For workers in high-income countries like the United States, the prospect of companies using technology to monitor their employees might seem dystopian. But elsewhere, in low-income countries around the globe, the adoption of monitoring technologies could actually lead to broader societal good, in some cases.
UC Santa Cruz economist David Schönholzer studies how public goods such as schools, roads, public safety, and public transit can be provided efficiently, and in a new paper for the October issue of the American Economic Review, he and a small team of researchers shared their findings from an experimental application of a worker monitoring technology to minibus transit companies in Kenya.
The research team wanted to know how providing information to the owners of these buses about the driving behavior of their employees might affect the profitability of each business and the agreements and relationships between bus owners and drivers. In Kenya, minibus companies are the backbone of an informal transit system that facilitates the majority of daily commuting. But these businesses often struggle to grow beyond a few employees.
In some areas of the private sector, having a larger number of smaller firms may work well, but this approach to transit systems hasn’t been particularly successful for Kenya or other countries.
“Throughout Sub Saharan Africa, privately run public transit is extremely chaotic, congested with an oversupply of services, and also quite dangerous,” Schönholzer explained. “Those problems stem from a lack of coordination, due to the fact that you don’t have economies of scale. The smaller firms are less productive and efficient, and because they struggle to grow, it also limits their potential to provide more jobs.”
The research team wanted to explore monitoring technology as a potential tool to address some of the workforce oversight challenges that currently impede business growth in the sector. In Kenya’s minibus industry, drivers keep any fares they collect beyond an agreed upon daily revenue target, while bus owners pay for all vehicle repair costs and have very little oversight into driving practices. This setup incentivizes speeding and reckless off-road driving, which increases vehicle maintenance costs, reduces business profits, and puts public safety at risk. The status quo also results in a deep lack of trust between drivers and bus owners.
“This issue with lack of oversight cuts both ways, because drivers who are keen to do a good job often have a hard time convincing their employers that they did what they were supposed to do, since owners are so skeptical,” Schönholzer said. “There’s no sense of trust, because there have been some really egregious cases of drivers behaving poorly on the roads and damaging vehicles or hurting people.”
To see what effects monitoring technology might have on this issue, the research team fitted 255 minibuses with tracking devices that recorded the driver’s location, hours worked, distance driven, and number of safety violations. Then they randomized which bus owners got access to this information over the course of a six-month period. Drivers in both groups were aware that tracking devices had been installed.
By the end of the study period, vehicle owners who had access to the tracking data had lowered daily revenue targets by about 5% to remove some of the incentive for risk taking. And their drivers engaged in substantially less risky behavior, which reduced repair costs by roughly 45% and increased business profit almost 14% by the fourth month of the experiment. The team found suggestive evidence that businesses with access to the data were about 13 percentage points more likely to add an additional vehicle to their fleet by the end of the study period.
These findings are important for a number of reasons, the most obvious being the potential for improvements to public safety. But Schönholzer also says there’s evidence that, when small businesses in low-income countries can successfully grow, benefits in industrial efficiency spill over into other domains of public life. For example, business growth contributes to a rise in gross domestic product (GDP), a key measure of economic activity that tends to be linked with increased quality of life benefits, including access to education and healthcare.
For their part, employees who were monitored ended up earning the same amount of revenue as those who weren’t. But to do it, they had to compensate for the lost income potential of riskier driving by spending about 10% more hours on the road. Schönholzer says that’s a cost that should be taken seriously in this sector, where drivers often already work 14 hour days. Still, at the end of the experiment, 98% of the drivers reported that they preferred driving with the monitoring device because of the better working relationship that came from improved trust with the bus owner.
“Despite there not being monetary benefits to them, they preferred it because of how the monitoring information improved the relationship with their employers,” Schönholzer said. “In other settings, employees might actually feel less trusted as a result of being monitored, so monitoring could hurt the relationship. Either way, the effect on relationships is always important to study in order to understand the societal impacts of potential applications for these technologies.”
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