researchers to answer three closely related research questions: 1) what is the impact of receiving free factory housing on productivity and turnover rates?; 2) what is the impact of living with friends on worker productivity?; and 3) can we increase worker productivity by integrating them into existing social circles?

High worker turnover rates and a lack of housing are two major constraints to the development and growth of the industrial sector, not just in Ethiopia, but in most developing countries. Lessons learned from this project will have important implications for the design of industrial policies in developing countries and whether it is the government or firms themselves that should be more proactive in the provision of housing, for example in industrial parks. In addition to this, establishing an industrial sector in countries with populations of limited prior exposure to an industrial work culture can be challenging, in particular regarding the training and productivity of workers. This project will show whether the social integration of new workers can increase the productivity of the mostly rural women, who are new to structured wage work.

Authors

Eyoual Demeke

University of California, Berkeley

Morgan Hardy

New York University, Abu Dhabi

Christian Johannes Meyer

University of Oxford

Marc Witte

University of Oxford