global economy: labour chapter 9 lecture 1. not so unlikely…
TRANSCRIPT
GLOBAL ECONOMY: LABOUR
Chapter 9 Lecture 1
Not So Unlikely…
Global Labor Issues
Labor as a Current Resource
Movement of Labor—people to jobs and jobs to people
Labor as a Future Resource
Labor Issues Create
– Legal Challenges
– Ethical Challenges
– Social Challenges to balance profits and equity
Labor as a Current Resource
About 3 billion people are in the global labor force 100% more than in 1965
Work in the informal sector generates as much as ¼ of the formal economy legitimate but not reported
– agriculture, casual work (like Avon salespeople), home-based workers, volunteering
illegal – drugs, prostitution, illegal gambling, pornography, slave running
Developing economies– most workers are in informal sectors, e.g., agriculture and low value-added
industries– only 15% have wage contracts– Paid labor opportunities are increasing
Advanced economies– most workers are in formal sector but 70% are in service jobs– many more are in high-value added industries that pay high wages– they work fewer hours than in the developing economies
Global Business Create Relatively Few Jobs
So why are they so central?
Businesses Weigh Workforce Decisions Based on Different Labor Components
– Labor Costs Wages/Salary, Benefits, Incentives
– Skills and Education– Location, including proximity, supply chain
access – Intangibles like work ethic, commitment to
work
Hourly Wages for Textile Labor
Cambodia 32 ¢ China 68 Dominican Republic $1.65 El Salvador $1.58 Honduras $1.48 India 38 Jordan 81 Mexico $2.45 Philippines 50-76 Romania 24 Sri Lanka 48 Thailand 91 Turkey $2.13
Movement of Jobs
People to jobs via immigrationlegal and not legal
Jobs to other nations FDI Outsourcing from advanced to developing world– Many manufacturing jobs were exported – Service jobs have more recently been outsourced– Professional jobs have most recently begun
outsourcing
FDI and Outsourcing to Developing Economies: Is it a Race to the Bottom or Slog to the Top?
Evidence for “To the bottom”– Low wage jobs replaced with even lower wage ones– Labor standards will be relaxed to compete for low
wage jobs– Disruption of social contracts within nations
Evidence for “To the top”– Developing economies are now in the wage economy– Jobs beget jobs and grow economies– Global firms raise wages and labor standards
Centrality of Global Businesses Creates Challenges Such As
Competitors compete on cost—stay put with high labor costs and competitors will move
Workers want jobs to stay put and they want higher wages
There is worldwide demand for equitable wages but these affect local economies
Fair employment and social responsibilities, e.g., women, children at work
Organizational self-interest vs. global justice interests
Labor as A Future Resource
50 years ago visionaries saw a world where machines did all of the manual labor
We still have a need for labor In developing countries, labor is substituted for capital What will the future look like?
– More migration in search of jobs unless local economies develop
– More competition for low labor costs until labor costs stabilize worldwide
– More demand for knowledge workers
Education is an Important Asset to Nations and People
Returns to education accrue in advanced and developing economies
Returns to education are greater for developing economies
Returns to education often benefit underutilized groups in developing economies (women especially)
Education will increase in developing economies
Legal Challenges for Businesses due to Labor Issues
Extraterritoriality—the application of a country’s laws outside of its own borders
Increasingly, nations such as the U.S. seek to regulate the behavior of its companies and citizens outside of own borders, e.g., EEOC
Companies may find that they are caught in conflicting labor laws What is legal in one country may be illegal in another Restrictions on work by immigrants/expatriates
– Needed skills– Visas, quotas, etc.
Local content laws and need to build factories May drive temporary local labor demand Will it last? Or will jobs migrate again and disrupt economies?
Ethical Challenges
Child labor– How is a child defined?– What if the income is needed?
Appropriate wage– What is an appropriate wage?– What is the impact of wages on a local economy, on
social systems? Defining acceptable vs. excessive profits Women and minorities at work; who works?
Social Challenges
Anti-business social activism– Protests, boycotts, destruction
Demands to lower profits, keep jobs local Demands to lower executive salaries
Michael Eisner, CEO of the Disney Corporation earned $14.771 million annually; this works out to $6,155 per hour as compared to 28 cents for a Haitian laborer
Business Activities that Improve Labor and Worldwide Labor Conditions
Develop and follow standards and codes of behavior business industryglobal, e.g., Caux Principles
Educateworkersthe pubic
Collaborate across sectors Each of these increases business interconnections with
other sectors