Too Many Cooks Make The Broth Cost Effective

Business Standard, Mumbai - June 19, 2010

So for sixteen flats with probably a hundred people in them, there were twenty people involved in setting it up. Did it need that many people to do this? Well, everyone except the census people were doing this part time, each spending a tiny amount of time doing it, so it wasn't that many man hours doing it, though it seems like it. More expensive than if it involved just one or two people? Not to the census bureau because they only paid for their person, while the rest of the activity costs were effectively shared by all of us who pay for the watchmen and the manager and our domestic staff. Cumbersome process? Not really, unless you stop to analyse it. It actually was all quite smooth and well oiled and got the job done smoothly.

The fact is that we have lots and lots of people; and people doing things for each other at a price is what a service economy is. It's not software exports that are reflected in our service economy numbers but all these many people performing services for each other at a price. Our consumption structure is a lot of people consuming a little bit each that adds up to a lot. Our income structure is a lot of people earning a little bit each adding up to a lot (in the top 5 in terms of size of overall economy in PPP terms but number 162 in per capita income ranking, we are a large economy of mostly modest income people). Similarly the structure of our service economy is a lot of people doing a little bit each of the service task to be accomplished. And actually, that's quite ok, because that is a cost optimised model that works for us and spreads the earning around. We need to stop thinking that progress or the holy grail of modernity is to find ways to do tasks that eliminate using people, or to have fewer people doing more things. But why? Why keep customers waiting at cash counters in shops because the cashier has to fold the clothes and put away the hangers while the queue lengthens or to have secretaries walk down to the canteen to get you the coffee (that's expensive use of skilled labour for un skilled jobs) or have the hotel receptionist keep you on hold forever because he has to talk someone through getting connected to the internet etc. So that costs are low, customer satisfaction mediocre and a small number of people make more money?

But of course disguised unemployment is wasteful and a no-no. But first we need to think about what this actually is. The chap who stands in front of the toll booth to take the cash from the driver and give it to the man in the booth and vice versa shouldn't be there. He doesn't add any value. But if ten of them can run down the long line of cars and collect the tolls from the cars at the back of the long queues so that they can just sail through the toll gate, then they do add to system efficiency and time saved by those in cars for more productive work does qualify for a payment to these people. At some airports there is this established practice of people who hold the name board and waits for you, while the driver of the car does something else with the time saved - probably has tea or catches a nap. Is that extra person adding value? Of course he is because he is taking some of the pressure off the overworked driver - who can over work some more, after a brief rest. The driver presumable pays this person something, because he finds it valuable. This is the service economy, not wasteful inefficient ways of doing things.

The idea that more people performing a task is wasteful flab needs to be re examined. The market forces always work and we have an intensely competitive service economy, so it probably is a more efficient , finely calibrated work grade pricing model

We do however need to culturally fix our society where people who perform services get paid a fair wage even if it means that people who employ them have to pay more. This will result in better and more appropriate distribution of income. The horror of "becoming a high cost economy" is only for those who want to be high margin producers. We need to go from "servants" to "service people", from exploitative transactions to more fair transactions, and most important from daft unthinking processes to smarter ones using better implements (like having the cop at the airport painstakingly write down the number, name of traveller and destination of each departing cab instead of dictating it into a voice recorder which costs a lot less than the petrol burnt by others in the queue). Please, please let us not, in the name of modernity and labour productivity, try and fix what ain't broke.