Perceived Shortages of Unskilled Labor in Labor Surplus Economies: Costa Rica, El Salvador, Dominican Republic and Mexic
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Cheap labor is a major incentive for investing in developing countries, especially for export production involving capital extensive processes utilizing unskilled labor. Unfortunately, international investors will tend to overestimate the availability of unskilled labor if they assume that workers in developing countries all have the "industrialized" traits necessary for performing even unskilled labor. These traits are: coming to work on time, following directions, accepting guidance from the boss, working on an established schedule, being sober while working, and so on. (Subsistance agriculture does not inculcate such traits, and a large portion of the labor force in most developing countries are migrants from subsistance agriculture.) Laborers also must be sufficiently healthy to come to work regularly, they must be strong enough to do the job required, and they must be emotionally stable. In addition, frictions to geographical movement could cause local shortages of unskilled labor even if the region as a whole has a labor surplus. This article provides preliminary evidence regarding the perceived magnitude of unskilled labor shortages in certain developing countries. The data are an accidental "fallout" from industrial studies conducted in four countries-the Dominican Republic, El Salvador, Costa Rica and Mexico. I do not pretend that these findings constitute a systematic analysis of the characteristics required for employment in a modern factory. Rather, the data provide a preliminary estimate of the magnitude of perceived labor shortages, and the consequences of such shortages. Hopefully, the information provided will stimulate definitive research on this subject. * The data on which this article is based were obtained from studies financed in part by a grant from the Ford Foundation and administered by the Center for International Business Research of the University of Wisconsin. The author is grateful for this support. Helpful comments were received from Professors Robert W. Ozanne and Richard U. Miller of The University of Wisconsin. Professor Bilkey is a member of the faculty of the University of Wisconsin. I
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Review of Studies The Dominican Republic In 1964, while in the employ of the Central Bank of the Dominican Republic, I sent questionnaires to a stratified random sample of 1,150 industrial firms in that country. They constituted approximately 50% of the Dominican Republic's registered industrial firms.' One objective of that study was to ascertain management's perceived obstacles to increasing output. The particular question in that questionnaire which is relevant for this article was the following (translated from the Spanish original). Check (X) which of the following deficiencies or obstacles would make it extremely difficult to increase your firm's daily production by 50% compared with present production. A list of 24 possible obstacles
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