11 The Importance of Temporary Work Agencies in Turkish Labor Market and a. . . 247 Table 11.17 Test statisticsa,b Totalun Chi-square 10.949 df 3 Asymp. Sig. 0.012 aKruskal Wallis test bGrouping variable: country Table 11.18 Ranks Country N Mean rank Totalun 1.00 12 18.83 2.00 12 18.96 3.00 12 35.25 4.00 12 24.96 Total 48 Table 11.19 Multiple comparisons Country (I) Country (J) Mean difference (IÀJ) Standard error Significant 1.00 (Germany) 2.00 0.10000 0.66461 1.000 2.00 (Italy) 3.00 À3.42500* 1.06210 0.038 3.00 (Spain) 4.00 À0.93333 0.69768 0.734 4.00 (Turkey) 1.00 À0.10000 0.66461 1.000 3.00 À3.52500* 1.15550 0.042 4.00 À1.03333 .83299 0.788 1.00 1.06210 0.038 2.00 3.42500* 1.15550 0.042 4.00 3.52500* 1.17483 0.256 1.00 2.49167 0.69768 0.734 2.00 0.93333 0.83299 0.788 3.00 1.03333 1.17483 0.256 À2.49167 *The mean difference is significant at the 0.05 level Depending on the statistics calculated in Table 11.19 the total unemployment rates in Germany and Italy is significantly lower than in Spain. The difference is not significant between Turkey and other specified countries. The differences and similarities have been analyzed among specified countries with the comparison of data 1998–2009. Panel (data) analysis has been used in order to discover the impact of TAW on unemployment and the number of the workers employed by TAW is used as a variable in countries Germany, Spain and Italy. 11.4.5.3 The Impact of TAW on Employment Panel (data) analysis is a statistical method, which deals with two-dimensional (cross sectional/times series) panel data. The data are usually collected over time and over the same individuals and then a regression is run over these dimensions.
248 A. Beyhan Acar and G. Ordun Fig. 11.2 The impact of TAW on total female unemployment Fig. 11.3 The impact of TAW on youth female unemployment Depending on the panel data analysis, TAWs impact on total female unemploy- ment is significant. The coefficient is about À0.015. For the 1,000 people employed by TAW decreases the female unemployment rate 0.015. Depending on the findings that is shown in Fig. 11.2, the first hypothesis— TAWs impact on total female unemployment is significant—is accepted.
11 The Importance of Temporary Work Agencies in Turkish Labor Market and a. . . 249 Fig. 11.4 The impact of TAW on total unemployment Depending on the panel data analysis, TAWs impact on total youth female unemployment is significant. The coefficient is about À0.031. For the 1,000 people employed by TAW decreases the youth female unemployment rate 0.031. Depending on the findings that are shown in Fig. 11.3, the second hypothesis— TAWs impact on total female unemployment is significant—is accepted. Depending on the panel data analysis, TAWs impact on total unemployment is significant. The coefficient is about À0.011. For the 1,000 people employed by TAW decreases the total unemployment rate 0.011. Depending on the findings that is shown in Fig. 11.4, the third hypothesis— TAWs impact on total unemployment is significant—is accepted. 11.5 Conclusion Conserving the traditional role of meeting the supply and demand of workforce, the agencies began to fulfill the needs of temporary work relations as a professional activity. Temporary work employment service became common among agencies and private work agencies began to make most of their profit from it. Therefore all the private work agencies are labeled as temporary work agencies in Europe. As a professional service or professional work employment and the agencies providing this kind of service has been used in many countries like European Union countries, United States of America, Japan and, Canada for many years; In Euro- pean Union this service relevant legislation was enacted from the 1990s. Although it is not legalized yet in Turkey, the effort to legislate the temporary work has been in progress since 2002 but due to the oppositions of trade unions and labor
250 A. Beyhan Acar and G. Ordun confederation not much can be can be achieved. Still the efforts to legalize the temporary work are ongoing. It is expected that TAW have a significant effect on the female unemployment, youth female unemployment and total employment. With the results provided by the panel data analysis for the years 1998–2009 all the expectations have been met. TAWs positive effect on the rates of female employment, youth female employ- ment, and total employment is significant. As analyzed in the research section of the study Turkey seems to be in a better position for the total employment, female and youth female employment comparing to Spain. However, in consideration of informal employment Turkey’s statistics related with the specified issues is expected to be similar with Spain. As known, Spain is one of the worst for the unemployment rates in Europe, and depending on the structure of the labor force and economic characteristics of the country, many similarities can be identified between Spain and Turkey. For example temporary work in Spain is generally fulfilled with relatively unskilled workers. In Turkey, except for the information technology sector, temporary work is also carried out with unskilled workers. Informal employment is high in both Spain and Turkey but as a benefit of TAW temporary based informal employment is significantly reduced. If TAW, is legalized in Turkey, it is expected to have a significant improvement in employment and reduction in informal employment. Including the qualifications, education levels of workforce and temporary workers employed by different sectors as variables in further studies, a more accurate prediction can be made and a deeper understanding of the issue would be possible. References Antoni M, Jahn EJ (2006) Do changes in regulation affect employment duration in temporary work agencies? Institute For the Study of Labor (IZA), Germany Arellano FA (2009) The effect of outplacement services on earning prospects of unemployed. Fundacio´n de Estudios de Econom´ıa Aplicada (FEDEA), Spain Blanpain R, Graham R, Beirnaert W (2004) Temporary agency work and the information society. Aspen, New York CIETT (2007) Main statistics report Dra¨ger V, Marx P (2012) Do firms demand temporary workers when they face workload fluctu- ation? Cross-country firm-level evidence on the conditioning effect of employment protection. Institute For the Study of Labor (IZA), Germany Ehlert C et al (2012) Temporary work as an active labor market policy: evaluating an innovative program for disadvantaged youths. Institute For the Study of Labor (IZA), Germany EUROCIETT (2010) Europe 2020 from strategy to action: ensuring inclusive growth. EUROCIETT, Brussels EUROCIETT (2007) More work opportunities for more people. EUROCIETT, Brussels EUROCIETT (2006) The contribution of private employment agencies to flexicurity and a better functioning labor market in Europe. EUROCIETT, Brussels European Union (2012) Employment and social developments in Europe 2011. Publications Office of the European Union, Luxembourg
11 The Importance of Temporary Work Agencies in Turkish Labor Market and a. . . 251 Graaf-Zijl M, Berkhout EE (2007) Temporary agency work and the business cycle. SEO Eco- nomic Research, Amsterdam Hekimler A (2004) Federal Almanya’da Profesyonel O¨ du¨nc¸ I˙s¸ I˙lis¸kisinin Yasal C¸ erc¸evesi. Is¸veren J 33–42 Holmlund B, Storrie D (2012) Temporary work in turbulent times: the Swedish experience. Econ J 112:245–269 Houseman SN, Kalleberg LA (2003) The role of temporary agency employment in tight labor markets. Ind Labor Relat J 57(1):105–127 Hussmanns R (2004) Defining and measuring informal employment. ILO, Geneva Ichino A et al (2008) From temporary help jobs to permanent employment: what can we learn from matching estimators and their sensitivity? Appl Econometr J 23:305–327 ILO (2009) Private employment agencies, temporary agency workers and their contribution to the labor market. ILO, Geneva Jahn EJ, Rosholm M (2010) Looking beyond the bridge: how temporary agency employment affect labor market outcomes. Institute For the Study of Labor (IZA), Germany Jansen M, Uekxkul VE (2010) Trade and employment in the global crisis. ILO, Geneva Kahn LM (2009) Temporary jobs and job search effort in Europe. The Institute for the Study of Labor (IZA), Germany Kvasnicka M (2005) Does temporary agency work provide a stepping stone to regular employ- ment. SFB Discussion Papers, Berlin Lund F (2009) Social protection and the informal economy: linkages and good practices for poverty reduction and empowerment. OECD Handbook, Paris Massarelli N, Wozowczykeuropean M (2009) European Union labour force annual results. Eurostat Publications, Luxembourg Morrıs MDS, Vekker A (2001) An alternative look at temporary workers, their choices, and the growth in temporary employment. Labor Res J 22(2):373–390 Neugarty M, Storriez D (2003) Temporary work agencies and equilibrium unemployment. Pro- gram for the Study of Germany and Europe Working Paper No. 02.6 Schiek D (2004) Agency work—from marginalisation towards acceptance? Agency work in EU social and employment policy and the “Implementation” of the draft directive on agency work into German law. German Law J 5(10):1234–1250 Smith PJ (2000) Policy responses to social exclusion. In: Smith PJ (ed) Open University Press, Philadelphia Storrie D (2002) Temporary agency work in the European Union. Office For Official Publications of the European Communities, Luxembourg Su¨ral N (2005) O¨ zel I˙stihdam Bu¨roları. ˙Is¸veren J 15–21 (September) The World Bank (2013) Indicators. Washington. http://data.worldbank.org/indicator. Accessed 10 July 2013 Thommes K, Weiland K (2010) Explanatory factors for firms use of temporary agency work in Germany. Eur Manage J 28:55–67 Vosko LF (2009) Less than adequate: regulating temporary agency work in the EU in the face of an internal market in services. Camb J Reg Econ Soc 2:395–411 Wilthagen T, Tros F (2004) The concept of “Flexicurity: a new approach to regulating employ- ment and labor markets”. Eur Rev Labor Res J 10(2):1–24 Zijl M, Leeuwen MV (2005) Temporary jobs: intermediate positions or jumping boards. SEO Economic Research, Amsterdam
Chapter 12 Solution for Informal Work Problems: Microfinance for Women Aslı Beyhan Acar Abstract Microfinance in increasing the employment of women throughout the world, it is also known that microfinance fight against the unregistered employment which is very important for all governments. With microfinance, the unregistered labor force steadily becomes registered and also these small enterprises recruit more people as they grow after their businesses. It’s possible to say that the most important contribution of microfinance is increasing the effect of formal employ- ment. The objective of this study is to make a comparison between the countries in which microfinance practices can be seen. In this research, the contribution of microfinance in the women employment in Turkey, Bangladesh, India, Pakistan and Indonesia will be also studied by using statistical analyses. These millions of small people with their millions of small pursuits can add up to create the biggest development wonder. Prof. Dr. Muhammed Yunus 12.1 Introduction Through the long years of capitalism, the economy actors have not realized and understood that not the wealth of the entire public but only a very small number of people’s wealth has increased. This has increased the distinction between the income groups and it has also increased the unfairness in the total wealth distribu- tion among the relevant income groups. After the long years of this thought, it has been realized that the continuity of the economy and the growth in the total welfare depends on the fair income distribution and also the economic sustainability. These understanding led the researchers to found a new economic model. Microfinance A. Beyhan Acar (*) 253 Istanbul University, Institute of Business Administration, Istanbul, Turkey e-mail: [email protected] T. Dereli et al. (eds.), Labor and Employment Relations in a Globalized World, Contributions to Economics, DOI 10.1007/978-3-319-04349-4_12, © Springer International Publishing Switzerland 2014
254 A. Beyhan Acar has been founded after these studies by an academician called Prof. Dr. Muhammed Yunus who is a Bangladeshi banker, economist and Nobel Peace Prize recipient. After the long years of study, microfinance has become a very important and emerging topic in different countries primarily in Asia but afterwards in Africa, Americas and so on. This has increased the attention of the researchers to this specific area and they have conducted different studies regarding this issue. In this study, it has been used a different point of view from which we would see how poverty among the females could be decreased using microfinance in different countries. This was the main purpose of this study to show whether female employment affects or being affected by microfinance variables or not. The vari- ables used in the analysis are: Active borrowers to population, Loan Size to GDP, Unemployment, Women Unemployment, Population Below Poverty Line, Depos- itors to Population, Deposit Size to GDP, Female Labor Force Participation and Male to Female Rate. These variables and how they have been used were defined in the study. Afterwards, female unemployment and the total unemployment have been used in order to compare Bangladesh, India, Indonesia, Pakistan and Turkey between each other. Finally, in order to show how these countries were placed among the developed countries, it has been conducted a final analysis with the study has showed that Turkey and India were placed well below the other compared countries in terms of female employment and unemployment. 12.2 Historical Background and Scope of Microfinance Microfinance is the extension of small loans and other financial services (such as savings accounts) to the very poor. This allows them to pursue entrepreneurial projects that generate extra income, thus helping them to better provide for them- selves and their families (Microcredit Summit 2013). Although Microfinance is supposed to be founded by Yunus, in reality the first practices went back to fifteenth century. The brief history of this concept is shown as follows (Severino 2012, p. 2): • 1462—An Italian monk named Barnabe´ de Terni sets up a charitable institution, Monte di Pieta`, to fight usury. • 1653—Lorenzo Tonti, an Italian financier, sets up a savings association in France. His savings system becomes known as the tontine, after its founder. • 1720—In Dublin, Jonathan Swift is the first person to lend small amounts to poor craftsmen in the city. • 1864—Friedrich-Wilhelm Raiffeisen forms the first cooperative credit group in Rhineland, Germany. Its objective is to offer mutual financial guarantees to banks so that poor farmers can have access to credit. • 1880—In France, Father Ludovic de Besse sets up Cre´dit Mutuel et Populaire, of which Banque Populaire are an offshoot. In the following years, the French State
12 Solution for Informal Work Problems: Microfinance for Women 255 launches Cre´dit Agricole, based on the Raiffeisen model, in an attempt to reorganize and support the agricultural sector. • 1970s—Following the failure of rural development funds financed by interna- tional aid and various states in the 1950s, cooperative savings and credit unions start emerging in developing countries. Implementation of experimental Microfinance programs to groups of poor women: in India (SEWA), in Brazil (ACCION International). • 1989—In France, Maria Nowak creates the Association for the right to economic initiative (Adie). • 2005—The year is declared International Year for Microfinance by the United Nations, the motto being “Building inclusive financial sectors to achieve the Millennium Development Goals”. • 2006—The Nobel Peace Prize is given to both Professor Muhammed Yunus and the Grameen Bank, which he founded in 1976. • 2009–2012—Following several localized crises, various initiatives are launched to reinforce the supervision, transparency and performance of microfinance institutions. Muhammed Yunus, founder and managing director of Grameen Bank, said that if an institution could make financial resources available to the poorest people in Bangladesh, then each and every poor people may add value to the development of the entire country or the world. It was proven that the poor have not been tradi- tionally welcomed to financial institutions because (Latifee 2008, p. 1): • They have no asset • They have nothing to offer as collateral • They have no business experiences • They have no training • They have no credit history • They have no education With this belief and the general problems to access finance by the poor people, he has founded the Grameen (The name Grameen is derived from the word gram which means “rural” or “village” in the Bengali language) Bank. This establish- ment went back to 1970s. In 1976, Yunus who was the head of the Rural Economics Program at the University of Chittagong launched an action research project to examine the possibility of designing a credit delivery system to provide banking services targeted at the rural poor (Grameen Bank, “A Short History of Grameen Bank” 2013). At that time Yunus has depicted the poverty level and the model he was about to use in the following years with following sayings (Yunus 2007, p. 41): For one thing, most definitions of poor left out women and children. In my work, I found it useful to use three broad definitions of poor to describe the situation in Bangladesh: P1: Bottom 20% of the population (hard core or absolute poor) P2: Bottom 35% of the population P3: Bottom 50% of the population
256 A. Beyhan Acar Within each category of poor, I often created sub classifications on the basis of religion, region, occupation, ethnic background, sex, age and so on. Occupational or regional categories may not be quantifiable as income asset criteria, but they help us to create a multidimensional poverty matrix. The sayings have pointed out that Yunus have clearly stated the situation and very briefly classified the poverty levels depending on several factors which would help him in determining the real causes in the following terms. Meanwhile he has encountered an event which involves a lack of USD 27 caused 42 hardworking and capable people hindering from work. He has told this in his book as follows (Yunus 2007, p. 50): People like Sufiya were poor not because they were stupid or lazy. They worked all day long, doing complex physical tasks. They were poor because the financial institutions in the country did not help them widen their economic base. No formal financial structure was available to cater to the credit needs of the poor....But if I could just lend the Jobra villagers the twenty-seven dollars, they could sell their products to anyone. They would then get the highest possible return for their labor and would not be limited by the usurious practices of the traders and moneylenders. After these happenings, he decided to help these people by establishing a new foundation which will provide finance to all poor people who are eager to work. The action research demonstrated its strength in a village close to Chittagong University called Jobra and some of the neighboring villages during 1976–1979. With the sponsorship of the central bank of the country and the support of the nationalized commercial banks, the project was extended to a district north of Dhaka called Tangail in 1979. With the success in Tangail, the project was extended to several other districts throughout the country. Yunus carried his success story to traditional banks and proposed that they could also make uncollateralized loans to society’s poorest. In response, the banks asserted that borrowers would never sufficiently organize themselves to repay, that proceeds from such loans were too small to cover administrative costs and that female borrowers would simply hand over the funds to their husbands. Early critics argued that even if lenders avoided these pitfalls, the last thing the poor needed was the added burden of indebtedness (Mainsah et al. 2004, p. 2). Due to the above mentioned approaches of the banks, in October 1983, the Grameen Bank Project was transformed into an independent bank by government legislation. Today Grameen Bank is owned by the rural poor whom it serves. Borrowers of the Bank own 90 % of its shares, while the remaining 10 % is owned by the government (Grameen Bank, “A Short History of Grameen Bank” 2013). He believed that credit should be a human right. In addition to this understanding he has imposed 16 principles which are as follows (Libecap 2009, p. 167–168): 1. We shall follow and advance the four principles of Grameen Bank: Discipline, Unity, Courage and Hard work—in all walks of our lives. 2. Prosperity we shall bring to our families.
12 Solution for Informal Work Problems: Microfinance for Women 257 3. We shall not live in dilapidated houses. We shall repair our houses and work towards constructing new houses at the earliest. 4. We shall grow vegetables all the year round. We shall eat plenty of them and sell the surplus. 5. During the plantation seasons, we shall plant as many seedlings as possible. 6. We shall plan to keep our families small. We shall minimize our expenditures. We shall look after our health. 7. We shall educate our children and ensure that they can earn to pay for their education. 8. We shall always keep our children and the environment clean. 9. We shall build and use pit-latrines. 10. We shall drink water from tube wells. If it is not available, we shall boil water or use alum. 11. We shall not take any dowry at our sons’ weddings; neither shall we give any dowry at our daughter’s wedding. We shall keep our center free from the curse of dowry. We shall not practice child marriage. 12. We shall not inflict any injustice on anyone; neither shall we allow anyone to do so. 13. We shall collectively undertake bigger investments for higher incomes. 14. We shall always be ready to help each other. If anyone is in difficulty, we shall all help him or her. 15. If we come to know of any breach of discipline in any centre, we shall all go there and help restore discipline. 16. We shall take part in all social activities collectively. These principles were not all about the microfinance principles but they were totally about changing the life style of people in Bangladesh in order to reach all requirements which are needed by all people. That’s why every year Grameen Bank staff evaluates and checks whether the socio-economic situation of Grameen Bank members is improving or not. Grameen Bank evaluates poverty level of the borrowers using ten indicators. A member is considered to have moved out of poverty if her family fulfills the following criteria (Grameen Bank, “10 Indicators” 2013): 1. The family lives in a house worth at least TK 25.000 or a house with a tin roof, and each member of the family is able to sleep on bed instead of sleeping on the floor. 2. Family members drink pure water of tube-wells, boiled water or water purified by using alum, arsenic-free, purifying tablets or pitcher filters. 3. All children in the family over 6 years of age are all going to school or finished primary school. 4. Minimum weekly loan installment of the borrower is TK 200 or more. 5. Family uses sanitary latrine. 6. Family members have adequate clothing for everyday use, warm clothing for winter, such as shawls, sweaters, blankets, etc. and mosquito-nets to protect themselves from mosquitoes.
258 A. Beyhan Acar 7. Family has sources of additional income, such as vegetable garden, fruit- bearing trees, etc. so that they are able to fall back on these sources of income when they need additional money. 8. The borrower maintains an average annual balance of TK 5.000 in her savings accounts. 9. Family experiences no difficulty in having three square meals a day throughout the year, i.e. no member of the family goes hungry any time of the year. 10. Family can take care of the health. If any member of the family falls ill, family can afford to take all necessary steps to seek adequate healthcare. 12.3 How Does the System Work? After defining why microfinance has evolved in Bangladesh, we also need to tell the Grameen Bank’s method of action which can be illustrated by the following principles (Grameen Bank, “Method of Action” 2013): 1. Start with the problem rather than the solution: A credit system must be based on a survey of the social background rather than on a pre-established banking technique. 2. Adopt a progressive attitude: Development is a long-term process which depends on the aspirations and commitment of the economic operators. 3. Make sure that the credit system serves the poor, and not vice-versa: credit officers visit the villages, enabling them to get to know the borrowers. 4. Establish priorities for action vis-a`-vis to the target population: serve the most poverty-stricken people needing investment resources, who have no access to credit. 5. At the beginning, restrict credit to income-generating production operations, freely selected by the borrower. Make it possible for the borrower to be able to repay the loan. 6. Lean on solidarity groups: small informal groups consisting of co-opted mem- bers coming from the same background and trusting each other. 7. Associate savings with credit without it being necessarily a prerequisite. 8. Combine close monitoring of borrowers with procedures which are simple and standardized as possible. 9. Do everything possible to ensure the system’s financial balance. 10. Invest in human resources: training leaders will provide them with real devel- opment ethics based on rigour, creativity, understanding and respect for the rural environment. The above principles show how the microfinance facility should be designed in order to be reached by more poor people. This could only be done by an efficient credit delivery system. Grameen Bank credit delivery means taking credit to the very poor in their villages by means of the essential elements of the Grameen credit
12 Solution for Informal Work Problems: Microfinance for Women 259 delivery system. Grameen Bank credit delivery system has the following features (Grameen Bank, “Credit Delivery System” 2013): 1. There is an exclusive focus on the poorest of the poor. The priority has been increasingly assigned to women. The delivery system is geared to meet the diverse socio-economic development needs of the poor 2. Borrowers are organized into small homogeneous groups. 3. Special loan conditions which are particularly suitable for the poor. These include very small loans given without any collateral, the loans repayable in weekly installments spread over a year, eligibility for a subsequent loan depends upon repayment of first loan; individual, self-chosen, quick income generating activities which employ the skills that borrowers already possess etc. 4. Simultaneous undertaking of a social development agenda addressing basic needs of the clients. 5. Design and development of organization and management systems should be capable of delivering program resources to targeted clients. 6. Expansion of loan portfolio to meet diverse development needs of the poor. 12.4 How Did the Project Perform? After giving brief explanations about microfinance and its impact on the poor people the study will try to show how the project performed through Grameen Bank’s transactions. As it is shown in Fig. 12.1, the branch expansion caused an increase in the number of village covered. Both data series have depicted same trend of expansion where the left axis shows the number of village and the right shows the number of branches. Since the aim of the bank was to support the poor people to contribute produc- tion and the total welfare of the country, to be successful it was very important to increase the number of the participants to enter the program. Especially the women members were mostly welcomed due to the high poverty among these people. The developments can be easily seen from Fig. 12.2 which proved that as the members of the organization have increased the percentage of the females have also increased. As the trust has increased to this organization not only the members but also non-members have started to deposit money. Depending on the findings that are shown in Fig. 12.3, right axis shows the percentage of the member deposits in the total amount of deposits where the left axis shows the amount of deposit of the members and the non-members. As it is seen from Fig. 12.4, as the amount of outstanding loans given by Grameen Bank increases the delinquency ratio does not show any correlation with the relevant data series. Since the entire globe has encountered a big financial crisis starting from 2008 and has not stopped so far, the delinquency ratios have somehow increased in this period of time. However, after 2009 there is a sharp
260 A. Beyhan Acar 90,000 Number of Villages covered 3,000 80,000 Number of Branches 2,500 70,000 2,000 1,500 60,000 1,000 500 50,000 0 40,000 30,000 20,000 10,000 0 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 Fig. 12.1 Branch expansion vs the coverage. Source: Grameen Bank, “Historical Data”, http:// www.grameen-info.org/index.php?option¼com_content&task¼view&id¼632&Itemid¼664 Millions 9 100 Number of Members 90 80 8 70 7 % of Female Members 60 6 50 5 40 4 30 3 20 2 10 1 0 0 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 Fig. 12.2 The member structure of Grameen Bank. Source: Grameen Bank, “Historical Data”, http://www.grameen-info.org/index.php?option¼com_content&task¼view&id¼632&Itemid¼664 decrease in the total amount of overdue which brought the figure below 2 % which is pretty acceptable compared to the ratios of overdue of the conventional banks. After giving general figures of microfinance facilities, this study need to give a country practice from developed zone of the world. Since this facility has been used for the people living in under developed countries, it is also important to show how this facility has performed in a developed country such as France. Figure 12.5 shows where microfinance facility used by the French borrowers. It is seen that most of the facilities have been used for business and repair purposes which is followed by services to businesses and individuals. Beneficiaries of personal and professional microfinance often share the same characteristics. In general, they are under 40 years old with minimal qualifications. More specifically, beneficiaries of professional microfinance are essentially male
12 Solution for Informal Work Problems: Microfinance for Women 261 1,600 Total Deposits (Balance) 100.00 1,400 Deposits of GB Members (Balance) 90.00 1,200 GB Members' Deposit as % of Total Deposit 80.00 1,000 70.00 60.00 800 50.00 600 40.00 400 30.00 200 20.00 10.00 0 0.00 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Fig. 12.3 The funding structure of Grameen Bank. Source: Grameen Bank, “Historical Data”, http:// www.grameen-info.org/index.php?option¼com_content&task¼view&id¼632&Itemid¼664 1000 Total loan outstanding 3.00% 900 (gross) (In million USD) 2.50% 800 Delinquency RaƟo 2.00% 700 1.50% 600 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 1.00% 500 0.50% 400 0.00% 300 200 100 0 Fig. 12.4 The quality of the outstanding loans of Grameen Bank. Source: Grameen Bank, “Performance Indicators”, http://www.grameen-info.org/index.php?option¼com_content& task¼view&id¼632&Itemid¼664 (62 %), with a secondary or higher education diploma (43 %) and mostly unem- ployed (65 %). In this case, microfinance is a stepping-stone on the path to employment. Beneficiaries of personal microfinance on the other hand are essen- tially employed (52 %) (Severino 2012). As a result the study need to give the overall figures of microfinance from all reporting parties around the world. Depending of the findings that are shown in Table 12.1, microfinance facilities have attracted more people in under developed countries. There are very small numbers of programs reported from industrialized countries compared to the other countries such as African countries. The number of clients has been increasing very rapidly and reached almost 200 million which is 3 % of all world population.
262 A. Beyhan Acar Business and repair Services to businesses and individuals Hotels and restaurants ConstrucƟon Other Industry Agriculture 0% 5% 10% 15% 20% 25% 30% 35% 40% Fig. 12.5 Purpose of microfinance in France. Source: Severino 2012, p. 6 12.5 Microfinance and Women The Asia-Pacific region is the home to many microfinance institutions and the majority of programs are directed at women in rural areas. Targeting women as clients of microfinance programs has been an effective method to ensure that the benefits of increased family income are directed towards the general welfare of the family and particularly the children. In order to make it more clear to show how microfinance is used by the women we need to know what is meant by microfinance. If we make a broad classification the associated term, we have the following types of credit inside microfinance concept. These types of finance are as follows (Grameen Bank, “What is Microcredit?” 2013): • Traditional informal microfinance (such as, moneylender’s credit, pawn shops, loans from friends and relatives, consumer credit in informal market, etc.). • Microfinance based on traditional informal groups. • Activity-based Microfinance through conventional or specialized banks (such as, agricultural credit, livestock credit, fisheries credit, handloom credit, etc.). • Rural credit through specialized banks. • Cooperative Microfinance (cooperative credit, credit union, savings and loan associations, savings banks, etc.). • Consumer Microfinance. • Bank-NGO1 partnership based Microfinance. • Grameen type Microfinance or Grameen credit. • Other types of NGO Microfinance. • Other types of non-NGO non-collateralized Microfinance. As it is told before, microfinance refers to providing loans to poor people for self-employment. Generally, small amounts are disbursed as loans and the 1 Non-governmental organizations.
Table 12.1 Overview of microfinances in figures 12 Solution for Informal Work Problems: Microfinance for Women Number of Number of Number of Number of Number of Number of poorest Number of poorest prog total clients total clients poorest clients in poorest clients in women clients in 2009 women clients in 2010 reporting 2009 2010 2009 2010 12,692,579 Sub Saharan 1,009 10,776,726 6,360,861 7,248,732 3,935,808 4,783,256 Africa 1,746 169,125,878 156,403,658 13,847,987 117,178,142 125,530,437 97,385,541 104,752,430 Asia Pacific 12,257,181 2,834,742 2,919,646 1,935,685 2,363,100 4,290,735 Latin America and 647 4,552,387 199,957,179 183,989,952 Caribbean 155,254 148,628 MENA 91 5,202,069 1,492,322 1,680,181 1,217,113 1,165,358 5,996,500 127,866,067 137,378,996 104,474,146 113,064,144 Developing world 3,493 5,357,323 6,145,128 109,318 41,809 56,651 12,214 North America 86 205,314,502 190,135,080 and West Europe East Europe and 73 233,810 126,636 163,318 62,294 343,128 168,445 219,969 74,508 Central Asia 128,209,195 137,547,441 104,694,115 113,138,652 Industrialized 159 world Global 3,652 Source: Maes and Reed (2012) 263
264 A. Beyhan Acar timeframe for repayment of loans is longer compared to commercial banks’ install- ment based loans. Together with providing financial services, many microfinance institutions work for social development in the areas in which they operate. Microfinance institutions generally have the following characteristics (Taneja 2009, p. 117): • Providing small loans for the working capital requirements of the rural poor (especially for women). • Minimal appraisal of borrowers and investments as compared to commercial banks. • No collateral demanded; however, these institutions impose compulsory savings and group guarantees. • Based on the loan repayment history of the members, microfinance institutions extend larger loans to the members repeatedly. Microfinance practices are the social responsibility outputs of the corporations that serve this facility to their customers. Since the cost of this practices are very high for the companies, the microfinance practices are usually held by the non-profit organizations such as the endowments. The reason why these practices are so costly is their low requirements in reaching finance. Since anybody who has an entrepreneur character is able to reach these financing facilities with no collateral except the guarantees taken from the other microfinance customers. This means that there is a high credit risk for the bank which allocates microfinance limit for the individuals. It is possible to say that the first objective of this program is to bring the women into work who had been previously unemployed and hopeless to work. It is also known that in the developed countries the involvement of the women in the employment is far away high than the developing countries. It has been proven that the sustainable economic growth would not be succeeded if only the men are employed. From the early 1970s, women’s movements in a number of countries identified credit as a major constraint on women’s ability to earn an income and became increasingly interested in the degree to which poverty-focused credit programs and credit cooperatives were actually being used by women. Since the 1970s, many women’s organizations world-wide have included credit and savings, both as a way of increasing women’s incomes and to bring women together to address wider gender issues (Mayoux 2000, p. 5). Women workers throughout the world contribute to the economic growth and sustainable livelihoods of their families and communities. Microfinance helps empower women from poor households to make this contribution. Microfinance services lead to women’s empowerment by positively influencing women’s decision-making power and enhancing their overall socio-economic status. By the end of 2006, microfinance services had reached over 79 million of the poorest women in the world (ILO 2007, p. 3). Seventy percent of the world’s poor are women. Yet traditionally women have been disadvantaged in access to credit and other financial services. Commercial
12 Solution for Informal Work Problems: Microfinance for Women 265 banks often focus on men and formal businesses, neglecting the women who make up a large and growing segment of the informal economy. Female clients represent 85 % of the poorest microfinance clients reached. Therefore, targeting women borrowers makes sense from a public policy standpoint. The business case for focusing on female clients is substantial, as women clients register higher repay- ment rates. They also contribute larger portions of their income to household consumption than their male counterparts (ILO 2007, p. 3). In addition to the help of microfinance in increasing the employment of women throughout the world, it is also known that microfinance fight against the unregistered employment which is very important for all governments. With microfinance, the unregistered labor force steadily becomes registered and also these small enterprises recruit more people as they grow after their businesses. 12.6 Empirical Analyses on Microfinance and Its Effect on Women Employment In this section the findings of the empirical study will be shown. 12.6.1 Objective The objective of this study is to make a comparison between the countries in which microfinance practices can be seen. In this research, the contribution of microfinance in the women employment in Turkey, Bangladesh, India, Pakistan and Indonesia will be also studied by using statistical data and analyses. Further- more, a final analysis will be also conducted to show how these countries will be placed among the developed countries subject to the variables used in this study. 12.6.2 Method of Analyses In this study we have mainly used cluster analyses which is a generic name for a variety of mathematical methods that can be used to find out which objects in a set are similar (Romesburg 2004, p. 2). Cluster analysis is a convenient method for identifying homogenous groups of objects called clusters. Objects (or cases, obser- vations) in a specific cluster share many characteristics, but are very dissimilar to objects not belonging to that cluster (Mooi and Sarstedt 2011, p. 238). There are many clustering algorithms however there are two mainly used methods called:
266 A. Beyhan Acar • Hierarchical Clustering • K Means Clustering In this study Hierarchical Clustering is used which is based on the core idea of objects being more related to nearby objects than to objects far away. SPSS 18.0 has been used in the analysis of data. 12.6.3 Data Collection The required data have been collected from; mixmarket.org, CIA Website, ILO Website, Pakistan Bureau of Statistics Website, IMF Website, World bank Website and OECD Website. The data were about the following variables as of 2011: • Active_borrowers_to_population: The active number of microfinance borrowers divided by the population. • Loan_Size_to_GDP: The total microfinance exposure in the relevant country divided by the Gross Domestic Product. • Unemployment: The unemployment rate of the relevant country. • Women_unemployment: The women unemployment rate of the relevant country. • Population_below_poverty_line: The population below the poverty line divided by the total population. • Depositors_to_population: The active number of microfinance fund providers divided by the population. • Deposit_Size_to_GDP: The total deposit amount in the relevant country divided by the Gross Domestic Product. • Female_labor_force_participation: The female labor force divided by the total number of people employed. • Male_to_female_rate: The total number of males divided by the total number of females. 12.7 The Findings Before going forward, the first analysis was on the correlation of the data collected in order to understand whether there is connection between the data collected which may show the correlated variables with the women employment. The correlation method was chosen as Spearman’s Rho which is one of the nonparametric corre- lation methods. The reason was the low amount of data which do not show normal distribution (for parametric tests we need normal distribution) As per Table 12.2, there were found some significant correlations related to women unemployment. The findings are listed as follows:
Table 12.2 Correlations between variables 12 Solution for Informal Work Problems: Microfinance for Women Active_ Loan_ Population_ Deposit_ female_labor_ male_to_ borrowers_ force_ female_ to_population Size_ women_ below_ Depositors_to_ Size_ participation rate À0.100 to_GDP Unemployment unemployment poverty_line population to_GDP 0.500 0.873 0.391 5 Active_borrowers_ Correlation coefficient 1.000 0.700 À0.564 À0.900* 0.900* 0.900* 0.821 5 À0.600 to_population Sig. (two-tailed) 0.188 0.322 0.037 0.037 0.037 0.089 0.300 0.285 N 5 5 5 5 5 5 5 0.624 5 Loan_Size_to_GDP Correlation coefficient 0.700 1.000 À0.616 À0.400 0.400 0.600 0.667 5 0.616 0.219 0.308 0.269 Sig. (two-tailed) 0.188 0.269 0.505 0.505 0.285 5 0.614 5 5 5 5 5 À0.921* 5 0.000 N5 5 1.000 0.410 À0.410 À0.821 0.026 À0.600 1.000 À0.616 5 0.285 Unemployment Correlation coefficient À0.564 À0.667 5 0.000 0.219 0.600 1.000 Sig. (two-tailed) 0.322 0.269 0.493 0.493 0.089 5 0.285 5 0.667 5 -0.200 N 55 5 5 5 5 0.219 0.100 0.747 0.410 1.000 À1.000** À0.800 5 0.873 5 Women_ Correlation coefficient À0.900* À0.400 0.493 0.104 0.975** 5 À0.359 unemployment 0.005 À0.051 0.553 Sig. (two-tailed) 0.037 0.505 5 0.935 5 1.000 5 0.100 N5 5 5 5 5 5 1.000 0.873 0.400 À0.410 À1.000** 1.000 0.800 5 5 Population_below_ Correlation coefficient 0.900* 0.505 0.493 0.104 À0.051 5 1.000 poverty_line 0.935 0.100 Sig. (two-tailed) 0.037 5 0.873 5 À0.359 5 N5 5 5 5 5 5 0.553 0.600 À0.821 À0.800 0.800 1.000 5 Depositors_to_ Correlation coefficient 0.900* 0.285 0.089 0.104 0.104 population Sig. (two-tailed) 0.037 Deposit_Size_ N 5 5 5 5 5 5 to_GDP Correlation coefficient 0.821 0.667 À0.921* À0.667 0.667 0.975** Sig. (two-tailed) 0.089 0.219 0.026 0.219 0.219 0.005 Female_labor_ N 5 5 5 5 5 5 force_ Correlation coefficient 0.500 0.300 0.308 À0.600 0.600 0.100 participation Sig. (two-tailed) 0.391 0.624 0.614 0.285 0.285 0.873 N 5 5 5 5 5 5 Male_to_ Correlation coefficient À0.100 À0.600 0.616 0.000 0.000 À0.200 female_rate Sig. (two-tailed) 0.873 0.285 0.269 1.000 1.000 0.747 N 55 5 55 5 *Correlation is significant at the 0.05 level (two-tailed); **correlation is significant at the 0.01 level (two-tailed) 267
268 A. Beyhan Acar • There is a perfect negative correlation between women_unemployment and Population_below_poverty_line which shows that as the women employment increase the poverty decrease. • There is a very strong negative correlation between women_unemployment and Active_borrowers_to_population which shows that as the active borrowers of microfinance increase the women unemployment decrease. • Furthermore, there are insignificant but very high negative correlations between Depositors_to_population, Deposit_Size_to_GDP and women unemployment. Other than women unemployment and the other variable relations, there are indicated different important relations among the other variables as stated below: • Population_below_poverty_line and Active_borrowers_to_population are posi- tively correlated which may show as the number of poor people increase the need for microfinance increase. • Depositors_to_population and Active_borrowers_to_population are positively correlated which may show as the number of fund providers increase the active borrowers also increase. • Unemployment and Deposit_Size_to_GDP are negatively correlated which shows that as the amount of funds provided increase the rate of unemployment decrease. After conducting these studies it has also been used cluster analysis as per below figures. The objective of this analysis is to show how the countries were located among the group. This will show us whether there is a country located in the same group of other countries or will there be a country which will be located far away from the others. The cluster analysis should be done with a maximum amount of two variable sets since there are no more than five cases (countries). The generally accepted ratio for cluster analysis is: number of variable sets  (2, 5 or 3) ¼ minimum amount of cases (countries). In order to satisfy this restriction it has been used maximum two variable sets each time. The variable sets are chosen as follows: • Active_borrowers_to_population and Depositors_to_population • Unemployment and women_unemployment • Loan_Size_to_GDP and Deposit_Size_to_GDP Table 12.3 is called as Agglomeration Schedule which helps the researcher to understand how many groups are formed in the analysis. The main important indicator is the coefficient difference between the stages. Since the last coefficient is far big than the third stage’s coefficient we can say that there are only two separate groups among the countries. If this great difference was between second and third stages we could say that there would be three groups of countries. Figure 12.6 confirms the result that are shown in Table 12.3 which shows that Bangladesh is located in a separate group where the other countries are located in the same group. It shows that regarding the Active_borrowers_to_population and
12 Solution for Informal Work Problems: Microfinance for Women 269 Table 12.3 Agglomeration active_borrowers_to_population depositors_to_population Cluster combined Stage cluster first appears Stage Cluster 1 Cluster 2 Coefficients Cluster 1 Cluster 2 Next stage 1 35 0.2 00 2 2 34 1,150 10 3 3 23 3,637 02 4 4 12 325,893 03 0 Fig. 12.6 Dendogram active_borrowers_to_population depositors_to_population Depositors_to_population variables, microfinance in Bangladesh is far better than the other compared countries. The second analysis is upon Loan_Size_to_GDP and Deposit_Size_to_GDP. According to Table 12.4 there is seen either two or three group of countries. The coefficient difference between second stage and third stages and between third stage and fourth stages are approximately same. After analyzing Table 12.4 we could make more comments on Fig. 12.7. It is seen that Bangladesh and Pakistan show similar characteristics whereby Indonesia and Turkey show similar characteristics. India is located in a different group which is close to Bangladesh-Pakistan group. After comparing countries according to the microfinance density, the third comparison was done on the unemployment and women unemployment figures. According to Table 12.5 the biggest difference in the coefficients was between the second and the third stages. The coefficient of the third stage is approximately
270 A. Beyhan Acar Table 12.4 Agglomeration loan_size_to_GDP and deposit_size_to_GDP Cluster combined Stage cluster first appears Stage Cluster 1 Cluster 2 Coefficients Cluster 1 Cluster 2 Next stage 1 14 12,058 00 3 2 35 12,748 00 4 3 12 23,708 10 4 4 13 46,794 32 0 Fig. 12.7 Dendogram loan_size_to_GDP and deposit_size_to_GDP 30 times of second stage. This means that there should be three groups regarding the employment figures. The result of Fig. 12.8 confirms above table that there would be three groups which are formed as: first group as Bangladesh, second group as Indonesia and the last group cover Turkey, Pakistan and India. Figure 12.8 shows that Bangladesh as the origin of microfinance is often located in separate groups in all of the cluster analyses. Furthermore, the women employ- ment is seen to be increased in Bangladesh due to the access to microfinance. After completing the analyses among the compared countries, the study has tried to show a different comparison with the G7 countries in order to understand which countries (Bangladesh, India, Indonesia, Pakistan, Turkey) have been located with G7 countries. Table 12.6 shows that the coefficient difference between the first stage and the second stage is very big which means that there should be nine groups which is inconvenient. However also the coefficient difference between eighth and the ninth stages are also very big which results with three groups.
12 Solution for Informal Work Problems: Microfinance for Women 271 Table 12.5 Agglomeration unemployment and women_unemployment Next stage 2 Cluster combined Stage cluster first appears 3 4 Stage Cluster 1 Cluster 2 Coefficients Cluster 1 Cluster 2 0 1 45 1,700 00 2 24 3,550 01 3 23 116,927 20 4 12 817,930 03 Fig. 12.8 Dendogram unemployment and women_unemployment Table 12.6 Agglomeration G7 and analyzed countries Cluster combined Stage cluster first appears Stage Cluster 1 Cluster 2 Coefficients Cluster 1 Cluster 2 Next stage 1 25 0.200 00 3 2 48 0.965 00 5 3 23 1,011 10 6 4 19 1,449 00 9 5 4 11 1,894 20 7 6 26 4,066 30 7 7 24 8,153 65 9 8 7 10 9,010 00 10 9 12 23,490 47 10 10 17 56,777 98 0
272 A. Beyhan Acar When we look into the following figure three groups can be confirmed. These are: • First group: Canada, UK, Germany, Indonesia, France, Italy, US • Second group: Bangladesh, Japan • Third group: India, Turkey 12.8 Conclusion In this study it has given a brief summary of microfinance and its effect on the unemployment of females. Before doing so, this study has mentioned what microfinance is and why it is needed. According to one definition microfinance is the extension of small loans and other financial services to the very poor. This helps the individuals to save themselves from poverty and contributes to the entire economic development of the country. Microfinance emerged as a revolutionary tool to fight poverty in the different parts of the world. Microfinance, in the recent years, proved that it becomes an effective tool to help the poor population of a country who get neither the World Bank/IMF aid which is given for them nor the governmental help. Although the first practices go back to several centuries ago, the most important and modern practice has been noticed in Bangladesh with the attempt of Muhammed Yunus who is an academician. He believed that the poor people could not reach financial sources since they were not eligible to be financed. This is because that they were not rich, educated and credible. However, he wanted to show that if this people have been given a chance to reach financial resources which do not need to be so big, they would prove that they will produce and they participate to the economy. In his book he has given several examples of this. Furthermore, the unemployment with this action could be lowered as much as possible but in order to decrease poverty the female contribution should also be provided. Therefore, female contribution to the economy through microfinance has been also studied in several studies. If it was true for a community to decrease the poverty by providing more females into production, this would also be a cue for the other nations to use the same algorithm to increase the total wealth of the public. This was the main purpose of this study to show whether female employment affects or being affected by other microfinance variables or not. Afterwards, female unemployment and the total unemployment have been used in order to compare Bangladesh, India, Indonesia, Pakistan and Turkey between each other. To do so, it has used cluster analysis which is a convenient method for identi- fying homogenous groups of objects called clusters. Objects (or cases, observa- tions) in a specific cluster share many characteristics, but are very dissimilar to
12 Solution for Informal Work Problems: Microfinance for Women 273 objects not belonging to that cluster. This helped us to compare countries among each other. The variables used in the analysis are: Active borrowers to population, Loan Size to GDP, Unemployment, Women Unemployment, Population Below Poverty Line, Depositors to Population, Deposit Size to GDP, Female Labor Force Participation and Male to Female Rate. These variables have been defined in the study. According to the outputs of the analyses: the study has found that there is a perfect negative correlation between Women Unemployment and Population below Poverty Line, a very strong negative correlation between Women Unemployment and Active Borrowers to Population, insignificant but very high negative correla- tions between Depositors to Population, Deposit Size to GDP and Women Unem- ployment. Furthermore, it was found that Population below Poverty Line and Active Borrowers to Population are positively correlated, Depositors to Population and Active Borrowers to Population are also positively correlated and finally Unemployment and Deposit Size to GDP are negatively correlated. After conducting correlation analysis, it has been also applied cluster analysis. Under this analysis, the countries have been compared according to the three data sets. These were: Active borrowers to population and Depositors to population, Unemployment and women unemployment and finally Loan Size to GDP and Deposit Size to GDP. Regarding the Active borrowers to population and Depositors to population variables, microfinance in Bangladesh is far better than the other compared countries. The second analysis was upon Loan Size to GDP and Deposit Size to GDP which showed that Bangladesh—Pakistan and Indonesia—Turkey are grouped together. The final analysis between these countries were upon Women Unemployment and Overall Unemployment which resulted with the following groups: first group as Bangladesh, second group as Indonesia and the last group cover Turkey, Pakistan and India. In all of the cluster analyses Bangladesh has been placed in different places which shows that Bangladesh has been differentiated among the other countries under comparison. This has shown that microfinance practices have been efficiently adapted to Bangladesh which has increased the female employment with lowering the poverty and the total unemployment. Finally it has been tested whether these practices have differentiated the coun- tries under comparison with the G7 countries which are already industrialized countries with high level of life quality. Depending on the findings that are shown in Fig. 12.9 only India and Turkey have been located far away from the other countries which show that subject to female unemployment and overall unemployment figures Turkey and India are scored far below than the compared countries. Bangladesh is located very close to Japan which is agreed to be a developed country.
274 A. Beyhan Acar Fig. 12.9 Dendogram G7 and analyzed countries References Grameen Bank (2012a) A short history of Grameen Bank. January 2013. Bangladesh. http://www. grameeninfo.org/index.php?option¼com_content&task¼view&id¼19&Itemid¼114. Accessed January 2013 Grameen Bank (2012b) Credit delivery system. January 2013. Bangladesh. http://www.grameeninfo. org/index.php?option¼com_content&task¼view&id¼24&Itemid¼127. Accessed January 2013 Grameen Bank (2012c) Method of action. January 2013. Bangladesh. http://www.grameeninfo. org/index.php?option¼com_content&task¼view&id¼33&Itemid¼107. Accessed February 2013 Grameen Bank (2012d) What is microcredit? October 2011. Bangladesh. http://www.grameeninfo. org/index.php?option¼com_content&task¼view&id¼28&Itemid¼108. Accessed November 2012 ILO (2007) Small change, big changes: women and microfinance. ILO, Geneva Latifee HI (2008) Financial inclusion: the experience of Grameen Bank. Deepening financial sector reforms and regional cooperation in South Asia. Gulmohar Hall, India Libecap GD (2009) Measuring the social value of innovation: a link in the university technology transfer and entrepreneurship equation. Emerald Group, Bingley Maes JP, Reed LR (2012) State of the Microcredit Summit Campaign Report 2012. Microcredit Summit Campaign, US, p 38 Mainsah E et al (2004) Grameen Bank: taking capitalism to the poor, Columbia Business School. Chazen Web J Int Bus (Spring) 1–24 Mayoux L (2000) Micro-finance and the empowerment of women. ILO, Geneva Microcredit Summit Campaign (2013) 2013 Summit. Washington. http://www.microcredits ummit.org/about-the-summits.html. Accessed Feb 2013 Mooi E, Sarstedt M (2011) A concise guide to market research. Springer, Heidelberg
12 Solution for Informal Work Problems: Microfinance for Women 275 Romesburg HC (2004) Cluster analysis for researchers. Lulu, US Severino JM (2012) Microfinance barometer 2012. 3rd edn, Convergences 2015, Paris Taneja K (2009) Micro finance: the new mantra of rural finance to reduce poverty. Delhi Bus Rev J 10(2):117–121 Yunus M (2007) Banker to the poor: micro-lending and the battle against world poverty. New York Times Bestseller, New York Yunus M (2012) 10 indicators. January 2013. Bangladesh. http://www.grameeninfo.org/index. php?option¼com_content&task¼view&id¼23&Itemid¼126. Accessed February 2013
Chapter 13 Visiting the Iron Cage: Bureaucracy and the Contemporary Workplace Ahmet Hakan Yu¨ ksel Abstract Bureaucracy as an organizational form has always been a controversial issue and placed at the very heart of most discussions within organizational theory. One side of this prolonged discussion praises this administrative form as the ‘rational’ way to run an organization. It provides needed guidance and clarifies responsibilities, which enables employees to become more efficient. However, the opposition claims that in a non-linear world, where industrial organizations are forced to confront the challenging task of sensing and responding to unpredictable, novel situations of highly competitive markets, such an organizational form stifles creativity, fosters de-motivation and causes pressure on employees. Dealing with a bureaucratic form of organization and its consequences begs for a context. It would be appropriate to quit ‘taking sides’ and develop a sound analysis of this phenom- enon under the conditions of today’s global workplace environment. This chapter intends to delineate the conditions under which bureaucracy has emerged and the way it has been interpreted since its inception and develop a sound and appropriate analytical approach to its functioning given the prevailing conditions of the con- temporary workplace. 13.1 Introduction Dealing with the voluminous literature on bureaucracy requires strenuous endeavor. After spending a considerable amount of time and effort in trying to grasp the very insight of Weber’s conception of bureaucracy, ending up in one of the most rigorous academic battlefields is almost inevitable; with detractors on the one side and proponents, though few, on the another. Bureaucracy has generally been labeled as the chief villain in the world of organization and management theory. The prolonged arguments regarding the effectiveness of bureaucratic A.H. Yu¨ksel (*) 277 Is¸ık University, Universite Sok. No.2, 34980 S¸ ile, I˙stanbul, Turkey T. Dereli et al. (eds.), Labor and Employment Relations in a Globalized World, Contributions to Economics, DOI 10.1007/978-3-319-04349-4_13, © Springer International Publishing Switzerland 2014
278 A.H. Yu¨ksel organizational structures have leaped to their self-evident conclusions. The assump- tions and premises of a typical bureaucratic organization are claimed to have failed to accommodate ‘post-bureaucratic’ organizational and managerial concerns such as teamwork, flexibility, adaptability, managing knowledge and employee contri- bution. Bureaucracy habitually implies inefficiency, slowness, top-down decision- making and waste of resources (Bo¨hm 2006). There is an entire literature dedicated to revealing bureaucracy’s imperfections. On the other hand, bureaucracies are still quite prevalent. Bureaucracy has persisted throughout the last century and still does. Apparently, the need for the utilization of its constituting elements is still vibrant. It would be more constructive to alter our stance on the matter and embrace a more reasonable one rather than producing arguments of abstract celebration or denunciation of bureaucracy, prais- ing it for its impartiality or condemning it for its conservatism, to approve its efficiency or damn its amorality (Du Gay 2005). The taken-for-granted assumptions of the ‘linear’ world have been shattered by the unprecedented level of inter- connectedness which has been causing a great deal of change, especially, for the last couple of decades. Among the constellation of theories in the world of organi- zational studies none could afford to be treated as a universally valid administrative apparatus applicable to all organizations regardless of their functions including bureaucracy. Organizations are constantly in pursuit of developing unique capabil- ities to cope with the challenges in the business ecology and engage in symbiotic relationships through which they will manage to adapt to the environmental con- ditions and become a part of interdependent coevolution. The components that constitute bureaucratic rationality are still vibrant and the fingerprints of its very logic could be traced in many contemporary arguments, though re-presented via more fashionable buzzwords. It would be more appropriate to resist the firmly fixed habit that touts bureaucracy as an object of scorn and spend effort to establish forward and backward contextual linkages, which will eventually enable us to devise a neo-bureaucratic system of thought that is capable of being resilient and embracing complexity. This chapter intends to delineate the conceptual framework of bureaucracy and tap into the functionality of its qualities under the circumstances of current global conditions in a ‘sine ira et studio’ manner. 13.2 Weber and His Conception of Bureaucracy: Eliminating the Bugs Max Weber was born in 1864 into a prosperous German bourgeoisie family. His family was wealthy Protestants and his father was a member of the Prussian House of Deputies and the Reichstag, or the imperial parliament, which gave him ample opportunity to meet prominent scholars and politicians in person (Clegg and Lounsbury 2009; Sheldrake 2003). Even his works in economy would alone be sufficient to qualify him as one of the most important theorists of the field, while his
13 Visiting the Iron Cage: Bureaucracy and the Contemporary Workplace 279 political sociology was unique in kind and quality in its day and still remains a model of grand theory backed by detailed observations (Lune 2010). He is acknowl- edged among the distinguished scholars in sociology, though Weber’s training was focused on legal and economic history. Weber’s ability to synthesize a broad range of interests into coherent conceptual frameworks on economics, religion, stratification, urbanism and research method- ology is quite remarkable (Lune 2010). In his work, History of Commercial Partnership (Weber [1889] 2003), which has barely attracted attention of scholar analysis, Weber established many of the theoretical foundations that would be central to his corpus such as rationalization, the historical separation of household and business, and the construction of modern forms of organization and authority that would pave the way to the formulation of bureaucracy (Clegg and Lounsbury 2009). Weber wrote about his conception of bureaucracy first in his study on the Economies of Antiquity, and later, looked more intensively into the question of the development and growth of the modern administrative apparatus in Economy and Society (Morrison 2006). Some of the prominent works of Weber’s corpus became available in English when Talcott Parsons, an American visitor to Germany who was formally attached to London School of Economics, visited Heidelberg and learned of his reputation there (Clegg and Lounsbury 2009). As a consequence of the inaccurate translation of Weber’s work, that fails to gain access to the underlying thoughts and contextual subtleties, the prolonged analytical studies on bureaucracy have been based on false grounds. Townley (2008) depicts the situation as follows: Influenced by Parsons (1959), organization theory’s incorporation of Weber is based on two misconceptions: a selective and a historical interpretation of bureaucracy; and a misinter- pretation of the concept of the ideal type. Thus read, Weber’s reception into English laid the foundations of an abstract organization theory; the commonly assumed view of bureau- cracy as synonymous with organization; and a prescriptive theory of bureaucratic organi- zations as superior to other formal organizations. Thus, the entire concept of bureaucracy had been downplayed and reduced to a level of suggested ‘ideal’ organizational architecture ignoring the rationality that underpins the concept. When Weber’s works were read and analyzed by English- speaking organizational scholars, who were unfamiliar to the corpus of contempo- rary German scholarship, this inevitably engendered analytical disengagement with Weber’s scholarship as they failed to encompass the irrefutable influence of critical thinkers belonging to German school such as Nietzsche, Hegel or Marx on Weber’s work as well as Immanuel Kant (Clegg and Lounsbury 2009). The present standing of Weber’s work is that he has been arguably misread and oversimplified (Lune 2010). A quick scanning of organization textbooks would reveal that Weber is mostly mentioned as one of the classical theorists of management along with Taylor and Henri Fayol. Bureaucracy ushered a multifarious managerial research questions such as issues of motivation, emotionality and the individual’s perception of work, which enabled the work concept to become no longer the sole concern for individ- ual co-workers but a managerial concern (Styhre 2007). Taylorist management regime had put special emphasis on the extrinsic motivation of the workers, while
280 A.H. Yu¨ksel bureaucratic organization focused on the ability to understand the intrinsic motiva- tion of the employees (Styhre 2007). Clegg and Lounsbury (2009) states: Weber’s inscription as a part of the classical canon by management writers added a touch of class to a rather pedestrian set of concerns. . . .While Weber was familiar with the work of Taylor and other scientific management writers, they were not familiar with him. While Taylor proposed technologies to exert power, Weber explained them. It would be wholly incorrect to bundle Weber up as a scholar of the ‘classical school’, akin to F.W. Taylor or to situate his corpus within the narrative of formal management theories. They have very little in common at all. The ‘Max Weber’ known in most management and organization theory is therefore an exceedingly simplified caricature in which the nuance, depth and cultural embeddedness of the original texts had been lost. Organization theory and management borrowed selectively from Weber’s description of bureaucracy underscoring hierarchical authority and task specializa- tion as properties common to all organizations (Townley 2008). These features have been embraced as the indispensable components of his ‘ideal type’, which had been misconstrued by the scholar circles. Weber defined and explained the very insight of bureaucracy via an ideal-type model of the bureaucratic form. The ideal- type is an analytic concept and should in no way conjure up ideals. The ideal type could be defined as a construct or a device used to identify the characteristics of social phenomena such as bureaucracies (Linstead et al. 2009). It is hypothetical, does not refer to something normatively ideal, ‘but to an ideational type serving as a mental model that can be widely shared and used’ (Clegg 2011). Weber was far from being in search for the formula for a utopian society, rather he focused on describing the institutional arrangement that shaped our social relations (Lune 2010). He examined social action within a context of social interaction, not just viewing people as objects driven by impersonal forces (Clegg and Lounsbury 2009). Weber had developed his ideal type in the context of German state-building process in the nineteenth and early twentieth century and never claimed to have devised a ‘valid-for-all’ formula, let alone one that would fit into post-war American concerns (Clegg and Lounsbury 2009). Ergo, discussions regarding the virtues or setbacks of bureaucracy would better be sensitive to context and avoid ignoring the need to evaluate explanations and attitudes in terms of the interplay between ideologies, interests and practices of various actors (Thompson and Alvesson 2005; Townley 2008). At this point it would be appropriate to highlight the relationship between bureaucracy and rationality. Grint (2005) explains two essential ingredients of bureaucracy; ‘it was legal that it operated on the basis of procedures that could be adjudged correct or otherwise through resort to a body of rules by those subject to its authority and it was rational because it operated on the principles of expert knowledge and calculability’. Rationality is central to Weber’s work. It is a process, which had evolved throughout the centuries. The advent of modernity, which started to alter the social, political, technological and religious landscape in the sixteenth century and became dominant at the end of nineteenth century, ushered in a whole new world of meaning (Lune 2010). As coined by Weber, ‘enchantment’ of the pre-modern world had been replaced by calculability (disenchantment) on
13 Visiting the Iron Cage: Bureaucracy and the Contemporary Workplace 281 which the rationality as a value is built. Disenchantment began with the Greek philosophy and science, became salient in Renaissance and culminated in Calvin- ism. The result was the rationalization of worldly matters. Rationalization of institutions postulates that the world had become increasingly calculable and controllable due to the advancements in sciences, technologies and forms of organization (Merz 2011). Weber suggested that while all human action was governed by what he called a ‘means-ends rationality’, this rationality was subject to change from one historical period to another’ (Morrison 2006). As an engaged scholar, instead of describing the shift to scientific thinking as progress and seeing the results as a greater truth, he put special emphasis on the process of change and highlighted the importance of rationality as the core value of modern society, which encouraged setting clear goals and finding efficient paths toward their achievement (Lune 2010). According to Weber, development and success of bureaucratic administration is an indication of the triumph of ‘formal rationality’, which indicates the greatest amount of precise calculation (Morrison 2006). What makes rationality ‘formal’ is its ‘straightforward, unambiguous, application of numerical, calculable standards’ (Weber 1978). ‘Bureaucracy’s superiority lies in its formality, and with this, its guarantee of calculability’ (Townley 2008). Formal rationality does not necessarily overlap operational efficiency. ‘Ideally rational cannot be equated with perfectly efficient as Weber’s early translators assumed, just as a bureaucracy cannot be assumed to be an ideal type organization’ (Townley 2008). Bureaucracy as a tool of technical rationality was later replaced with the narrower conception of efficiency (Clegg 2011). Merton (2012) delineates that formality facilitates the interaction of the office holders despite their private attitudes toward one another; thus, the subordinate is secured from potential arbitrary actions of his superiors, since the actions of both are constrained by a mutually recognized set of rules. The system of predetermined relations the various offices involves a considerable degree of formality and clearly defined social distance between the occupants of these positions. Bureaucracy aims to depersonalize the way of getting things done, which by itself, is not a good or a bad thing, nevertheless, has certain advantages over absolute and arbitrary power (Lune 2010). In a bureaucratic organizational structure roles and responsibilities, power and privilege are divided among a fixed and identifiable set of offices as well as the formally prescribed relationships among them (Lune 2010). Merton (2012) also points out that formality is manifested by means of a more or less complicated social ritual, which symbolizes and supports the pecking order of the various offices. When formality gets integrated with the way authority is distributed within the system, it minimizes friction by mainly restricting official contact to modes, which are previously defined by the roles of the organization. Bureaucratic rationality inherently harbors domination through knowledge that eventually makes the system technically superior. Bureaucracy is about making things to become known: the construction of written documents and files; the identification of spheres of application; the formulation and application of rules (Fig. 13.1). Drawing definitional boundaries, becoming predictable, following a
282 A.H. Yu¨ksel Fig. 13.1 Bureaucratic rationality: making things known (adapted from Townley 2008) rule and impersonality are conceded as the constitutive elements of bureaucracy. Weber (1925) states: Bureaucratic administration means fundamentally domination through knowledge. This is the feature of it that makes it specifically rational. This consists on the one hand in technical knowledge which, by itself is sufficient to ensure it a position of extraordinary power. But, in addition to this, bureaucratic organizations, or the holders of power who make use of them, have the tendency to increase their power still further by the knowledge growing out of experience in the service. A bureaucratic organization follows a clearly defined structure of offices and positions (Morrison 2006). Every series of actions is functionally related to the purposes of the organization, thus, in such an organization there needs to be an integrated series of hierarchized statuses in which inhere a number of obligations and privileges closely defined by limited and specific rules (Merton 2012). Bureau- cratic organizational cultures are generally depicted by the strict formalized rules and structures with an intense focus on efficiency, stability and predictability (Berson et al. 2008). Following a rule provides discipline, thus, it distinguishes formal organizations from traditional organizations and informal groups (Townley 2008). Weber (1978) emphasizes that: Management of the office follows general rules which are more or less stable, more or less exhaustive, and which can be learned. Knowledge of the rules represents a special technical expertise which officials possess. . . .The content of discipline is nothing but the consis- tently rationalized methodically prepared and exact execution of the received order. . . .What is decisive for discipline is that the obedience of a plurality of men is rationally uniform.
13 Visiting the Iron Cage: Bureaucracy and the Contemporary Workplace 283 Fig. 13.2 Principles of bureaucracy (adapted from Robbins and Barnwell 2006) There are clear principles in a bureaucratic organization (Fig. 13.2). Stringent hierarchy is a prominent one that characterizes the essence of such bureaucratic cultures, which involve clearly articulated division of labor, and strict control over the personnel (Ho¨pfl 2006). Indispensable organizational qualities such as, predict- ability, precision, speed, unambiguity, knowledge of the files, unity, lack of arbi- trariness, reduction of friction are raised to the optimum point in the strictly bureaucratic administration, and especially in its monocratic form (Weber 1984). The prevailing style of leadership in bureaucratic organizational cultures is known for their special emphasis on monitoring, organizing and coordinating (Cameron and Quinn 2005). Conformity is highly rewarded while ongoing employee management practices foment control and stability (Gregory et al. 2009). Bureaucracy requires officials to treat their subjects impersonally, sine ira et studio (without hatred or passion, and hence without affection or enthusiasm) and without respect to persons or status (Ho¨pfl 2006; Townley 2008). Weber (1978) writes: . . .homo politicus, as well as homo economicus, performs his duty best when he acts without regard to the person in question, sine era et studio, without hate and without love, without personal predilection and therefore without grace, but sheerly in accordance with the impersonal duty imposed by his calling, and not as a result of any concrete personal relationships. Bureaucratic rationality encompasses means through which predictability is attained. Predictability refers to the routines, procedures, roles and rules that allow individuals to function or operate with certainty serves as the fertile ground on which longer-term decision making and security and efficiency of actions are cultivated. (Townley 2008). Besides, standardization of processes provide the ability to act flexibly to contingencies, thus rendering the system potentially more predictable; however, predictability does not imply the ability of knowing for certain every contingency (Townley 2008).
284 A.H. Yu¨ksel 13.3 Buraucracy vs. Post-Bureaucracy Post-bureaucratic postulations are dedicated to reveal the imperfections of bureau- cracy and condemn it as ponderous and, thus, far from being resilient. The prefix ‘post’ is usually employed to describe the new state that is about to supersede or has already superseded the adjunct concept. Post-bureaucracy, intends to diagnose the fallacies of old bureaucracy via emphasizing the merits of the new set of managerial ideas, which are supposed to have fixed all the bugs inherent in bureaucratic system of thought. Proponents of post-bureaucratic arguments seem to be quite certain that bureaucracy itself fails to provide an enabling organizational environment for improvement and adaptation, so it is ‘portrayed as a supplement as what is always already different and less accomplished than other forms of organization’ (Styhre 2007). It is generally assumed that, by definition, bureaucracy is incapable of adapting. Such an inference is quite speculative and insufficient (Thompson and Alvesson 2005). Adler (2012) highlights the increasing number studies focusing on bureaucracy. He reminds us of the strong tendency to replace bureaucracy by markets or social networks advocated by post-bureaucratic discourses also inhere the risks of losing the benefits of bureaucracy not solely limited to operational performance and technical reliability, but also for the welfare of the employees, clients and the broader public. In the light of fulsomely appreciated watchwords, such as self-organizing, teamwork, self-governance, lean-organizations and flexibility, bureaucracy con- fronts a barrage of counter-arguments more erosive than ever. The majority of the criticisms, however, are banal, constructed upon abstracted and utopian standards of efficiency (Clegg 2011). In spite of the prolonged disdain for bureaucracy, the evidence of the bureaucratic rationality could be found in almost every organiza- tional setting and ‘the scope of claims made about post-bureaucracy is not matched by a similar depth or scope of empirical support’ (Thompson and Alvesson 2005). Adler (2012) draws attention to the ongoing prevalence of bureaucracies in both the private and public sector. Features of bureaucracy, such as documentation, strict control over well-defined performance criteria, formal procedures that ensure discipline through application of rules without regard for persons are still regarded as the plausible and ‘essential tools for assuring efficiency, conformance, quality and timeliness’ (Thompson and Alvesson 2005). Numerous writers pass negative judgment on bureaucracy without bothering to submit empirical evidence or sys- tematic research to support their arguments (Styhre 2007). Popular discourses of contemporary management literature redefine the concept of ‘work’ and see it ‘not as a painful obligation imposed upon individuals, nor as an activity undertaken for mainly instrumental purposes, but rather as a vital means to individual and self- fulfillment’ (Du Gay 2000). Since bureaucracy is held responsible for the confine- ment of individuals in contemporary organizational settings, then there is a dire need for a savior (feasible set of applications) that will render employees free. However, a rather intriguing question remains unanswered: How?
13 Visiting the Iron Cage: Bureaucracy and the Contemporary Workplace 285 Detractors of bureaucracy usually ‘exchange the bureau with some form of organizational culture that is led by charismatic leaders’ (Bo¨hm 2006). In contrast with the personal detached bureaucrat, ‘entrepreneurial new wave management is represented as calculatingly charismatic in essence’ (Du Gay 2000). Increased flexibility should not allude to fewer or no rules in any organizational setting. Incorporation of teamwork into organizational processes has undoubtedly provided a framework for functional flexibility and utilization of employee expertise; how- ever, fragmentation, highly specified tasks and existence of formal procedures are prevalent in spite of the decline in the demarcation of rules (Thompson and Alvesson 2005). Hierarchy, which is the mainstay of Weber’s conception of bureaucracy, is one of the most denigrated characteristics of bureaucracies. The ‘hierarchy’ and ‘bureaucracy’, though frequently used interchangeably, should be separated out because the first one is about managing up and down whereas the latter is about managing across (Birkinshaw 2010). Hierarchy is usually seen as the source of what is wrong in the contemporary world of organizations. Although vilified, a hierarchy is utilized by majority of the large corporations with success stories. Leavitt (2005) accentuates the fallacy that remained throughout the decades regarding the demise of hierarchies. He states that the arrival of the knowledge workers was supposed to initiate a whole new age that would sweep hierarchies away. The strict rule following the nature of a hierarchical organizational structure would be incapable of dealing with the sort of people who were adding value with their brains; nevertheless, hierarchies survived. He again draws attention to the quantum leap in information and communication technologies and how they revived the hopes of weeding out hierarchies. In the new mighty world of IT, each and every single employee could gain instant access to all the information available to base their actions on informed grounds, ergo, ‘information would no longer have to flow tortuously up the hierarchy and decisions distortedly back down’ (Leavitt 2005). Hierarchies survived, again. Revolutionary new technologies are not necessarily epitomized by managerial repercussions (Balle 2007). As discussed by Thompson and Alvesson (2005), implications of incorporation of the information and communication technologies into work processes have been greatly exaggerated by many of the theorists in the field. Even in knowledge-intensive firms bureaucracy remains essential and ‘for- merly adhocratic arrangements may move towards more bureaucratic forms of governance over a period of time’ (Alvesson and Thompson 2005). The proposed elements of knowledge management such as codification, storing and distribution, ‘take the form of standardized, highly structured systems in areas such as software design or surveying as well as rules for the use of databases in order to recycle knowledge’. Knowledge management initiatives include efforts to develop mea- sures to codify knowledge and then urge people follow particular procedures and comply with the associated templates and project metrics (Hansen et al. 1999). Installment of the state-of-the-art IT systems facilitate managerial power, rather than diminish its density. Post-bureaucratic arguments confidently state the belief in complexity, networks and emergence as means of being antithetical to bureaucracy.
286 A.H. Yu¨ksel In contrast with the taken for granted anti-bureaucratic assumptions, a hierarchy does not ensure inability to cope with the increasing complexity in the organiza- tional environment. Kay (1997) states: . . . the function of hierarchy is to reduce amount of complexity facing individual decision- makers in recognition of the tendency for individual cognitive capabilities to cluster around standard parameters. Furthermore, the amount of complexity an individual can handle is directly related to familiarity and practice opportunities and inversely related to unfamil- iarity and novelty, which means that the complexity of individual tasks at lower levels is typically significantly higher than the content of tasks at higher levels. Repercussions of bureaucracy ‘motivated organization theory with both propul- sion and repulsion’ Starbuck (2003). Being intimidated by bureauphobia might drift us away from the heart of the matter given the vast array of companies organized in accordance bureaucratic principles (Styhre 2007). Many of the writers and contributors in the field of organization theory have treated bureaucracy as a static ideal type, instead of a living, changing and diverse set of practices (Alvesson and Thompson 2005). Bureaucracies are barely strictly mechanical systems, espe- cially when the ‘variety of processes, forms of working, communities, expert groups and other organizational resources safeguarding dynamic responses to external environments’ involved in many of the bureaucratic organizational struc- tures are taken into consideration (Styhre 2007). On the other hand the world of organization studies should not turn a blind eye to the criticisms received by bureaucracy. Although the advent of highly developed information and communication studies did not alter the very core of organizational activities, it did, however, increase the speed of doing business and transformed the climate in which organizations are striving to survive. Over the last three decades, an integrated world economy has emerged with new markets opening up in previously closed regions, and new competitors with very different operating norms to those usually emphasized (Birkinshaw 2010). Globalization, which refers to entrenched and enduring patterns of worldwide interconnectedness, suggests a growing magnitude and intensity of global flows such that states and societies have become enmeshed in networks of interaction (Held and McGrew 2003). Rapid growth in information and communication technologies, intensified competitive forces, the vicissitudes and volatility of global markets have reshaped the organi- zational landscape to such an extent that continuous change has become a perma- nent phenomenon with organizations having to constantly reinvent themselves (Kamoche et al. 2002). Organizations have to become more fluid in order to be able to develop capa- bilities that will enable them to tackle prevailing conditions of current global business landscape. This raises the need to manage complex information flows, grasp new ideas quickly and spread those ideas throughout the enterprise (Kanter 2003). Fluidity, is an important contribution of process philosophy to research on organization and management practice referring to the shift from being to becom- ing, from existence to ‘in-the-making’ (Styhre 2007). Knowledge is in perpetual flux and flows along various receptors across the organization and penetrates into work settings and effect unpredictable consequences. Complexity is conceded as
13 Visiting the Iron Cage: Bureaucracy and the Contemporary Workplace 287 one of the prominent fluid epistemologies. The complexity theory is the study of the dynamic behaviors of complexly interacting interdependent and adaptive agents under conditions of internal and external pressure (Uhl-Bien and Marion 2008). It implies what is fluxing and fluid and operating in non-linearity (Styhre 2007). In a complex (non-linear) system a small exogenous event may trigger a change in the fundamental functioning of the system (Schneider and Somers 2006). Any organi- zational activity can feed back onto itself in ways that are positive (enhancing, stimulating) or negative (detracting, inhibiting) (Uhl-Bien and Marion 2009). Evolutionary change arises when a series of alterations and modifications ensue shifts in practice, which lead to the occurrence of conditions for further break- downs, unanticipated outcomes and innovations (Orlikowski 1996). Therefore, given the need for organic and fluid structures that are able to keep pace with the increasingly turbulent global environment, a neo-bureaucratic for- mation seems to be a sound resolution. We shall seek for new work architectures that increase our dependence on bureaucratic logics and forms of organizing in different ways from those typical of the classic Weberian bureaucracy, and this may be a more accurate description and interpretation of what is currently occurring and where it might lead (Reed 2005). Such neo-bureaucratic formations shall resemble ‘biological organisms that are structured in accordance with a number of principles suggesting order, rules and routines – for instance, the metabolism is structured around recurrent temporal events – but does not fail to maintain a close attention to the external environment’ (Styhre 2007). So, instead of insisting for a paradigm shift, it makes more sense to transform organizations into ecologies of innovation where effectiveness and efficiency co-exist through incorporation of the assump- tions of complexity theory into bureaucratic rationality. ‘Bureaucracy and com- plexity coexist effectively when those in position of authority acknowledge the existence and importance of complexity dynamics, and supplement their roles with enabling behaviors’ (Marion and Uhl-Bien 2011). 13.4 Conclusion The very insights of bureaucratic mindset are timeless regardless of the organiza- tional setting, whether a for-profit organization, government agency or a non-profit organization. However, evolution is inevitable. Like computer software, bureau- cracy and its attributes should be upgraded organically in line with the demands imposed by the ecology in which organizations strive to survive. Many of the drawbacks identified for bureaucracy are a result of the way in which bureaucracy has been operationalized rather than being inherent to the concept (Robbins and Barnwell 2006). Encouraging employee involvement in novelty, creating and preserving an appropriate organizational social context for continuous communi- cation and enabling rigorous social interactions between individuals and groups in a way that will produce feedback networks are more than necessary efforts in today’s organizations. Nevertheless, these efforts are supposed to be made in a bureaucracy
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Appendix: Summary of the Empirical Literature Author(s) and Country Period Type of skill studied Reason of change year of study US 1950– Cognitive, interactive, Skill biased techno- Wollf (1995) 1990 motor skills and logical change in education manufacturing industries Betts (1997) Canada 1962– Skilled, unskilled based on Skill-technology 1986 skill class (blue collar, complementarities white collar worker) Machin and Seven OECD 1973– Skill upgrading based on Skill-technology com- education plementarities Van Reenen countries 1989 across all countries (1998) Caroli and Van Britain 1984– Skilled, unskilled based on Organizational change categories of occupation Reenen 1990 (unskilled and skilled Organizational change manuals, clerical (2001) France 1992– workers, middle man- agers and technicians, 1996 senior managers) Hansson (2001) Sweden 1960– Skilled, unskilled based on Complementarities 1995 education between knowl- edge capital, skill, investment in R&D Bresnahan US 1987– Skill class and education Complementarities 1994 et al. (2002) level between IT, human 1960– 1998 capital and decentralization Autor US Cognitive and manual skills, Skill-biased techno- et al. (2003) problem-solving, com- logical change munication skills (continued) T. Dereli et al. (eds.), Labor and Employment Relations in a Globalized World, 291 Contributions to Economics, DOI 10.1007/978-3-319-04349-4, © Springer International Publishing Switzerland 2014
292 Appendix: Summary of the Empirical Literature Author(s) and Country Period Type of skill studied Reason of change year of study Australia Motor skills, interactive 1986– Skill-ICT comple- Kelly and 1996 skills and cognitive mentarities and Lewis skills, education confluence of (2003) direct and indirect Skilled, unskilled based on affects Pavcnik (2003) Chile 1979– skill class (blue collar, 1986 white collar worker) Not SBTC, additional investment is asso- Attanasio Colombia 1984– Skilled, unskilled based on ciated with skill 1998 education upgrading et al. (2004) Nonprogrammable cogni- Skilled-biased techno- Maurin and France 1984– tive skills logical change and 1995 indirect effect of Thesmar trade liberal 1976– 2000 Skill-technology complementarities 1983– (2004) 1998 Beaudry and US Skilled, unskilled based on Not SBTC but ratio of education human capital to Green physical capital Skilled, unskilled based on (2005) occupation (non-manual Skill-biased techno- and manual workers) logical change Berman India related to Skilled unskilled based on increased output et al. (2005) occupation (profes- sionals and technicians) Not ongoing SBTC Perugini and Fourteen EU 1995– but temporary Pompei countries 2001 Motor skills, interactive technological (2009) skills and cognitive shock skills, education Kelly and Australia 1991– Technological change 2006 Skilled unskilled based on in the recovery and Lewis five classes of education boom periods 1986– levels (2010) 2006 Skill-biased techno- Skilled unskilled based on logical change Cazzavillan and Poland 1975– five classes of education 2008 levels Skill-biased techno- Olszewski logical change Skilled unskilled based on (2011) occupation (production Skill-biased techno- and administrative logical change US workers) Skill biased techno- Meschi Turkey 1980– Skilled, unskilled based on logical change 2000 years of education et al. (2011) Blankenau and US 1968– Employee involvement Both skill biased tech- Cassou England 2006 (2011) 1992– Green (2012) 2006 skills nological change and work organi- zation indicators Lindley (2012) England 1997– Numeracy and literacy skills Gender biases in tech- Composed by the author 2006 nology—skill complementarities
Appendix: Summary of the Empirical Literature 293 References Attanasio O, Goldberg P, Pavcnik N (2004) Trade reforms and income inequality in Colombia. J Dev Econ 74:331–366 Autor DH, Levy F, Murnane RJ (2003) The skill content of recent technological change: an empirical exploration. Q J Econ 118:1279–1333 Beaudry P, Green D (2005) Changes in U.S. wages, 1976–2000: ongoing skill bias or major technological change? J Labor Econ 23:609–48 Berman E, Somanathan R, Tan HW (2005) Is skill-biased technological change here yet? Evidence from Indian manufacturing in the 1990’s. Ann Econ Stat 79(80):299–321 Betts JR (1997) The skill bias of technological change in Canadian manufacturing industries. Rev Econ Stat 79:146–150 Blankenau WF, Cassou SP (2011) Industry estimates of the elasticity of substitution and the rate of biased technological change between skilled and unskilled labor. Appl Econ 43:3129–3142 Bresnahan T, Brynjolfsson E, Hitt L (2002) Information technology, workplace organization, and the demand for skilled labor. Q J Econ 117:339–376 Caroli E, Van Reenen J (2001) Skill-biased organizational change? Evidence from a panel of British and French establishments. Q J Econ 116:1449–1492 Cazzavillan G, Olszewski K (2011) Skill-biased technological change, endogenous labor supply and growth: a model and calibration to Poland and the US. Res Econ 65:124–136 Green F (2012) Employee involvement, technology and evolution in job skills: a task-based analysis. Ind Labor Relat Rev 65:36–67 Hansson P (2001) Skill upgrading and production transfer within Swedish multinationals in the 1990s. FIEF Working Paper Series no. 166. Trade Union Institute for Economic Research, Stockholm Kelly R, Lewis P (2003) The new economy and demand for skills. Aust J Labour Econ 6:135–152 Kelly R, Lewis P (2010) The change in labor skills in Australia over the business cycle. Aust Bull Labour 36:260–277 Lindley J (2012) The gender dimension of technical change and the role of task inputs. Labour Econ 19:516–526 Machin S, Van Reenen J (1998) Technology and changes in skill structure: evidence from seven OECD countries. Q J Econ 113:1215–1244 Maurin E, Thesmar D (2004) Changes in the functional structure of firms and the demand for skill. J Labor Econ 22:639–664 Meschi E, Taymaz E, Vivarelli M (2011) Trade, technology and skills: evidence from Turkish microdata. Labour Econ 18:60–70 Pavcnik N (2003) What explains skill upgrading in less developed countries? J Dev Econ 71:311–328 Perugini C, Pompei F (2009) Technological change and income distribution in Europe. Int Labor Rev 148:123–148 Wollf NE (1995) Technology and the demand for skills. Levy Economics Institute Working Paper No. 153. Available at SSRN: http://ssrn.com/abstract¼116308 or http://dx.doi.org/10.2139/ ssrn.116308
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