Issues of Globalization for Trade Unions and Labour Organization - Coursework Example

Human Resources Management Table of Contents Human Resources Management Table of Contents 2 Introduction 3 Outsourcing and its effect on wages 3 Outsourcing model 4 Globalization & Competition between Workers 6 Impact of Globalization on Job 6 Reaction of Trade Union towards Globalization 8 Globalization and International Labor Regulation 10 Impact of Globalization on Industrial Relation Law 11 Conclusion 12 References 13 Introduction During the last twenty years significant decline had been observed in the labor market because of globalization. Labor market had shifted the demand from less skilled employees to high skilled employees. This had caused income inequality between high and low skilled employees and thus unemployment of low skilled employees had increased in many countries. Globalization had shifted the demand of employment. Due to the shift in demand of employees, the countries with fairly flexible wage had transformed into those with low relative wages. Almost 70% of U.S. employees’ demand had shifted in manufacturing industry from less skilled employees to high skilled employees. Globalization had affected the prices of employee wages. Trade flow among countries gave rise to change in demand for employees because the requirement for more employees in profitable sector had increased and these changes in demand led to increase in employees’ wages (Swagel & Slaughter, 1997). The globalization had affected the demand elasticity of employees. The higher receptiveness of employees’ demand had changed the relative cost of employees (Bruno & Et. Al., 2004). Outsourcing and its effect on wages Globalization influences outsourcing and it affects the wages of labor. For example, the following figure shows the relative wages of the employees in US manufacturing industry. Source: (Feenstra, 2007). From the above graph, it can be viewed that the relative wages was in declining stage from the year 1960 to 1980. The reason for this decline in relative wages of employees is that the globalization had increased the supply of experienced graduate students from different countries and thus the skilled employees were forced to shift into non – production professions (Feenstra, 2007). Outsourcing model The value chain of a company involves works like that of manufacturing of products. The manufacturing activity needs lesser skilled labors and more unskilled labors compared to marketing and research and development activities. For this reason, companies always want to outsource manufacturing activities to other countries where they can find unskilled labor with lower wages. The following figure shows the outsourcing pattern of value chain of a company (Feenstra, 2007). Source: (Feenstra, 2007). Globalization had helped to outsource the production and manufacturing activities to be accomplished by unskilled labor force. For this reason, the activities in the left side of A in the above figure are those which are accumulated from overseas countries and activities of right side of B are those which are undertaken in home country. Globalization had liberalized the trade agreement among countries that led to improve the infrastructure of foreign company. The outsourcing leads to accomplish the works of left side of A at abroad. The activities which are performed at home country need more skilled employees. This is the reason for raise in relative wages for skilled employees in home country. On the other hand, the relative wages of foreign country also increased because certain activities between A and B requires more skilled labor than the activities at the left side of A. For this reason the relative demand of skilled employees had increased in foreign country, which led to increase in relative wages of skilled employees in foreign country (Feenstra, 2007). Globalization & Competition between Workers Globalization is associated with the process of integrating international market into a single market. It encompasses goods, services, capital, and technology and labor market. The governments of many countries are taking more liberal approaches for implying privatization, economic liberalization, monetary discipline, reduction in import duties, and elasticity of labor market. The foreign companies are becoming more closely connected with other countries due to reduction in trade barriers. For example, Brazil had decreased their import duties from 25% to 12% from the year 1991 to 1997. Simultaneously, China had also decreased their import duties from 43% to 18% from the year 1992 to 1997, and similarly India had also decreased the import tariffs from 82% to 30% from the year 1990 to 1997. These reductions in trade barrier had put employees of the countries in competition with each other. The competition had created vulnerability for employees in regard to reduction in earnings and working conditions (Bezuidenhout, 2000). Impact of Globalization on Job The increasing trade with low wages in the developing countries had enlarged job-cuts and increased the fear of low wages and lesser benefits than before. Companies always want to employ skilled labor with comparatively low wages to compete with their rival competitors, and globalization had helped the companies to fulfill this need. There are three big changes in trends which occurred because of globalization. The first trend is the introduction of technology which had improved the communication with lesser cost and made transportation easier. The second trend is remarkable increase in supply of cheap and skilled employees in the international market. The third trend is the change in governmental policies which had reduced the trade barriers to invest and operate in businesses in foreign countries. These new changes had created new threats for employees. The threats are emphasized by changes in employment model which is the direct consequences of increased international competition. The reduction of wage sharing had caused income inequality and became a major factor of economic insecurity of many employees. The integration of India, Brazil, Russia and China into global economy resulted in involvement of greater portion of population in the world economy. This extra addition had increased the global supply of employees which was estimated at almost 50% increase in new workers. This had been possible because of globalization which created more competitive environment for employees in developed countries like that of the United States. Globalization had integrated the economies of poor and wealthy countries. Thus, the employees of wealthy countries are in direct competition with the employees of developing countries who might receive comparatively fewer wages but are more educated than wealthy countries’ employees. Hence, through the integration, globalization had increased the fear of job-loss among the employees of wealthy countries and also the fear of lower wages and benefits in comparison to other countries. In the U.S., many employees had lost their jobs despite the growing economy and full–employment. One of the reasons for this job-loss was globalization and outsourcing. Employees who had lost their jobs had found it difficult to get a new employment and thus agreed to lower salary job for getting employed again. The outsourcing through internet facility had helped many jobs like business service, accounting, and computer programming to be outsourced from less-developed and poor countries. Many businesses were reneged to offer health insurance and usual pensions to stay competitive in the international economy. These factors had affected the job security and health & pension benefits of employees. The outsourcing of services had also affected the employment in a few industries. So, the global competition is a potential threat for employee’s job security and earning. The globalization had affected the bargaining power of employees. The pressure of technological change and globalization had forced many employees to accept jobs which are without any increase in wages. The employees were isolated in competitive squeeze and the fair share of work was violated. In the period form the year 2000 to 2006, mere 3.4% of employees of the U.S. had enjoyed increase in incomes. The productivity of employees had increased by 71% from the year 1980 to 2005; whereas the compensation of 80% of employees had increased by only 4%. In manufacturing sector of the U.S., the productivity had increased by 131% but the compensation increased by just 7% (Ahearn, 2008). Reaction of Trade Union towards Globalization Globalization had different consequences on employees. Where there are negative impacts of globalization on employees, at the same time globalization helped employees to organize worldwide, negotiate with other organization on an international level, address international issues and sustainable development. The trade unions also played major role in manipulating, executing and imposing rule to accomplish reasonable globalization and encourage development. The trade unions had enlarged their programs to engage with foreign companies and manipulate their policies. As the authority of MNEs (Multi National Enterprises) increased, the trade unions also involved themselves throughout IFA (International Framework Agreements). They have prepared international campaigns and expanded their collaboration at the transactional level. The key implication of trade union over globalization is establishing alliance with foreign companies, expanding their program and accomplishing fair globalization process through ILO (International Labor Organization) and labor standards. The trade unions use IFA as a tool to set rules of conduct for foreign companies. If any MNEs breach social and ecological rules, the GUF (Global Union Federation) can instigate action or take positive steps by making a proposal to bargain with the company. The global trade union consists of ITUC (International Trade Union Confederation), GUF and TUAC (Trade Union Advisory Committee) which engage with big international associations like IMF, the United Nations and World Bank Group among others. In response with globalization, the trade unions had established networks between other trade unions as an international co-operation. Trade unions often had to deal with various human resource management approaches of global production structure and respond accordingly in difficult conditions. The ILO played important part in civilizing the working condition. ILO organized the international community to put pressure on foreign countries so that they do not change the core principles to make crucial changes in working condition. The challenges of globalization can only be resolved if the trade union takes proper steps and simultaneously concentrate on new issues and adjust organizational structure consequently. The encouragement and completion of global labor standards is an important instrument to accomplish a fair globalization process. Strong, modern, unified and comprehensive trade union with a revelation of justice, rational concept for public and financial policy, efficient collective bargaining are the key requirements for accomplishing fair globalization process (Schmidt, n.d.). Globalization and International Labor Regulation The globalization had shown to the whole world that there is no border for work. Thus, the focus of labor law had also changed in this new dimension. The ILO is liable for monitoring the activities of multinational companies to oversee whether the international labor standards are being valued or not. Labor law had been made to protect the interest of employees. The European Union had synchronized the labor regulations without any exceptions. For this reason, if any multinational company employs an employee of any state of Europe, it should maintain strictly the labor regulation of the European Union. In case of USA, Mexico and Canada, the labor regulations are treated independently. The methods of dealing labor related issues in those three states do not collide with each other. Each state had their own modalities about labor wages, child labor and other labor related issues. The other regions of the world like Asia, South America, Africa and Oceania had their own labor regulations which protect their employees’ rights. The globalization gets enhanced with advanced technology and there is requirement for strongly functioning Labor Law which can defend the right of employees in workplace (Scribd, 2011). Impact of Globalization on Industrial Relation Law Globalization had symbolized the change in industrial relation law and policy. It leads to the implementation of new methods of construction and workplace practices. The delegation of wage bargaining, deregulation of employment, changes in employment policy and employment relation are some of the vital changes that occurred because of globalization. Significant changes took place where labor is regulated in different international economics (Bray & Murray, 2000). The development of global enterprises industrialization and effect of new system of management need broader perspective on employment relationship. The modern economies are more apprehensive with rising employment, high wage and high skilled jobs. Some countries had made considerable improvement in employment and working condition to the degree that they experienced employee shortage and increasingly depend on foreign employees to attain quick growth. In the new developing countries, there is a need for appropriate labor policy and regulation to maintain economic growth. For meeting the demand for technology and skilled and participative employees, the introduction of new performance related pay methods in many regions had taken place. Flexible pay systems are ever more considered to reward employees based on performance and skill. In some countries initial impulsion for changed pay had taken place. For example, the government of Australia and New Zealand had considered various methods of pay according to employees’ performance. Globalization had changed the industrial relation (IR) at enterprise level. The IR is considered as an important tool for developing, manufacturing and marketing functions of any company. New form of employment regulation are being practiced which include job security of employees, flexible contracts for minor employees, challenging job, continuous skill improvement, individual performance appraisal, performance based reward system and employee participation in decision making (Macdonald, 1997). Conclusion The ILO had been very positive in taking action to face the challenges resulting by globalization that includes the recognition of core labor regulations and standards, employment creation, social channel of communication, vibrant enterprises, the exclusion of different asymmetries in the work place and practices in business units. Trade union action in national level reveals the guidelines created by the ILO and the leading global trade unions. Globalization must be viewed as continuing process and a change caused by capitalism. Trade unions must acknowledge the challenge of globalization to replenish its dedication to the working class, and must cooperate at the international level (Morris, 2002). References Ahearn, R. J., 2008. Globalization, Worker Insecurity, and Policy Approaches. CRS Report for Congress. [Online] Available at: http://www.fas.org/sgp/crs/misc/RL34091.pdf [Accessed May 5, 2011]. Bezuidenhout, A., 2000. Labor and Society Programme. University of the Witwatersrand. [Online] Available at: http://www.swopinstitute.org.za/files/bezuidenhout%20dp11500.pdf [Accessed May 5, 2011]. Bruno, G. S. F. & Et. Al., 2004. Measuring the Effect of Globalization on Labor Demand Elasticity. Università Commerciale Luigi Boccioni. [Online] Available at: ftp://wuecon195.wustl.edu/opt/ReDIF/RePEc/cri/papers/WP153FalzoniBrunoHelg.pdf [Accessed May 5, 2011]. Bray, M. & Murray, G., 2000. Introduction: Globalization and Labor Regulation. The Journal of Industrial Relation, Vol. 42. [Online] Available at: http://jir.sagepub.com/content/42/2/167.extract [Accessed May 5, 2011]. Feenstra, R. C., 2007. Globalization and Its Impact on Labor. wiiw Working Papers | 44. [Online] Available at: http://publications.wiiw.ac.at/modPubl/download.php?publ=WP44 [Accessed May 5, 2011]. Macdonald, D., 1997. Industrial Relations and Globalization: Challenges for Employers and Their Organizations. Senior Industrial Relations Specialist. [Online] Available at: http://www.ilo.org/public/english/dialogue/actemp/downloads/publications/dmirglob.pdf [Accessed May 5, 2011]. Morris, R. L., 2002. Trade Unions and Globalization. International Labor Organization. [Online] Available at: http://www.ilocarib.org.tt/portal/images/stories/contenido/pdf/WorkersActivities/trade%20union%20and%20globalization.pdf [Accessed May 5, 2011]. Schmidt, V., No Date. Trade Union Responses to Globalization. Documents. [Online] Available at: http://www.ilo.org/wcmsp5/groups/public/@dgreports/@dcomm/documents/publication/wcms_088078.pdf [Accessed May 5, 2011]. Scribd, 2011. Labour Law and Its Impact in Globalization. Doc. [Online] Available at: http://www.scribd.com/doc/38427109/Labour-Law-and-Its-Impact-on-Globalization [Accessed May 5, 2011]. Swagel, P., & Slaughter, M. J., 1997. Does Globalization Lower Wages and Export Jobs?. International Monetary Fund. [Online] Available at: http://www.imf.org/external/pubs/ft/issues11/ [Accessed May 5, 2011]. Read More