The Impact of Transnational Corporations on Italy and Greece - Coursework Example

Comparison Between Italy and Greece on the Challenges Imposed by TNCs on Workers and Trade Unions in the Process of Globalisation TABLE OF CONTENTS INTRODUCTION…………………………………………………………………………… 2 DISCUSSION……………………………………………………………………………….. 3 Comparative Industrial Relations………………………………………………………. 4 The Impact of Transnational Corporations on Italy and Greece……………………….. 5 Workers and Trade Unions…………………………………………………………….. 5 The State………………………………………………………………………………... 7 Impacts on Workers’ Wages…………………………………………………………… 9 Industrial Conflicts and Strikes………………………………………………………… 10 CONCLUSION…………………………………………………………………………….. 11 BIBLIOGRAPHY………………………………………………………………………….. 12 INTERNET REFERENCES……………………………………………………………….. 15 Comparison Between Italy and Greece on the Challenges Imposed by TNCs on Workers and Trade Unions in the Process of Globalisation INTRODUCTION Industrial Relations is defined as “a study of the rules governing employment” (Edwards 2003: 8), or “a systematic study of all aspects of the employment relationship” (Poole 2003: 4). The core of industrial relations is the relationship between employee and employer, while the state and the trade union form two key institutions. Transnational corporations are companies which have the power to coordinate operations in more than one country, even without ownership, and form two-thirds of all global exports (Dicken 2007). Comparative industrial relationship systematically investigates the employment relationship in two or more countries (Bamber and Lansbury 1998). Ofreneo (2006: 2) states that globalisation means “the rapid integration of economies through freer flow of goods, capital and services”, changing industrial setting in developed and developing economies, and reduced job security. Thesis Statement: The purpose of this paper is to discuss the main challenges that transnational companies (TNCs) impose on workers and trade unions in Europe in the process of globalisation. The two countries belonging to the European Union that will be compared on this issue are Italy and Greece. DISCUSSION Globalization and world-wide relocation often results in the formation of a global commodity chain (GCC) composed of transnational corporation-related commodity producers distributed in different countries. The global restructuring of transnational corporations is in search of higher profits and cheaper production sites. With the world of work changing radically due to globalization, “the most direly affected are the workers and the trade union movement, which developed two centuries ago in reaction to the abuses of the Industrial Revolution in Europe” (Ofreneo 2006: 8). Globalization impacts the trade union movement which are faced with a decline in regular jobs, lowering wage levels, deprivation of rights, weakening bargaining power and other factors. The field of industrial relations includes the study of job regulation and rule making in the employment relationship. “Industrial relations encompasses a set of phenomena, both inside and outside the workplace, concerned with determining and regulating the employment relationship” (Salamon 2000: 3). According to Dunlop (1984), the core function of industrial relations is the establishment of procedures, and use of the collective bargaining processes. Greece has a background of political authoritarianism, dictatorship, and economic backwardness. The country continues its social and economic transition “to integration within the European Union and a competitive international economy” (Ferner & Hyman 1998: 504). On the other hand, Italy has a significantly bipolar economy, with a large group of multiplant and multinational enterprises. It also has an extensive number of small establishments or high technology cottage industry, which have helped in the development of some of the most advanced sectors of Italian manufacturing. Comparative Industrial Relations Comparative industrial relations determines whether a particular type of industrial relationship can be explained for more than one country, or whether comparative analysis can be done on its basis. The Convergence Theory (Kerr et al 1960, Weinberg 1969) states that the different approaches to industrial relations in diverse countries ultimately converge towards the same outcomes. Concurrently, Morley, Gunnigle & Collings (2006) state that the sustained divergence between different industrial relations systems, forms a significant issue in comparative industrial relations. The Labour Institute of the Greek General Confederation of Labour investigated the effect of company mergers and acquisitions (M & A) on employment and labour relations. There was a considerable increase in such activity in the past decade. Due to the lack of a powerful institutional framework, business restructuring causes a serious social deficit. Developments in the field of M & A result in trade unions’ intervention towards new conditions of employment. Generally, both redundancies and recruitment are linked with restructuring by M & A. On the whole, the outcome is more flexible employment contracts and an individualisation of labour relations (Stamati 2009). In Italy the predominant forces of labour in the past included a continued revolutionary commitment and the significance of religion in the form of Roman Catholicism, besides enduring radical currents and close trade union-political party linkages (IDE 1981). According to Molina & Rhodes (2007: 817), “recent developments suggest that politico-ideological variables still play a role in relations between unions, employers and governments”. However, changing from a multi-party to a more bipolar system has not only changed traditional alliances, but the earlier implications of democracy and the role of concertation through reciprocal dialogue. The Impact of Transnational Corporations on Italy and Greece Since1980 there has been increasing growth in corporate globalization (Cooke 2003). According to Meardi, Marginson & Fichter (2009), today there are 70,000 parent TNCs worldwide employing 82 to 95 million workers. The key drivers of transnational corporations are cross-border trade liberalization by the World Trade Organization and the European Union. Transnational firms seek increased market share in a highly competitive business environment (UNCTD 2005). Transnational corporations’ “ability to move production from country to country challenge trade union structures” (Kearney 1997), and disintegrate established patterns of collective bargaining. The top one hundred transnational companies control one-third of all foreign direct investment. These have the maximum impact on home and host country production, demand for goods, flow of trade and technology, and practices related to employment and labour. Significantly, 43 of the top 100 transnational companies are based in the European Union. Workers and Trade Unions International capitalism is increasingly exploiting workers in terms of wages, working hours and entitlements. Besides the direct impact of globalisation on workers, the change from public to private ownership has caused the trade unions in several sectors to suffer, because of the new private owners’ increasing approach of ignoring or opposing unions. Unions have always claimed that globalisation and privatisation have caused losses for workers, consumers and communities, while the gainers have been the multinational and transnational corporations (Kearney 1997). Transnational companies restructure and transform their businesses to sub-contract merchandising and licensing, resulting in a new trend of manufacturers without factories. An example for Italian business is the fashion group Benetton, which employs 3,500 employees of its own, but its sub-contractors employ between 45,000 to 50,000 workers. In Greece, labour flexibility in decentralized bargaining, pay, working time and employee participation is key to industrial relations reform. However, evidence from research conducted by Kufidu and Mihail (1999) revealed that an extensive gap existed between rhetoric and the actual implementation of flexibility in practice. In the area of industrial relations in the footwear industry in Greece, the national actors such as trade unions and the supranational actors such as the employer organisations were identified through a representational study. This study focused on their representational quality as well as their role in collective bargaining, “in order to determine their relative importance in the sector’s industrial relations” (Tikos 2010). The Greek government simply informs its social partners after publishing its plans, before implementing policy measures in any sector of economic activity. Hence, though employer and worker organisations are eligible to conduct collective bargaining, there are no tripartite agencies of social dialogue in the footwear industry. The most basic form of a trade union represents a group of employees in a specific part of their relations with a single employer. “A union’s role can be measured in terms of density, extent, mobilization and scope” (Edwards 2003: 9). Unions endeavour to organize employees and mobilize them towards the fulfillment of sets of demands. Through the approach of collective bargaining trade unions engage with employers; and by making demands for legislation or reforms, they engage with the state. Based on the effects of globalisation and state regulation of the economy, unions engage the state in consultation and negotiation. Unions may take political action to deal with labour market weakness. For example, in 2002, the Italian government faced general strikes protesting against labour market and welfare reforms, hence it split the three confederations and isolated the CGIL (Frege & Kelly 2004). Another example is the Greek parliament’s approval in November 2008 of a governmental plan to privatise Olympic Airways. Olympic Airways was to split into three separate companies and sold to private buyers, resulting in the emergence of a smaller successor airline. The employees were offered voluntary departure with financial benefits and transfers to other parts of the public sector. This privatisation plan was strongly opposed by the workers and the unions (Tikos 2009). Italy exemplifies the valuable connection between corporatism and centrally organized and influential employers’ groups. “Confindustria maintains great power both politically and economically” (Poole 2003: 59), a situation that emerged largely from the Fascist period. During that time, employer associations had wide government powers, and any changes impacting employment conditions of workers could be implemented only through their federations Italian trade unionism has undergone changes with globalization and the impact of transnational companies. Trade union strength depends on its numbers. Only by rapid and substantial increase in the numbers of workers in trade unions, and through increased member involvement, can they remain effective in the face of transnational companies. Additionally, unions need to maximise their limited resources, and excel as negotiators in order to deal with transnationals (Locke 1992). The State The state has a direct impact on the employment relationship through laws such as that of minimum wages, working conditions such as hours of work, and several other issues. Further, it influences the employment relationship on the basis of its role as an employer of public sector workers. The indirect influences of the state include: its relationship with unions either through laws on union government, or through bilateral arrangements such as the UK social contract of the 1970s in which unions promised to moderate wage demands in returm for tax concessions. Additionally, the state may operate through trilateral relationships involving employers, as corporatism. Further, the state “may have bilateral relations with employers and also shape employers’ conduct through legally mandated collective bargaining” (Edwards 2003: 10). The state can also play a vital role in the area of market and managerial relations. Italian industrial relations and welfare state systems underwent a marked shift in the 1990s from long-term reform to significant innovations, both in policy-making in the form of concertation through social pacts, and in the content of reform in the form of decentralization in the collective bargaining system and greater flexibilization of a rigid labour market. After 1998, concertation weakened once “macro-economic convergence for EMU membership had been achieved, and contestation of the collective bargaining system and labour market regulations reappeared” (Molina & Rhodes 2007: 803). The consequences of reform for wage bargaining and employment have been significant. Scholars such as Acocella et al (2006) argue that if concertation or mutual exchange of information is implemented again between all actors: the state, the trade unions and the employers, it will necessitate all actors to commit to increasing productivity in exchange for wage moderation. Others, for example, Ciccarone & Raitone (2006) argue that it is essential to take the following together into consideration: producivity, flexibility and human capital development. This will support Italy’s shift towards the flexicurity model advocated by many social policy experts and the European Employment Strategy. The relationship between employers, the state and trade unions should promote national competitiveness and joint effort for the full development of human resources (Regini & Regalia 1997). More than a decade after joint working between the main actors was proposed, it is still unclear whether they are closer to achieving it. However, Franzini (2001) states that the greatest deficiency in the Italian welfare state-labour market nexus lies in its system of unemployment benefits which is distributed neither equitably nor efficiently. The September 2009 Annual Report of the Institute of Labour (INE) of the Greek General Confederation of Labour (GSEE) published the core developments in the economy. The Greek industrial relations, social policy and employment have been taken into consideration. The 2009 report demonstrates rise in direct taxes, average real wages, longer working hours and increase in unemployment. A greater number of women than men are unemployed or work part-time (Lampousaki 2009). Impacts on Workers’ Wages Hancke & Hermann (2007) and Croce & Ghignoni (2004) state that policies based on wage flexibility and widening range of wage dispersion could result in depressing training investments, lower the skill requirements of the economy, and reduce the quality of employment. This may already have occurred in a wide range of firms tried to compete since the mid-1990s, on the basis of poorly paid, irregular contract employment rather than invest in human capital (Tiraboschi 2005). The key to explaining aggregate wage differentials remain collective bargaining institutions. Inter-personal wage inequalities decreased until the mid-1980s, then increased moderately until the mid-1990s, and after that time, Italy has experienced relative stability as compared to other European countries (Brandolini et al 2001). Significantly, there has been an extension of performance and productivity-related wage clauses in companies leading to greater wage differentials, on a theoretical basis. However, because of the harmonising role undertaken by the Contratto Collettivo Nazionale Di Lavoro, or CCNL (Italian labor legislation), wage increases are still negotiated equitably. The effects of globalization was seen in the increasing numbers of the population living in new poverty in Greece. Hence, there was a need to create the framework in which the wage level was comparative to that of developed countries of the European Union. The other essential factors were the protection of social cohesion, reduction of inequalities, boosting competitiveness, having the advantage of low labour costs, and the reduction of inflation. A minimum safety net for protecting incomes from increased inflation through imposition of minimum wages was brought into motion in the new National General Collective Labour Agreement (EGSSE), March, 2009 (Tikos 2009). Industrial Conflicts and Strikes There may be several sources of tension and conflict resulting from the changing economic and technical forces in market economies, job security, the price of labour and control of its uses, power relations based on command and subordination, the conditions of production and its outcome. Conflict encompasses both individual and collective responses including strikes, work slowdowns, sabotage and boycotts, besides individual actions such as absenteeism and quitting. Greece has unique patterns of industrial conflict where strikes are not used for applying continued pressure upon employers during collective bargaining. This is because Greek unions lack the resources for such a trial of economic strength. Their methods of protest include a number of cut-price sanctions such as “short workplace stoppages, go-slows, working to rule, refusal to perform specific duties and sit-ins” (Bean 1994: 130). In Italy, the Fiat Group management in presented its plan to the government, the regional administrations and the trade unions in December 2009. This provided for the closure of Fiat’s Sicilian plant at Termini Imerese, investments totalling €5 billion and an “increase in annual car production to 900,000 units” (Epicoco 2010). Workers protested against the closure of the plant, and trade unions opposed the decision. CONCLUSION This paper has comparatively analysed transnational corporations’ influences on industrial relations in Italy and Greece. This includes the impacts of globalisation on workers and trade unions, the state’s role in industrial relations, the outcomes of transnationals on workers’ wages, and industrial conflicts and strikes. The challenge faced by trade unions in both Italy and Greece, as a result of globalization, is about the development of a new type of unionism. This should be relevant, inclusive and consider the requirements of all types of workers. Ofreneo (2006: 10) supports this, and adds that the aim should be for “a just and equitable global labour market”. Since industrial relations in various countries differ from one another, the same elemental conditions cannot explain phenomena as diverse as strike activity in Greece and trade unionism in Italy. Hence, it is clear that a general, inclusive industrial relations theory cannot be established. Frameworks should be developed for analysing the impacts of TNCs on the workers and the trade unions of both countries. Additionally, there is a need for the precise formulation of specific theories in a series of significant areas. The evidence indicates that there is a limited number of elemental conditions which support the strategies of the actors: the state, the trade union and the employers. Thus, future empirical research and theoretical scholarship would need to focus on “cultural values, ideologies, politico-economic structures, the institutional framework of industrial relations, the action taken by the actors” (Poole 2003: 198) and other factors. BIBLIOGRAPHY Bamber, G. & Lansbury, R. (1998). An introduction to international and comparative employment relations. In G. Bamber & R. Lansbury (Eds.). International and comparative employment relations: A study in industrialized market economies. Edition 3. Sydney: Allen and Unwin. Bean, R. (1994). Comparative industrial relations: An introduction to cross-national j perspectives. Edition 2. London: Cengage Learning EMEA. Cooke, W. (Ed.). (2003). Multinational companies and global human resource strategies. Connecticut: Quorum Books. Dicken, P. (2007). Global shift: Mapping the changing contours of the world economy. Edition 5, London: Sage Publications Ltd. Dunlop, J.T. (1984). Dispute resolution: Negotiation and consensus building. The United States of America: Greenwood Publishing Group. Edwards, P.K. (2003). Industrial relations: Theory and practice. Edition 2. Great Britain: Wiley-Blackwell. Ferner, A. & Hyman, R. (1998). Changing industrial relations in Europe. Edition 2. London: Wiley-Blackwell. Franzini, M. (2001). The welfare state and the unemployed. The Italian experience. Paper presented at the conference on The Welfare State in Italy and Great Britain. Dipartimento di Economia Politica, Universita di Siena and Sticerd, London School of Economics. Frege, C.M. & Kelly, J.E. (2004). Varieties of unionism: Strategies for union revitalization in a globalizing economy. London: Oxford University Press. Hancke, B. & Hermann, M. (2007). Wage bargaining and comparative advantage in EMU. In B. Hancke, M. Rhodes & M. Thatcher (Eds.). Beyond varieties of capitalism: conflict, contradiction and complementarities in the European economy. Oxford: Oxford University Press: pp.89-121. IDE International Research Group (1981). Industrial democracies in Europe: Differences and similarities across countries and hierarchies. Organizational Studies, 2 (2): pp. 113-129. Kerr, C., Dunlop, J.T., Harbison, F.H. & Myers, C.A. (1960). Industrialism and industrial man. Massachusetts: Harvard University Press. Kufidu, S. & Mihail, D. (1999). Decentralisation and flexibility in Greek industrial relations. Employee Relations, 21 (5): pp.485-499. Locke, R.M. (1992). The demise of the national union in Italy: Lessons for comparative industrial relations theory. Industrial and Labour Relations Review, 45 (2): pp.229- 241. Meardi, G., Marginson, P., Fichter, M. et al. (2009). The complexity of relocation and the diversity of trade union responses: Efficiency-oriented Foreign Direct Investment in Central Europe. The European Journal of Industrial Relations, 15 (1): pp.27-47. Molina, O. & Rhodes, M. (2007). Industrial relations and the welfare state in Italy: Assessing the potential of negotiated change. West European Politics, Special Issue: Italy: A contested polity, 30 (4): pp.803-829. Morley, M., Gunnigle, P. & Collings, D.G. (2006). Global industrial relations. London: Routledge. Poole, M. (2003). Industrial relations: Origins and patterns of national diversity. London: Routledge. Regini, M. & Regalia, I. (1997). Employers, unions and the state: The resurgence of concertation in Italy? West European Politics, 20 (1): pp.210-230. Salamon, M. (2000). Industrial relations: Theory and practice. Edition 4. London: Financial Times: Prentice Hall. Tiraboschi, M. (2005). The Italian labour market after the Biagi reform. International Journal of Comparative Labour Law and Industrial Relations, 21 (2): pp.149-192. UNCTD (United Nations Conference on Trade and Development). (2005). Transnational corporations and the internationalization of R & D. World Investment Report. Switzerland: United Nations Publications. Ulman, L., Eichengreen, B.J. & Dickens, W.T. (1993). Labour and an integrated Europe. Washington, D.C.: Brookings Institution Press. Weinberg, I. (1969). The problem of convergence of industrial societies: A critical look at the state of a theory. Comparative Studies in Society and History, 11: pp.1-15. INTERNET REFERENCES Brandolini, A., Cipollone, P. & Sestito, P. (2001). Earnings dispersion, low pay and household poverty in Italy, 1977-1998. Banca d’Italia. Temi di discussions no. 427/ 2001, Rome: Bank of Italy. Retrieved on 10th May, 2010 from: http://www.bancaditalia.it/pubblicazioni/econo/temidi/td01/td427_01/td427/tema_427_01.pdf Croce, G. & Ghignoni, E. (2004). Training by firms in Italian regional labour markets: The effects of education and unemployment. Working Paper No.66. Dipartimento di Economia Pubblica, Universita Degli Studi di Roma. Retrieved on 10th May, 2010 from: http://dep.eco.uniroma1.it/docs/working_papers/wp66.pdf Kearney, N. (1997). Privatisation, globalisation and the growing power of transnational corporations. International Textile, Garment and Leather Workers' Federation. Retrieved on 12th May, 2010 from: http://training.itcilo.it/actrav_cdrom1/english/global/clause/nkpriv.htm Lampousaki, S. (2009). INE/GSEE presents economic and employment outlook for 2009. European Industrial Relations Observatory Online (eironline). Retrieved on 12th May, 2010 from: http://www.eurofound.europa.eu/eiro/2009/10/articles/gr0910019i.htm Ofreneo, R.E. (2006). Globalization and unionism: The SMU challenge. Paper prepared for Track II: Cooperativism and Social Movement Unionism of the Asia-Pacific Conference of Cooperatives, held in Manila, July 6-7, 2006. Retrieved on 11th May, 2009 from: http://www.upd.edu.ph/~solair/images/Ofreneo,%20Rene%20-%20Globalization%20and%20Unionism%5B1%5D.pdf Stamati, A. (2009). Impact of mergers and acquisitions on employment and labour relations. European Industrial Relations Observatory Online (eironline). Retrieved on 12th May, 2010 from: http://www.eurofound.europa.eu/eiro/2009/03/articles/gr0903029i.htm Tikos, S. (2010). Representativeness of the European social partner organisations: Footwear industry – Greece. European Industrial Relations Observatory Online (eironline). Retrieved on 12th May, 2010 from: http://www.eurofound.europa.eu/eiro/studies/tn0907017s/gr0907019q.htm Tikos, S. (2009). Employees oppose privatisation plan for Olympic Airways. European Industrial Relations Observatory Online (eironline). Retrieved on 12th May, 2010 from: http://www.eurofound.europa.eu/eiro/2008/12/articles/gr0812019i.htm Tikos, S. (2009). Greece: Wage formation. European Industrial Relations Observatory Online (eironline). Retrieved on 12th May, 2010 from: http://www.eurofound.europa.eu/eiro/studies/tn0808019s/gr0808019q.htm Read More