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Strategies & Market Trends : Booms, Busts, and Recoveries

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To: Don Lloyd who wrote (11101)	11/13/2001 12:46:16 PM
From: elmatador	Read Replies (1) of 74559

Hi Don! Good points you made. I wrote under the assumption that there are hidden costs. As an example: Here in Brazil is often mentioned as 'the cost Brazil'. The so-called 'cost Brazil' is heavily disputed. And is heavily disputed because these costs are hidden. Just keeping the construction industry for simplicity sake: The lift makers (Schindler, OTIS or Kone) keep a engineer following the construction of high rise buildings. They do so because the construction companies usually build the elevators' shaft not according to the specs set by the manufacturer of the elevators. They discovered that after the buildings were ready to install the elevators, they had to cope with costly and time-consuming modifications before installing the lifts. So Schindler, OTIS, Kone etc bear the costs of having an engineers following up and advising the constructors. This is an example of 'hidden' costs. Those costs started being "un-hidden" after Brazil tamed runway inflation and they became visible. The discussions started. The construction companies started saying that 25% of the materials were wasted due to poor training of the workers. They started comparing with international benchmarks and discovered they were behind. Today no one -understandably- wants to bear those costs. As a result comes the pressure in this form: If I can't get the labor at a quality I can compete, I have to get rid of it and use something else. Other construction techniques or machinery. This results -as you correctly say- displacing workers. In this case, even though there is labor at a price the market can pay for, the market displace it. That's different than the case where labor priced itself out of the market. The solution is clear: we need to invest in training. Slowly the market has discovered that and there are steps in this direction. Steps those taken by the public school system and in the industry itself. Go to a air-conditioning company web site and they are offering training. For the first time -in Brazil- above 90% of the kids between 7 and 14 years are seating at the school.

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