All else equal, productivity is lower on hotter days. Garment factories rarely control temperature on the production floor. Thus, outdoor temperatures determine, in large part, the environment workers experience inside the factory.
What incentive can we give businesses to make the physical work environment more comfortable for workers?
We partnered with Shahi Exports, India’s largest apparel export house, to test the impact of replacing fluorescent lights with LED lights in 26 of their factories. Over the last decade, buyers have become more stringent about environmental regulations on the factory floor. This led to a staggered roll-out of LEDs across factories within Shahi based on who the respective buyer was – those with a particular kind, got LEDs. This generated a seemingly random replacement which took the form of substituting a portion of compact fluorescent lights targeted at individual operations with an equivalent number of small LED lights mounted on individual workers’ machines. On average, each factory replaced about 1,000 fluorescent lights consuming 7W each, with LED lights consuming 1W each.
We tracked administrative data on productivity, efficiency, and other workplace outcomes for all workers and found:
Finally, we performed cost-benefit calculations for LED adoption, looking at efficiency gains and the firm's costing of the entire shift. If only energy savings are taken into account, it would take more than three and a half years to break even. However, when the productivity benefits are also considered, the firm breaks even in less than a year after LED installation. The average factory in our data gains about $2800 in power consumption savings, and about $7500 in productivity efficiency gain.
In hot climates, LED lighting compared to fluorescent lighting, is much more affordable than a naïve comparison of energy cost savings would suggest. All new Shahi factories now use LED lighting.
Image credits: Nayantara Parikh
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