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The objective of QWI is to measure the quality of the workforce and provide business with a means of (1) comparing countries and (2) making such decisions as the degree to which capital intensive operations are feasible. The measure for both manufacturing and services is based on 15 criteria grouped under three subindices, as detailed below.
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The weights for the three subindices reflect their relative importance to the quality of a workforce. Workforce Performance receives the heaviest weighting, 40%. Next is Workforce Characteristics with a weight of 35%; this subindex measures the attributes of the workforce that contribute to its ability to perform. Workforce Organization and Practices, with a weight of 25%, is about the environment within which personnel work; this subindex measures the legal framework for labor and attitudes of workers and their unions affecting worker performance.
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The ratings given for each criterion are relative to all 42 countries. For example, if a country's management quality had improved in 2000 compared to 1990, its rating could decline if other countries improved even more during the same period.
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QWI ratings are assigned on the premise that both causal and symptomatic factors are involved. On a weighted basis, causal criteria are 58% of a QWI rating, and symptomatic criteria are 42%. Ten of the 15 criteria are causal factors, and five are symptomatic. The causal and symptomatic factors are indicted in the detailed explanation below by the keys [c] for causal and [s] for symptomatic. In addition, a model is added on the last page of the Explanation to summarize criterion categories.
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Five of the 15 criteria - (1) relative productivity, (2) scope of productivity, (3) quality of equipment and physical facilities, (4) attention span and health, and (5) workforce militancy - are based wholly on quantitative data obtained form various international agencies. A sixth criterion, support for education and training, is partially quantitative. Nine criteria are based wholly on qualitative information and subjective opinion. Ideally, comprehensive surveys should be conducted in all 42 countries covered by the QWI. However, the cost of such an annual undertaking is prohibitive. Therefore, BERI S.A. has instead used its country risk analysts covering the countries regularly and its two panels of experts providing ratings for the Business Risk Service. The model on the last page of the Explanation also identifies criterion in qualitative and quantitative categories.
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All national currencies are converted to special drawing rights (SDR's) issued by the International Monetary Fund (IMF). The SDR is a weighted average of the U.S. dollar (39%), European euro (32%), Japanese yen (18%), and British pound sterling (11%). Although using the SDR ensures a better degree of comparability, the appreciation or depreciation of a country's currency against the SDR will respectively inflate or deflate the value of the converted data.
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I. Workforce Performance - 40%
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P.1. Relative Productivity [s] 11%: This criterion assesses the cost competitiveness of a country's workforce. It measures (1) the average amount of value added (GDP) per hour worked divided by (2) the labor cost per hour including wages, employer-paid taxes, and compulsory benefits. All statistics in national currencies are converted to SDRs. The GDP and wage data are obtained from the IMF's International Financial Statistics (IFS), the International Labor Organization's Yearbook of Labor Statistics (YLS), and country sources used by the two publications as required.
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P.2. Scope of Productivity [s] 11%: This criterion indicates the surplus produced by the average worker over and above his wages, employer-paid taxes, and compulsory benefits. This criterion measures capital's share of output. This can be shown as follows:
| Scope of Productivity | = GDP/Hour minus Labor Cost/Hour (Labor Share) |
| = Surplus GDP/Hour (Capital Share) |
Increasing the scope of productivity is crucial because it allows investments to be made. The capacity to allocate increasing amounts to capital equipment, research and development, personnel development, etc., becomes more important as the supply of labor tightens. Moreover, when capital's share increases, part of the surplus can be distributed as monetary and nonmonetary rewards for workers. The data used for this criterion are the same as those for the relative productivity criterion.
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P.3. Quality of Equipment and Physical Facilities [c] 6%: The premise in this criterion is that the larger the gross fixed capital formation or investment per worker (in SDRs) is, the better the quality of the equipment and facilities available to the average worker. Data on capital formation and employment size are obtained from IMF's IFS and ILO's YLS.
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P.4. Management Quality [c] 6%: This criterion assesses the skills and experience of managers at all levels and is based on qualitative evaluations obtained from BERI S.A.'s country risk analysts and contributions by panel members.
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P.5. Support for Education and Training [c] 6%: Because the available data on governments' post-employment training support are inadequate, real government expenditures on education in SDRs per capita, are used. Data are obtained from IMF's Government Finance Statistics Yearbook and ILO's YLS. Educational spending by private bodies or governments lower than the provincial/state/prefecture level is based on qualitative evaluations obtained from BERI S.A.'s country risk analysts and contributions by panel members. The subjective adjustment ranges from zero in a developing country to large in such countries as Japan.
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II. Workforce Characteristics - 35%
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C.1. Work Ethic [c] 11%: This criterion assesses the level of the workforce's industriousness and general willingness to work and is based on qualitative evaluations obtained from BERI S.A.'s country risk analysts and contributions by panel members. The key indicator of industriousness is the number of paid hours actually worked compared with time taken for social discussions, unnecessary extensions of the time for assignments, and other means for not fulfilling employer expectations. In some jobs the extent of unpaid hours worked indicates the extent of workers' commitment to the job.
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C.2. Availability and Quality of Trained Manpower [c] 6%: BERI S.A.'s analysts and panel members assess the demand and supply situation for all levels of skilled labor in a country. Perfect scores are given for countries that have a sufficient supply of trained manpower meeting quality standards of the job.
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C.3. Class, Ethnic and Religious Factors [c] 6%: The assumption in this criterion is that the ability of a workforce to excel is directly related to the degree of social harmony that exists. Monoethnic countries tend to have lower degrees of social discord. Although class differences affect all societies, workers at lower levels in the organization are sometimes sensitive about attitudes and privileges of personnel in upper levels. Scores are assigned based on assessments made by BERI S.A.'s country risk analysts and contributions by panel members.
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C.4. Attention Span and Health [c] 6%: The daily calorie intake per capita data released by the World Health Organization are used as an indicator of a worker's ability to stay healthy and remain attentive on the job. After extensive research, BERI S.A. has established an intake range that is considered appropriate for workers in different regions of the world. Countries with intakes lower than the range are penalized more heavily than are those with intakes higher than the appropriate range. The premise is that under-consumption of calories affects a worker's health and attention more than does over-consumption.
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C.5. Absenteeism [s] 6%: This criterion is based on assessments by BERI S.A.'s analysts. Available studies are (1) usually company and/or industry-specific, (2) not comparable between countries, and (3) one-time efforts not repeated annually. Research included both the degree to which employees tend to be absent from work without authorization and take medical leave when they are not sick. Training, annual leave, and other forms of absence for which the employer has made the necessary allowance are excluded.
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III. Workforce Organization and Practices - 25%
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OP.1. Workforce Militancy [s] 11%: This is defined as the work days lost to industrial disputes per million man-days worked. The data source is ILO's YLS, although it is sometimes necessary to obtain recent years directly from the country source used by the ILO.
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OP.2. Hire, Fire and Layoff Flexibility [c] 6%: Management requires flexibility to optimize use of the workforce. It needs to adjust the number of workers by skill and training to cash flow and volume of business taking place in products and services. Also, the motivation and performance of a worker will vary inversely with the degree of statutory restrictions on the capacity of an employer to hire, fire, or lay off a worker. Assessments are made based on the range between rigid labor laws and regulations permitting minimal flexibility and those which permit substantial adjustments in the workforce when substantial changes occur in the company's business.
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OP.3. Adherence to Collective Bargaining Terms [s] 3%: When collective bargaining agreements are honored by both management and unions and supported by affected workers, a basis is established for specific benefits, work rules, grievance procedures, and other factors. The contract provides a framework for resolving disputes and a foundation for an orderly relationship. If the agreement becomes meaningless, employees are less motivated, and tension builds between supervisors and subordinates. Scores are assigned based on the assessments done by BERI S.A.'s analysts.
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OP.4. Union Corruption and Influence of Organized Crime or Extremists [c] 3%: In the countries with corrupt unions, extreme political and religious factions, and/or criminal syndicates, the average worker's capacity to perform is often inhibited. The criterion also allows for the adverse impact of union organizations being affiliated with political parties and disrupting work for political reasons unrelated to company policies and practices. Scores are assigned based on assessments by BERI S.A.'s analysts.
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OP.5. Workforce Participation in Corporate Decision Making [c] 2%: Worker participation in decisions about production and delivery of quality goods and services is usually constructive. When this participation is institutionalized, either legally as in Germany and Sweden or traditionally as in Japan, the result frequently serves the interests of workforce factions, but in many cases the decision is contrary to effective company performance. For example, in Sweden and Germany an adversarial relationship sometimes develops between management and worker representatives on boards and committees. In Japan the consensus, bottom-up style of management creates informal obstacles for implementing plans and strategies quickly. Assessments are based on feedback from BERI S.A.'s analysts and clients.
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Supplemental Subindices for QWI
| I. Workforce Performance (40% weighting) |
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Criteria |
Definition |
Weighting |
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P1 |
Relative Productivity |
Symptomatic. Quantitative. |
11% |
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P2 |
Scope of Productivity |
Symptomatic. Quantitative. |
11% |
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P3 |
Quality of Equipment and Physical Facilities |
Causal. Quantitative |
6% |
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P4 |
Management Quality |
Causal. Qualitative. |
6% |
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P5 |
Support for Education and Training |
Causal. 50% Quantitative, 50% Qualitative. |
6% |
II. Workforce Characteristics (35% weighting) |
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Criteria |
Definition |
Weighting |
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C1 |
Work Ethic |
Causal. BERI assessment. |
11% |
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C2 |
Availability and Quality of Trained Manpower |
Causal. BERI assessment. |
6% |
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C3 |
Class, Ethnic, and Religious Factors in the Work Place |
Causal. BERI assessment. |
6% |
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C4 |
Attention Span and Health |
Causal. Calorie intake per capita (U.N.'s WHO). |
6% |
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C5 |
Absenteeism |
Symptomatic. BERI assessment. |
6% |
III. Workforce Organization and Practices (25% weighting) |
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Criteria |
Definition |
Weighting |
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OP1 |
Workforce Militance |
Symptomatic. Dispute days lost per 1000 working days. |
11% |
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OP2 |
Hire/Fire/Layoff Flexibility |
Causal. BERI assessment. |
6% |
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OP3 |
Adherence to Collective Bargaining Terms |
Causal. BERI assessment. |
3% |
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OP4 |
Union Corruption and Influence of Organized Crime and Extremists |
Symptomatic. BERI assessment. |
3% |
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OP5 |
Work Force Participation in Corporate Decision Making
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Causal. BERI assessment. |
2% |
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Criteria for the Causal: Symptomatic Assessment
| Causal Criteria (10 of 15 criteria): |
| P3 (6%), P4 (6%), P5 (6%), C1 (11%), C2 (6%), C3 (6%), C4 (6%), OP2 (6%), OP4 (3%), OP5 (2%) |
| 58% of 100% (Causal Subindex = Total of 10 criteria x 1.724) |
| Symptomatic Criteria (5 of 15 criteria): |
| P1 (11%), P2 (11%), C5 (6%), OP1 (11%), OP3 (3%) |
42% of 100% (Symptomatic Subindex = Total of 5 criteria x 2.381)
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Criteria for the Quantitative: Qualitative Assessment
| Quantitative Criteria (5.5 of 15 criteria): |
| P1 (11%), P2 (11%), P3 (6%), P5 (3%), C4 (6%), OP1 (11%) |
| 48% of 100% (Quantitative Subindex = Total of 5.5 criteria x 2.0833) |
| Qualitative Criteria (9.5 of 15 criteria): |
| P4 (6%), P5 (3%), C1 (11%), C2 (6%), C3 (6%), C5 (6%), OP2 (6%), OP3 (3%), OP4 (3%), OP5 (2%) |
52% of 100% (Qualitative Subindex = Total of 9.5 criteria x 1.923)
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