FACTORS THAT AFFECT THE GROWTH OF LABOR PRODUCTIVITY

FACTORS THAT AFFECT THE GROWTH OF LABOR

PRODUCTIVITY

Prof. MSc. Fatlum Gogiqi

Lecturer Professor in European College of Kosovo

e-mail: [email protected]

Edon Bibaj

Lawyer

e-mail: [email protected]

Abstract In order to create the processes of labor productivity there are influence of special factors which

affects in one way or another in help of company development processes. Today in modern time as

special part are considered separate laws and bylaws that clarify the obligations, duties and

responsibilities at the time of contract by the employer with work-receiver.

The contract is considered as immportant fact of weight in the growth of labor productivity, it is

regarded in this way by important factors that influence the creation of a secure welfare clarifying

the key elements which are wages, holidays provided by the employer in accordance with the law

of work and in compliance with the other acts in force.

Relationship between employee and employer is a service-related compensation, where both

parties have rights and obligations. A major influence in birth and development of labor law and

labor relations have exercised various treaties, conventions that enable employes protection in the

workplace, their non-discrimination on grounds of nationality, religion, sex or also political

convictions ,salary or extra hours etc. So these relationships are very important for life, work of

any man who enters employed to enforce the rights and obligations of the contracting parties.

Kosovo has forgotten work law which specifies responsibilities and duties for both parties. The

larger international organizations have made significant investments in building and labor

productivity in the process and minimizing costs, and on the other way by increasing the amount of

quality and productivity at work.

Potential accentmay have International Organization of Labor founded in 1998 in working

conference of Geneva. The aim of the Declaration is to reconcile the desire to promote the efforts

of all countries, that social progress go hand in hand with economic progress, the need to respect

the diversity of situations, opportunities and preferences of each country.1

Keywords:laborproductivity, factors affecting labor productivity, ethics, methods, market power.

1. THE IDENTIFICATION OF THE FACTORS THAT AFFECT

LABOR PRODUCTIVITY IN AN ENTERPRISE

Nowadays, the economic development is the most important factor that shows the

economic stability of a state, especially, all countries try to have investment and

economic policies in different areas which would affect the growth of economic

productivity.

1Deklarata e Punes ILO 1998

International Journal of Management and Business Economics (IJMBE) ISSN 2304-0207

Volume 3 | Number 3 December 2014

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25

Laws, legal acts, and other legal provisions are among the most important factors

in labour productivity, it is not unintentional, because the employee is an

individual to perform or carry out services for the employer in order to get paid.2

Current laws in the Republic of Kosovo defines the employer as an individual or a

legal entity that provides work for an employee and pays wages for the work or

services performed. The Assembly of Kosovo in order to create a functional legal

basis, sustainable and inclusive regarding the employment has approved the

Labour Law No.03 / L-212, which provides provisions on the rights and

obligations of employment which may be in the private sector or the public one. 3

This entire approach by the legislation and various legal provisions shows the

importance of some of the most important economic factors and conditions that

should be met in order to have productivity in various works carried out by

different subjects and thus to achieve personal or social profit. To come to a

conclusion about the interpretation and application of all these regulations into

practice, an individual or a legal entity, from the desire to create income, profits

should establish an enterprise, this can even be done by state bodies, creating

public enterprises to perform certain services for the benefit of the society. The

activity carried out by an enterprise means the purpose of production, business and

service delivery in the market.

An enterprise means a certain number of people (owners and employees) who

have legal person status. The enterprise has a special status of a legal entity, which

means that without this status, it is not possible to participate in legal and

economic relations in the market. Enterprises in accordance with legal provisions

are able to carry out one or more activities. The purpose of establishment of an

enterprise by an individual or legal entity in every aspect is to make profit.

Relations of th epeople in an established enterprise by people with personal

connections are much stronger in contrast to other enterprises.4

The establishment of these associations, is in advance based on familiarity with

partners where each partner may transfer his share of capital to a third party only

under conditions provided earlier. Depending on the duration of activity an

enterprise can be established as temporary or permanent, usually individuals can

establish:

A. 16 Partnership Association

B. 17 Limited Partnership Association

C. 18 Joint Association

D. 19 Limited Liability Company, legal entities can establish:

2 Enterprise on business law [information taken from Internet] 3 Labour Law[ Law on Labour of the Republic of Kosovo] Section I, basic provisions; Article 1 and Article 2 4 Enterprise on business lawe[information taken from Internet]



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E. 20 Joint Association,

F. 21 Limited Liability Company

G. 22 Partnership Association with Joint Ownership

The enterprise contents the general act and blog, it has its own statute, regulations

or decisions on the establishment of the enterprise which clarify and confirm

certain issues related to the activity of the enterprise. As a basic and general act of

the enterprise is the statute and all other acts which must be in accordance with the

act of establishment. All that was mentioned above implies that the company is an

important part of economic developement, and to succeed in that development

there must be a normalization of other factors that help the development of the

company.

1.1. THE MEANING OF THE ACTIVITIES AND FACTORS OF

PRODUCTON

For the existence of man and society, productivity is essential, while the factors of

production are men in one hand and and material resources on the other. Man, in

order to live, must be provided with various goods, such as food, housing,

clothing, education services, health, culture, etc. Nature has its own ground and

underground assets, and men should know to use them. At the same time, they

should produce products for their needs. To provide these goods, in terms of

variety, quantity as well as quality, they should work. The order of these factors

may be in some ways, and it is as follows:

- Man with his work - is the main factor of production,

- Land with all its ground and underground assets, and

- Capital.

Work is carried out by man, it represents the physical and mental capability of

man, ie using basic tools - means of production, in order to produce goods. This

means the staff, who as a firsthand priotity factor with their mental, psychological

and physical abilities constitute the major factor of creating goods in various

production processes.

Land includes all natural resources of all kinds, ground and underground, which

represent preconditions of economic development. Thus, hydrograph lands, fund

lands, forests, mines provides conditions for producing various materials, which

serve to meet human needs.

The capital is created by producing assets, and which is a result of human labor.

The expression capital means the funds, technical equipment, technical facilities,

buildings and cash flow (finished products, products in process, raw materials and

stocks). The national abundance is presented by: production and natural resources.

The best grouping of factors of production and development was done by P.

Samuelson, according to him, the economic development of a country, without



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taking into consideration whether rich or poor is based on these factors:

- Man;

- Nature;

- Capital;

- Technology.

The completed work is the basic component of the income, the equivalent of that

works is the new value. In every job position in manufacturing can be measured

the work performed with the work norms, because in every job position in

manufacturing the measurement component is possible, as a result of the work

performed. Thus, every job position in manufacturing can pose calculation unit,

when it comes to the realization of income as a result of the work performed.

Whereas in administration work, in most cases it is not possible to make such

measurements. The volume of the work can be measured in those processes where

certain obligations are assigned to a certain plan. If the units of the plans are

realized, then each unit can prove the realization of the plan.5

The role of the man today is increasingly greater, and it is expressed through

certain functions. Man, first of all in the role of leadership, management and

execution, performs certain tasks, which are directed towards a goal, as part of a

common goal, and that is to boost production - as essential material of society.

Man is presented as the initiator of market research, as collector of funds, as

organizer and leader of the technological process.

Man sets quantitative relations of production and proportions, the degree of cost

and profitability of certain products. Man is as inventive and creative as

constructor and organizer, thus he is the most important factor in direct production,

production planning, organization and distribution - sales.

2. CONTRACT AND ITS IMPORTANCE IN ECONOMIC

RELATIONS

The contract is the main source and the most important one regarding duties. The

contract is an agreement of two or more people which intends to create, alter or

cancel a legal relationship of duties. The contract serves for both parts. 6

The contract regulates the relationship of the participants in the flow of goods and

the provision of services, through it is regulated the internal circulation, as well as

international circulation of the goods. The contract is a tool of legal activity,

5 Investments as a condition for economic development [Through the promotion of investment to increase the

competitiveness of the economy] - Rifat Halili and Fatlum Gogiqi, Prishtinë 2013 fq. 147-156. 6 The law of duties [general and special part] Dr.sc Nerxhivane Dauti; Second part; Sources of the law of

contract,Section I; Contract of duties p;55



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through which is expressed the dinamic of goods exchange.7 The right of

contracting is one of the fundamental principles of the law which presents an

opportunity for participants regarding duties on their free will to regulate mutual

legal relations. The principle of the right of contract means that any party has the

right to decide freely, to make or not to make a certain contract, any party has the

right to freely choose the person (partner) with whom to award the contract, that

the party has the right to freely assign the contract content, form and manner of the

contract, the paerty has the right to decide freely on the change and termination of

the contract.

In cases when the contract is made between parties with different citizenship, the

parties can freely choose which law will apply to their contract, and assign the

court in case of dispute between the parties. In economic relations these issues

have a special importance because at the moment of signing the contract for a

particular trade service, or any other services of any nature then through this

regulatory is formed the legal basis which enables the party, if one party does not

fulfill the obligation, to solve the dispute by authorities such as arbitration, where

both parties have that right and then a decision will be taken on the obligation

which achieves the goal of the enterprise or any other economic entity.

2.1. METHODS TO BE CONSIDERED DURING WORK PERFORMANCE

An enterprise, in order to achieve its goal which as much as possible profit, then

it's essential that both individuals and entitiy should understand the motion and the

object of labor law, which based on the study of employment is work. The initial

method which is required by law is to fulfill the obligation which means the carry

out the service of the employee with efficiency, quality and also respecting the

code of ethics of work.

The employee as well as the employer must respect the contract and then they

should use methods that lead to more or favorable conditions for work in order to

provide tools that ensure workers' lives and society, to ensure work in case of an

unexpected event in order that the enterprise does not have loss. Also, besides

others a great attention should be paid to technological tools which nowadays they

are the key to good results for the consumer as well as producer, because the use of

technology impacts also in reducing expenditure and raising capacity and

productivity in an enterprise.

The higher level of education has given people more control over their health,

government and culture. Global challenges that we face today are proof that we

need to solve problems. We need people who are productive, determined, creative

and gifted in the field of technology and culture, in order to have solutions to the

7 E Drejta e detyrimeve[pjesa e përgjithëshme dhe e veqantë] Dr.sc Nerxhivane Dauti; Pjesa e dytë; Parimi I

lirisë së kontraktimit fq;57



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challenges we face. People with higher levels of education earn more, have control

over the number of births and have healthier and better educated children.

Education gives people the skills to win, to make innovations and to have access to

culture - enabling them to live a more fulfilling life. Investing in knowledge and

skills of people is a promoter of development8

3. STATE FACTORS THAT AFFECT ECONOMICAL

DEVELOPEMENT

In all modern economies the state has an important role and often even a primary

one in economic activity. The basic duty of the state in relation to the economy of

any country is the creation and application of the legal and institutional platform

on which the economic activity takes place. 9

Nowadays, the economists identify some important facts that justify the state's

participation in economic activities and they are:

a) non proper functioning of the market, where history shows clearly that in

certain circumstances the free market fails to function properly often

leading economic activity in a negative spiral, which cannot be avoided

without the intervention of a different factor from private sector facing this

situation.

b) regularly recurring economic crises clearly dictate the need for

intervention by the state to overcome temporary failure in the functioning

of the market mechanism

In such cases the benefit of state intervention in the economy is justified by the

capacities that the state owns. The need of delivery of public goods and services:

the state generally takes the responsibility of delivery of those goods and services

to its citizens, which are obtained in the same manner by all citizens and in a

large scale, direct duti free.

The functioning of the state as an agent of the manufacturer of goods and

services. Besides irreplaceable role in the creation and aplication of legal

platform on which economic activity takes place, for various reasons, the state

is implicated in certain cases directly in the production of goods or services by

operating like any other economic agent in market. Where, the education or

health system, power or water supply, public transport or production of

weapons are just a few examples of areas in which the state has traditionally

been active in providing relevant products, in some of them on an exclusive

basis. The function of the state as the purchaser of goods and services in the

market: the state is also a buyer of goods and services in the market, even

8 Investments as a condition for economic development [Through the promotion of investment to increase the

competitiveness of the economy]- Rifat Halili and Fatlum Gogiqi, Prishtinë 2013 p. 21. 9 Document published in the website on the topic: the role of the state in the economy



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among the most important ones, if not the main one.

By the purchase of products, from paper, computers, office equipment, food

for schools and hospitals, to the airplanes and ships, the state directly

influences the activity of the private sector, by controlling the demand for

products and services that it offers. The function of the state as market

regulator:10

The state intervenes in the market to ensure sustainable economic growth, price

stability and employment growth. State affects the functioning of the private sector

through: the advancement and progress of market regulatory system aiming to

protect consumers, workers, the environment and avoiding uncompetitive and

discriminatory practices, tax, and subsidies which apply to businesses, individuals

and any other unit of economic activity, granting of rights of use, exploitation or

development of national resources.

The role of the state in the redistribution of income: income redistributive function

constitutes one of the earliest roles of the state. In modern economies

redistributive mechanism is mainly based on tax system which allows the proceeds

of certain social groups, and their redistribution through social assistance, social

and health insurance or education systems, etc.

The legacy of public institutions: even in most liberal countries, for historical

reasons, utilitarian or political reasons, it has been impossible that some state

economic functions, be transferred to private sector. A case where all world

economies are obeyed to, for example, is the functioning of central banks, which

are completely public function of the respective states or their economic

groupings. Similarly, many of the former communist countries (including

Albania), despite successes in structural reforms and privatization of the economy,

yet a significant part of economic activity is owned by wholly or partly public

institutions or corporation.

One of the key indicators of the importance of the role of the state in the economy

is the number of state employees, as part of the total number of employees in the

country. Also, public spending as part of overall economic output of a country, is

another indicator of the degree of state involvement in the economy.

3.1. ECONOMICAL, HISTORICAL AND SOCIAL DEVELOPEMENT IN

KOSOVO

The unsolved status of Kosovo for a long time and undefined ownership of land

and enterprises, kept away investors and resulted in unfavorable economic

conditions. For many households, remittances from diaspora were an important

financial source. The importance of diaspora for the development of Kosovo is

10 Ibid



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highly important, first of all their family members in Kosovo increased prosperity,

which, however modest it was, if measured by western standards, those groups

created an ever greater lead compared to economic groups, those that worked in

the Yugoslav weakened economy. As a very important factor that Kosovo has in

economical development is that it has the youngest population in Europe, and it is

under 25 years old. 11

Format e integrimeve ekonomike ndërkombëtare janë të ndryshme. Marrë

globalisht, në kuadër të integrimeve ekonomike dallojmë katër forma kryesore, e

që janë:

It is difficult to define the meaning of international economic integration, since it

is not affected by only economical factors, but there are also many other factors

implemented such as political, military, etc. However, it can be said that the

regional international economic intergration means including more countries in a

specific geographic region worldwide in institutional form in certain areas, which

are characterized by the same socio-economic system and approximately the same

level of development of productive forces. European Union according to its size

and structure, presents a unique integration and largest of its kind in the world. it

represents the largest united market so far in the world.

There are no economic integration only in Europe, such integrations are

established and operating in other regions of the globe. Not forgeting to mention

other forms, the most common forms of regional and international (global)

integration, are without doubt, economic ones. There are such integration in the

American continent, like: Free Trade Agreement Association of Central America

(FTAA, or ALCA), Latin American Association of Free Trade (LAAFT), etc.

Forms of international economic integration are different. Taken globally, in the

context of economic integration there are four main forms,:

a) preferential zone

b) free market zone

c) custom union and

d) economic union

Preferential zone - is a form of international economic integration which presents

a special instrument of foreign trade, where trade preferences are given to member

countries of a certain community, it is achieved by bilateral and multilateral

agreements with member countries of the respective integration. In this case, trade

preferences are reciprocal and deal with exemption from customs duties for

exported goods between member countries.

Free trade zone - is another form of international economic integration which

11 Kosovo A Short History of a Balkan Central Region, Oliver Jens Schmitt, p 225 and 278 Social and

economic development



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represents a high degree of trade connections between two or more countries of a

regional community in comparison with preferential zone. Free trade zone in itself

means free customs in the circulation of goods and services between signatory

countries of this agreement. This area implies mutual exchange of goods and

services determined by agreement between the relevant countries, without

applying any instrument of foreign trade policy, such as: customs, contingents,

prohibitions, permissions, premiums etc.. These foreign trade benefits apply only

to member countries of the relevant international economic integration.

Meanwhile regarding third countries, signatory countries of the free trade zone,

hold on to the right of independent customs policies according to each country's

national tariff. Having summarized what was said above, we may define that free

trade zone represents the stage or degree of economic integration of two or more

countries. Upon formation of a free trade zone, it should be considered not toharm

the local economy. Therefore, in this case, the country should consider economic

advantage that brings this form of foreign trade and the level of development of its

productive forces and to the country which such agreement is signed with.

Customs union represents the union of two or more countries in a customs territory

with common boundaries and customs tariff. For the purpose of economic benefits,

countries claim involving bilateral or multilateral agreements for common customs

tariff to third countries, whereas the circulation of goods between are free of any

customs. Therefore customs union represents a higher level of international

economic integration, in comparison with the first two forms. Economic union is a

form of international integration which includes not only the abolition of customs

for the circulation of goods, but also all the inputs (factors), ie labor capacities,

capital, services etc. between signatory states. From this we can conclude that

economic union so far represents the highest degree of international economic

integration.

Economic integration processes and those regional international, do not depend

only on the goodwill of states which wish to create or to become part of these

processes, but also by other conditions and factors, such as political, social,

economic, geographical, etc. No doubt that the realization of regional economic

integration depends largely on economic factors. Foreign Trade Policy.12

4. CONCLUSION

Considering the study in labor relations and other acts which regulate the rights

and obligations of the employer and employee responsibilities, all these put

together in a separate regulation, undeniably will affect economic productivity in

an enterprise by carrying out more qualitative services and sufficient profit for the

enterprise.

12 European Economic Integration;[ Musa Limani] p: 13-17



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It should be noted that the state mechanisms are always important in increasing the

circulation of material goods through creation of opportunities in free trade, by

removing economic barriers that are challenging for other commercial enterprise

or institution, and therefore economic objectives are: Employment, price

sustainability, appropriate increase of long-term growth, balanced regional

development and equilibrated balance of payments, also a stable economy

requires that there is always a GDP growth by a substantial level (not by

numerical level).

BIBLIOGRAPHY

[1] Organization labour law [Ilo 1998]-

[2] http://www.ilo.org/public/english/standards/declaration/declaration_albanian.p

df [22.102014]

[3] Oliver Jens Schmit, Kosovo a brief history of a Balkan central region

[translated], Pristina 2012

[4] Musa Limani, European Economic Integration, Pristina 2004

[5] Nerxhivane Dauti, The law of obligations, general and special part, Pristina

2008

[6] Rifat Halili and Fatlum Gogiqi, Investments as a condition for economic

development [Through the promotion of investments to the increase of the

competitiveness of the economy], Prishtina 2013.



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FACTORS THAT AFFECT THE GROWTH OF LABOR PRODUCTIVITY

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