CHAPTER II

REVIEW OF RELATED LITERATURE

This chapter includes foreign literatures and foreign studies taken from the

internet, other unpublished thesis, and studies conducted by other research groups. This

chapter also includes local literatures, taken from local published books and materials,

and local studies, taken from research works and studies related to the subject matter.

Related foreign and local literature and studies that dealt with theories, principles,

concepts, approaches and techniques are reviewed which contributed a lot towards the

enrichment of knowledge, deeper understanding and insight of the researchers.

Foreign Literature

One of the more significant economic statistics to be released of late concerns

labor productivity. This is an interesting topic and widely non-understood concept -- very

few people understand either what it is or why it really matters.

Simply stated, labor productivity measures the amount (or value) of output

generated per hour worked. Why does it matter? Greater labor productivity enables firms

to produce a given amount of goods or services with a smaller number of labor hours.

And, since payroll cost is related to the number of hours they use, this helps firms control

their costs, making their enterprises more profitable.

Wages are not the correct measure the cost of labor to a firm. In economics, it

doesnt just focus on the costs of an activity, such as wages here. It looks at both costs

and benefits and their relationship to each other. What are the benefits from hiring more

labor? The output this labor input creates, in terms of labor productivity. So, the correct

measure of the cost of labor to firms is what economists refer to as unit labor costs
(ULC), or wages adjusted for productivity: the ratio of wages to productivity. If wages

are low, but productivity is also low, these can offset each other in terms of their

effects on ULC, potentially making labor expensive when wages are low.
 With regard to Labor Theory of Value: "Both Ricardo and Marx say that the value

of every commodity is (in perfect equilibrium and perfect competition) proportionally to

the quantity of labor contained in the commodity, provided this labor is in accordance

with the existing standard of efficiency of production. Both measure this quantity in

hours of work and use the same method in order to reduce different qualities of work to a

single standard."

The calculation or estimation of labor productivity impacts is one of the most

contentious topics in the construction industry. Disputes related to labor productivity

often lead to dispute resolution forums such as mediation, arbitration, and/or litigation

because labor productivity losses are often difficult to distinguish contemporaneously.

Additionally, labor productivity rates and other related data are often not tracked on

construction projects with any degree of precision. As a result, substantiating a cause-

and-effect relationship between project disruption issues and resulting labor productivity

losses and establishing entitlement to recovery for lost labor productivity often requires

analysis by a qualified construction labor productivity expert.

Construction labor productivity is typically measured as labor hours per quantity

of material installed. Labor productivity loss is experienced when a contractor, or a

particular crew, is not accomplishing the anticipated or planned production rates. In other

words, a loss of productivity is when it takes more labor and equipment to do the same

amount of work, thereby increasing project costs. There are many common causes for

labor productivity impacts on a construction project, stemming from owners, contractors,

and construction managers. Common causes include, but are not limited to,

mismanagement and maladministration, site access restrictions, differing site conditions,

defective plans and/or specifications, changes in the work; labor availability, turnover,

rework, testing/inspections, overtime and/or shift work, interferences, changes in

construction means and methods, over crowding, out-of-sequence work, and inclement

weather.

Productivity at the Job Site

Contractors and owners are often concerned with the labor activity at job sites.

For this purpose, it is convenient to express labor productivity as functional units per

labor hour for each type of construction task. However, even for such specific purposes,

different levels of measure may be used. Lower-level measures are more useful for

monitoring individual activities, while higher-level measures may be more convenient for

developing industry-wide standards of performance.

While each contractor or owner is free to use its own system to measure labor

productivity at a site, it is a good practice to set up a system which can be used to track

productivity trends over time and in varied locations. Considerable efforts are required to

collect information regionally or nationally over a number of years to produce such

results. The productivity indices compiled from statistical data should include parameters

such as the performance of major crafts, effects of project size, type and location, and

other major project influences.

In order to develop industry-wide standards of performance, there must be a

general agreement on the measures to be useful for compiling data. Then, the job site

productivity data collected by various contractors and owners can be correlated and

analyzed to develop certain measures for each of the major segment of the construction
industry. Thus, a contractor or owner can compare its performance with that of the

industry average.

Four levels of influence over a worker's productivity:

Lpez-Ortega and Saloma-Velazquez, Hershauer and Ruch considered it

impossible to measure the factors of human behavior and business management in a

quantitative manner to feed a simulator.

The Lpez-Ortega and Saloma-Velazquez model takes into account four levels of

influence over a worker's productivity:

1. Personal FactorsResponsibility, learning capacity, and satisfaction

2. Work Team FactorsLeadership, work team organization

3. Technology FactorsTraining, working methods

4. Organizational FactorsQualitative incentives, quantitative incentives,

productivity indicators

Productivity Influences

Personal Factors. Among the personal factors that influence a worker's

productivity are responsibilitythe worker's commitment to the task at hand; learning

capacitythe ability to learn, which is tied to the worker's education level and the

willingness to learn; and satisfactiona complex factor that motivates the worker's

display of responsibility and learning capacity.

 Work Group Factors. Leadership is important. Appropriate leadership helps create

a satisfying work environment conducive to high productivity. Good relationships and

organization within the work team provide a balance of effortno one member shoulders

an unfair loadand motivates team members to excel.

Technology Factors. Employees must receive adequate training. They also must

work in an appropriate environment in terms of safety, comfort, and physical capabilities.

Organizational Factors. Incentives, both qualitative (nonmonetary, such as rewards and

honors) and quantitative (monetary compensation based on performance and

productivity), go a long way toward motivating workers to be more productive, and they

increase job satisfaction. Measuring productivity and communicating with the employee

about his or her performance are critical elements in achieving optimal productivity.

According to Accel-Team.com, worker productivity will improve if employees

are properly motivated, coached, receive the right information at the right time, use

simple productivity improvement tools and techniques, and are rewarded in the

appropriate way.

Both productivity models focus on the same factors: motivation, training,

communication, tools, techniques, and rewards. Assuming the employee is a fit for the

job, much of the responsibility for worker productivity rests with the employer.

Organizations must look closely at the workplace culture for ways to incentivize and help

workers, and ultimately the company, achieve optimal productivity.

Factors Affecting Job-Site Productivity

Job-site productivity is influenced by many factors which can be characterized either

as labor characteristics, project work conditions or as non-productive activities. The labor

characteristics include:

age, skill and experience of workforce

leadership and motivation of workforce

The project work conditions include among other factors:

Job size and complexity.

Job site accessibility.

Labor availability.

Equipment utilization.

Contractual agreements.

Local climate.

Local cultural characteristics, particularly in foreign operations.

The non-productive activities associated with a project may or may not be paid by the

owner, but they nevertheless take up potential labor resources which can otherwise be

directed to the project. The non-productive activities include among other factors:

Indirect labor required to maintain the progress of the project

Rework for correcting unsatisfactory work

Temporary work stoppage due to inclement weather or material shortage

Time off for union activities

Absentee time, including late start and early quits

Non-working holidays
 Strikes

Each category of factors affects the productive labor available to a project as well as the

on-site labor efficiency.

Local Literature

Department of Labor and Employment

One of the main agencies responsible for ensuring the welfare of the Filipino

worker is the DOLE (Department of Labor and Employment). DOLEs responsibilities

include setting the minimum wage, ensuring safe working conditions, and creating

occupational safety and health ( OSH) standards. It also has a Productivity Improvement

Program to increase workers productivity in select manufacturing industries through

improved working and living conditions. The department is in constant dialogue with

workers, employers, and their organizations with regard to social and economic concerns,

including environmental issues. DOLE and its close links with the well-established NGO

(Non-Governmental Organizations) network promote greater bilateral participation in

enhancing safety and health in the workplace while both entrepreneurs and workers are

encouraged to implement low cost improvements in work conditions which can

eventually lead to improvement in productivity and the general well-being of the

workers.

Workers have been urged to increase productivity rather than demand for higher wages in

this time of economic difficulty.

"Higher wages are unsustainable unless you increase productivity. If factory

raises wages and productivity remained low, it will close its shop in the country and move
to other countries where wages could be smaller," Socioeconomic Planning Secretary

Romulo Neri said.

He said it is difficult to demand for wage adjustment without increasing

productivity in view of the current global economic slowdown.

Foreign Studies

According to the study of Preston H. Haskell (2004), two independent

methodologies demonstrate that total construction productivity has increased during the

past 37 years, on the order of 33 percent, or 0.78% per year. We are receiving more

building for less money than we did 37 years ago, and moreover, the product is

qualitatively superior. These improvements are the result of increased productivity made

possible by mechanization, automation, prefabrication, less costly and easier-touse

materials, and lower level of real wages (which, unlike the other drivers, is not a good

thing). Moreover, productivity gains in construction can and must continue. In the his

view, the potential for further productivity enhancements falls into five categories which

are information technology, project delivery, workforce development, materials, and

automation and prefabrication.

Also, on June 2007, a study concerning the building projectsa in the Gaza Strip in

palestine done by Adnan Enshassi found out that productivity is considered the main

value-addingfunction within the construction sector. A total of 45 factors were identified

in this study, with identification of factors influencing construction productivity being

based on a careful review of literature and suggestions from local experts in building

construction. Furthermore, this factors considered in the study were divided into 10
groups, which were ranked according to their importance index: Materials/tools factors

group, Supervision factors group, Leadership factors group, Quality factors group, Time

factors group, Manpower factors group, Project factors group, External factors group,

Motivation factors group and Safety factors group.

In addition, a study done on United Kingdom (1990) concerning the Profitability

of UK construction contractors showed that there is the existence of a positive correlation

between the size and percentage of turnover profitability of the construction companies in

the sample. Evidence was also found to suggest that larger contractors were more

consistent in their profitability levels. Investigation of the possible reasons for differences

in profitability between companies showed the degree and type of diversification into

different activities, particularly housebuilding, to be major factors associated with

enhanced profitability. The apparent stability of profitability at about 3% of turnover per

annum found in this, and other similar studies, suggests the presence of some underlying

homeostatic mechanism of which diversification may be a part.

Local Studies

On 1991, Josephine Tuble of the University of Santo Tomas Graduate School

made a study that concerns the productivity and job satisfaction of workers in

construction company in Metro Manila. These results to productivity level that was rated

on the whole as good due to the following dimensions: quantity of work, quality of

work, supervision required, attendance, and conservation. Also, the respondents of this

study were neither satisfied nor dissatisfied because of low ratings made on promotion

and pay aspects. In connection with this, the level of productivity is correlated with job
satisfaction with regards to the nature of work, supervision, co-workers relationship and

pay aspects.

Moreover, sponsored by the American Studies Association of the Phils. - Baguio

Cordillera Chapter, Antonia Corinthia Naz accomplished a study regarding the factors

that influences the labor Productivity of miners in Benguet. With this, it has been found

that the the productivity level vary according to mining methods and was significantly

affected by technical factors followed by economic factors and personal factors. Major

problems on labor productivity are: the need for more involvement in decision-making;

thorough discussion on miners concerns; that the company adopts a variety of training

methods; the need to be informed of the policies; the desire of workers for management

to be more sensitive and responsive to workers concerns and the necessity for more and

better quality of tools and equipment for underground work.