Globalization and Working Conditions: A Trade Union

Perspective

Molly McCoy

International Trade Union Confederation/Global Unions

9 April 2008

How do unions define globalization?

• Globalization is a result of market forces:– Technological change– Improved communication and transport

• AND policy choices– Trade and investment liberalization– Capital Market Liberalization

Are unions anti-globalization?

• No, but trade unions have often protested these policy choices and the way they’re carried out

• Three facets of globalization that affect vulnerable workers:

1) Increased Insecurity2) Labor mobility3) Greater inequality

1. Globalization increases insecurity for low-skill workers

• Globalized businesses respond quickly to shifts in comparative advantage by relocating or outsourcing abroad

• Countries are encouraged to respond to change by adopting more flexible labor market policies– Flexibility = elimination of restrictions on firing/lay-

offs and employer-paid severance; fixed-term contracts; no minimum wage

Insecurity affects workers in industrialized countries…

• Workers in industrialized countries fear trade will lead to job loss from outsourcing and off-shoring– Nearly 15 years after signing of trade agreement

(NAFTA) between US, Canada, and Mexico, US presidential candidates still debating its employment effects

• US union, AFL-CIO, publishes March 2008 article on “How NAFTA hurts workers” in an automaker in Michigan and NY

– Loss of jobs to China now a major concern of industrialized country workers

…And in developing countries• Following elimination of garment quotas in

2005, garment exports from many developing countries, including those with preferential US and EU market access, declined

• Small countries without preferential access suffered dire employment loss:– Fiji – 6,000 jobs lost from 2005 to 2006– Maldives – 65% of jobs lost between 2005 and

2006 (797 jobs, mostly Sri Lankan women)– Mongolia – 30% of jobs lost– Nepal – 66% of jobs lost, 20% decline in wages for

remaining workers

Unlike trade-displaced workers in industrialized countries, many

developing country workers have no safety net

• In US: “Trade Adjustment Assistance” provides additional government-paid unemployment insurance to workers. Some also receive retraining and/or employer-paid severance

• 50% of world’s population has no form of social security

• In sub-Saharan Africa and South Asia, only 5-10% of workers have some social security coverage

Does globalization discourage social spending?

• Free Trade Zones (FTZs) frequently offer tax breaks to foreign business, decreasing the host country’s tax base

• Employer-funded health, maternity, retirement, workplace injury, family allowance, severance, and other payroll taxes considered a detrimental to international competitiveness

Does globalization discourage social spending? (cont’d)

• Higher corporate tax rates believed to hurt entrepreneurship and foreign direct investment (FDI), so “business-friendly” countries may choose to eliminate such schemes

• Contributory schemes, where they exist, may be inaccessible for informal sector or poor workers

2. Globalization encourages labor mobility

• Despite restrictions on immigration, there are 86 million migrant workers worldwide

• According to World Bank, remittances from migrants to developing countries were $240 billion in 27 (2x greater than official development aid, and 2/3 the size of FDI flows)  

Profile of Migrant Workers

• Half migrate between developing countries

• 10-15% may be irregular (“undocumented”)

• Majority of migrant workers are low-skill

High risks for low-skill migrant workers

• “3D Jobs”: Dirty, dangerous, and difficult– Informal sector, work outside of legally-enforced

minimum wage, health, and safety standards

• Wages of immigrants as a whole are less than those of native workers – Limited bargaining power, irregular situation,

lower-level jobs, discrimination, language barriers

• Less employment security because of contractual or visa arrangements

• Labor brokers may exploit or traffic workers, or retain some of their wages

3. Inequality grows, despite economic growth

• Global GDP growth has averaged 5% per annum from 2004 to 2007,

• But half of global GDP growth over last 20 years occurred in 4 countries: US, Japan, India and China

• Most poverty reduction has occurred in East Asia– New WB calculations on purchasing power parity

show Asian poverty reduction is less than was previously assumed

Extreme poverty declining, but high numbers of working poor

persist• 550 million people in the world are working

poor, earning less than $1/day• Extreme poverty (<$1/day) worldwide has

declined from 40.6% in 1981 to 18.4% in 2003,– But results are less dramatic when China is

excluded 32% in 1981 to 21.2% in 2003

• Share of people living on <$2/day has only declined from 59.3% to 51.3% (excluding China) in the same period

Reduction in poverty has not reduced income inequality

• 2007 International Monetary Fund study finds that within both rich and poor countries, income inequality has increased over past two decades. – IMF attributes this more to technological change

than globalization, but admits globalization is a factor in spreading technology

• 2007 WB data on 59 developing countries showed increasing inequality in 46 of them

The “skills gap” and inequality

• Income for low-skill workers hasn’t risen as fast as income for high-skill workers – Downward pressure on wages of least-skilled

workers, given new abundance of lower-cost labor abroad

• IMF reports four-fold increase in global labor force over past 20 years, mostly as a result of globalization

– FDI tends to focus on technology-intensive industries, putting a greater premium on skills and leading to faster income increases for skilled workers

Trade union positions on globalization: policy goals

• Comprehensive social security and old-pension programs to protect the poorest

• Increased access to collective bargaining to ensure that workers can negotiate for a fair share of growth

• Statutory minimum wage to protect lowest paid workers and those with weak or nonexistent bargaining position

Trade union positions on globalization: policy goals

• Fair procedures for dismissal of workers, including severance pay and access to retraining

• Investment in education and training• Decent work as an objective of

development strategies: 1. Employment2. Rights at Work3. Social Protection4. Social Dialogue5. Gender equity

How are unions responding to globalization?

1. By globalizing:

• ITUC, founded in 2006, brought two international trade union bodies together to form a new organization representing 168 million workers in 155 countries worldwide. – 2/3rds of membership in developing countries

• 4 new regional organizations (in Africa, Asia, Latin America, and Europe/Central Asia) have also been created.

By globalizing:

• Sector-level Global Union Federations negotiate with companies on a global basis through international framework agreements

• International Framework Agreements establish companies’ commitment to ensuring basic labor conditions, including workers’ right to organize and bargain collectively– 55 agreements in place cover approx. 5 million

workers worldwide– Companies are primarily Western European, and

include: IKEA, Chiquita fruit, Anglo Gold, H&M, Volkswagen, Lukoil, Carrefour

2. Emphasis on core labor standards

• Campaigning for Core Labor Standards (CLS) policies at development finance and other multilateral institutions– Beginning with IFC and World Bank, MDBs are

increasingly adopting CLS policies

• Inclusion of CLS clauses in trade agreements (primarily in US and Canadian-negotiated agreements)

• Development cooperation programs to strengthen worker/union rights (primarily EU)

3. Organizing and including migrant and informal sector

workers• Migrants are largely excluded from

representation and social dialogue, but unions are working to include them

• In developed countries, unions are increasingly working with workers’ centers or associations that serve informal sector or migrant workers – US: Service worker unions cooperating with

associations of domestic workers; building trades unions supporting day laborer centers

Developing countries: informal sector unions advocate and serve

• India: Self-Employed Womens’ Association, SEWA includes 800,000 (female) members– Social security scheme, insurance company,

pension fund, childcare centers

• DRC: CSC Congo, traditionally a formal sector union, now includes 200,000 informal sector members– Organizing meetings and committees– Negotiating with government on issues of concern,

such as taxes and administrative requirements for small vendors, safety, and health insurance

Challenges for the international trade union movement

   Campaigning on workers’ rights and working conditions in global economy has been fruitful, but unions have less direct emphasis on employment creation policies

    Balancing demands for increased workforce flexibility with sufficient social protection and safety net policies

    Creating space for social dialogue given new workplace relationships