Firms in developing countries are infamous for their poor working conditions—often justified in the name of productivity. A new research review, however, finds that improving working conditions not only benefits workers but can also enhances firm productivity.
This podcast is the fifth of a series in collaboration with J-PAL, covering their policy insights which highlight evidence on important topics in development. Read J-PAL's policy insights here - Workplace interventions to improve worker well-being.
In this episode of VoxDevTalks, host Tim Phillips speaks with Achyuta Adhvaryu about his recent review of research into worker well-being and its impact on firms. Drawing on studies—many of them randomised controlled trials (RCTs)—conducted across a variety of low-income settings, the review explores how improving working conditions not only benefits workers but can also enhance firm productivity.
"Part of the problem that we're talking about in this review is the conditions that exist in workplaces… also broader issues that exist for low-income populations in general, that then manifest in the workplace."
He notes that these issues include poor nutrition, limited financial inclusion, and a lack of empowerment, all of which are often reflected in harsh and unsafe working environments.
The central question, then, is whether firm-level interventions aimed at improving these conditions can also benefit employers.
“Businesses don't tend to do things that don't affect their bottom lines in a positive way.”
The review highlights a range of interventions that demonstrate a potential ‘dual benefit’—improving worker well-being while raising productivity.
Improving workplace safety through worker participation
One major area of focus in the review is workplace safety, particularly in the context of global value chains. While external audits can play a role, they are often limited in scope and enforcement. An RCT by Laura Boudreau in Bangladesh highlights the effectiveness of involving workers directly in safety oversight.
“When you encourage firms to upgrade their safety standards and hold the firm management accountable by having worker-led committees that guarantee that safety, you actually find that safety improves, and as a result, workers are better off.”
Interestingly, Boudreau’s findings suggest that the success of such interventions depends heavily on existing management quality.
“It's only when you really have proper managerial structures and general managerial quality in place that you can actually improve your outcomes through these external stimuli.”
This implies that upgrading management capabilities may be a prerequisite for many successful reforms.
Addressing environmental hazards to improve health and output
The physical environment in which workers operate also has a significant effect on both their health and productivity. Factories in low-income countries often suffer from poor air quality, extreme heat, and excessive noise—all of which impair workers' physical and cognitive performance.
“There are a raft of studies that we take a look at in this review, finding excessive heat and excessive pollution both have negative productivity impacts, likely through the channel of affecting workers physical ability to work, as well as the cognitive focus that workers have, and that actually improving those conditions can lead to substantial gains in productivity.”
These impacts are not trivial: reducing pollution and heat can result in measurable gains in productivity.
Enhancing worker voice through technology and anonymity
A recurring theme in the conversation is the importance of giving workers a voice, especially those who are economically or socially disempowered. Traditional unions are often weak or non-existent in the Global South, particularly for frontline workers. This has prompted researchers to explore alternative mechanisms for collective expression and grievance redressal.
Adhvaryu and his collaborators have developed a simple but effective intervention: a technology-based channel for anonymous two-way communication between workers and human resources.
“What we find is that when you do this, worker satisfaction with the workplace improves. They are less likely to leave the firm. They’re less likely to be absent on any given day… We find that when you actually provide HR with incentives for appropriately addressing the grievances that come through this results in a productivity gain as well, which is then shared by workers through higher incomes compensation.”
He underscores the importance of protecting worker anonymity.
“If you don’t prove to workers that their communications can remain anonymous, even if you make the technology super easy, super accessible, they still won’t use it because there’s a lack of trust.”
Soft skills and training: Not just for jobseekers
While training interventions are often discussed in the context of helping unemployed individuals gain work, this episode highlights the power of on-the-job training, especially in soft skills like communication and emotional regulation. Such skills are often assumed to be irrelevant for manual labourers, but this assumption is increasingly being challenged by evidence.
“We saw substantial improvements in soft skills like collaboration and teamwork, and those skills then translated into greater productivity… large productivity improvements on the order of 18 to 20%.”
The benefits extend beyond workers to their managers, who are often under pressure themselves and transmit this stress down the chain. Teaching supervisors emotional regulation helped them manage teams more effectively, again boosting productivity.
Gender dynamics and the potential for workplace empowerment
Many of the studies reviewed focus specifically on women in the workplace, given the additional structural challenges they face. Women are often underrepresented in managerial roles and overrepresented among low-paid, frontline workers.
“Women tend to be more financially disempowered, tend to have less ability to speak out and have agency within their homes as well as within the workplace.”
Research from Bangladesh has shown that empowering women to report workplace harassment, especially through anonymous or group-based channels, can significantly increase reporting rates and lead to better working environments. Other interventions have targeted promotion pathways, training women for supervisory roles. Initially, these efforts were met with resistance, but over time, they helped shift discriminatory beliefs and demonstrated the income effects of remaining in the workplace.
Scaling what works and encouraging firm take-up
If these interventions are so effective, why are firms not implementing them? Part of the answer lies in visibility and perception. While researchers can measure a 4% productivity increase, managers on the factory floor may not notice such marginal gains. Furthermore, as Adhvaryu points out, implementation challenges are real.
“Sometimes the CEO says, ‘This sounds like a great programme, let’s go ahead and implement it,’ but, three rungs down the chain, the person who actually has to implement it sees this just as a bunch of extra work.”
This underscores the importance of not only identifying effective interventions but also finding ways to scale them. The Good Business Lab, which Adhvaryu helped found, aims to do exactly this, taking insights from research and advocating for them across industries.
“What you need is tactile, hands-on experience of a programme before actually running it.”
The role of government in driving better working conditions
While the review focuses on firm-level interventions, Adhvaryu is clear that government has a role to play. Through tax incentives, subsidies, and regulatory nudges, policymakers can encourage firms to adopt practices that improve worker well-being.
“Policy involvement is critical… Sometimes firms will adopt on their own, and sometimes they’ll need government to help show them the way.”
Encouragingly, many interventions are low-cost once designed and tested. Governments could play a key role in funding that initial development and then disseminating programmes widely.