To save costs and increase production.

Global recession. What are its implications? Firms and consumers alike are desperate to cut costs and increase productivity as they now are faced with the harsh reality of the basic economic problem- scarce resources vs. unlimited wants. How resources are allocated become very important in order to maximise the use of the available resources one at such a time- when consumers have less spending power due to the fall of their disposable income and firms have to cut costs and increase productivity to maintain its profits. Here are a few tips for both consumers and producers on how to become efficient during this recession.

• PRODUCERS:

How to increase productivity of workers? Simple- give them an incentive. It is a well-known fact that labour is the highest cost of running a business, along side with overheads such as electricity and rent. However, the average fixed costs can be reduced by increasing production as the same cost is spread over a larger number of units and plus, how can you give overheads an incentive? The answer is, give people an incentive to work harder! These are what promotions and the promise of a big, fat year-end bonus is for! Tertiary firms are more than likely to already be implementing this system are labour-oriented. This simply means more competition against the people and rewards, regardless of whether they are financial or non-financial means, are a great way to increase productivity.

There are a few theories regarding how to motivate workers but I believe that McGregor's Theory X and Y sums it all up- some are motivated financially with money and other tangible rewards, and some are motivated by non-financial means such as when they are recognized, presented with greater responsability and have good working conditions. Therefore, I believe that to increase productivity, producers should create reward systems for workers who are more productive in either quality or quantity that include both financial, tangible rewards such as an expense-paid trip and also a non-financial reward such as the "employee of the month" award and is then able to take part in the decision making process of the firm- even McDonalds does it. Even Stalin, the man who turned Russia into a communist country, used financial rewards to increase the productivity of Russia's five-year plans. So whats so hard about it?

Both employers and employees benefit that way- employees feel more motivated to work and get rewards while employers enjoy the increased productivity. Moreover, this does not really address the problem of the shortage of resources available or even the complicated mathematical procedure or reducing costs- it simply encourages resources to be used to its fullest potential.

• CONSUMERS

Every consumer has faced this problem at least once, regardless of age, gender and anything else possible: overspending because you have the desire to buy something else. That has been made even more likely through the widely spread used and advertised credit cards accepted almost anywhere in the world. However, cash is still king- has been and always will be. So, why the need to have and use a credit card? 3 words: Status, ease and of course, some very attractive benefits that I believe do not completely outweigh the costs. Cutting the use of credit cards, in my opinion, can solve the problem of cutting costs and overspending from the consumer's point of view.

Credit cards have this adverse effects on its user: overspending. Why? People do not see their money disappearing from their wallets, but instead just the deceiving image of a swiping card and a simple signature on a tiny piece of paper. Instead of just creating some form of demand for the good, you are now generating effective demand for it as you are able to pay for it instantly with the abundance of no-limit credit cards like that gold American Express card shoved into one of the pockets of your wallet. This can happen anytime, anywhere. From cold storage where you spend a few extra dollars for that tempting bar of Hershey chocolate on promotion to those really nice expensive pair of kitten heels that match the dress you just bought yesterday for no occasion whatsoever- just because it was pretty. Until you see another pretty dress and this cycle repeats itself again (like what happens in the movie ‘the confessions of a shopaholic’). Promotions do not necessarily mean that you save more- you just end up spending more because you THINK that you will save. Like ice mountain- why should you buy 3 when all you save is a mere $0.45? You buy simply because you can and not because you need it urgently or in the near future- and of course you do it for the sake of feeling proud for finding something that seemed to perfect at that time. Trust me, the extra charged by using your credit card the shock and guilt you will feel when you see the credit card statement is not worth it.

Anyways, back to the point. If you only had cash, you would re-consider buying all those luxury and sometimes completely unnecessary goods that are now lying somewhere in your house collecting dust and waiting for its expiry date to come- or the day you decide to have spring cleaning and throw it out, completely new and untouched. How much could you have saved if you had realized how much you were spending on them in total? Therefore, one should restrain from the use of credit cards- it makes temptations seem much more desirable and attainable. Set a budget aside for the week and list down the things you need to buy beforehand- put just slightly more than enough cash in your wallet in case of an emergency. People survived in the past without credit cards, so why can’t you?

See the difference when you see your money depleting before your eyes. It’s not a nice feeling and it makes you way more thrifty-er when spending, hence cutting your costs!