The Impact of MNCs on the Local Labour Market - Essay Example

IMPACT OF MNCs ON THE LOCAL LABOUR MARKET Customer Name: Course Name: 21 August 2015 Table of Contents Table of Contents 0 Impacts of MNCs on the local labor markets 3 There exist both positive and negative impacts in MNCs on the local labor markets. Thus it would be essential for host countries to weigh both the positive and negative impacts before making a decision to allow MNCs to operate in their countries. Some of the positive impacts to be discussed includes job creation an. The negative impacts are poor working conditions, harassment, wage differences and child labor. 3 Child labour 4 Moore, Malcolm. “Apple admits child labor used at its assembly plants,” The Telegraph, February 27, 2010, accessed August 21, 2015, http://www.telegraph.co.uk/finance/newsbysector/mediatechnologyandtelecoms/7332405/Apple-admits-child-labour-used-at-its-assembly-plants.html 4 Ibid 1 5 China Labor Watch. “Samsung’s Supplier Factory Exploiting Child Labor,” China Labor Watch, August 8, 2012, accessed August 21, 2015 http://www.chinalaborwatch.org/newscast/172 6 Creation of job opportunities 6 Threat to the environment 7 Poor working conditions, harassment and wage differences 8 Recommendations 9 Xiaolei, Jing. "Child Labour Disgrace." Beijing Review, July 12, 2007, accessed August 21, 2015 http://www.bjreview.com.cn/quotes/txt/2007-07/06/content_68382.htm. 10 Sundar, Shyam. Changes in Labour Institutions in China: Right Steps towards Achievement of Decent Work. New Delphi: Book Well Publications, 2009. 10 China Labor Watch. “Samsung’s Supplier Factory Exploiting Child Labor,” China Labor Watch, August 8, 2012, accessed August 21, 2015 http://www.chinalaborwatch.org/newscast/172 12 Garside, Juliette, “Child labor uncovered in Apple's supply chain," The Guardian, January 25, 2013, accessed August 21, 2015. http://www.theguardian.com/technology/2013/jan/25/apple-child-labour-supply 12 Moore, Malcolm. “Apple admits child labor used at its assembly plants,” The Telegraph, February 27, 2010, accessed August 21, 2015, http://www.telegraph.co.uk/finance/newsbysector/mediatechnologyandtelecoms/7332405/Apple-admits-child-labour-used-at-its-assembly-plants.html 12 Executive Summary MNCs have over the last two decades grown rapidly and as with the prominent aspect of globalization the aspect of MNCs seems to be a controversial one. The impact of MNCs in the local labour markets has been of great concern. The deteriorating conditions of the unskilled workers and mostly in the developing countries were a major issue of concern. This paper has discussed the impact of MNCs on the local labour markets by comparing China and Indonesia. Introduction Globalisation is seen as being a multifaceted trend and it attracts a great number of researchers. An aspect that is closely linked to globalisation is the proliferation of multinational firms. The numerous effects of the MNCs on global business have attracted heated debates on a number of issues over the past decade. As being a primary driver of globalisation, MNCs has become an important target area of the discussion on globalisation. A great number of researchers have asserted that MNCs depict a broad range of benefits in that they promote global economy and that they play an essential role in the development of local economies such as creation of jobs, elevation of poverty, promotion of social welfare, transfer in technology as well as capacity building. Other researchers have also asserted that the activities of MNCs and mostly in the developing countries criticises them due to the adverse effects on the environment and the society. This essays sets out to discuss the impact of multinational firms on the local labour markets and this will be done by comparing and contrasting two countries that is China and Indonesia the issues to be discussed include child labour, unionism and the working conditions of the employees in the MNCs. Impacts of MNCs on the local labor markets There exist both positive and negative impacts in MNCs on the local labor markets. Thus it would be essential for host countries to weigh both the positive and negative impacts before making a decision to allow MNCs to operate in their countries. Some of the positive impacts to be discussed includes job creation an. The negative impacts are poor working conditions, harassment, wage differences and child labor. Child labour A major area of comparison between the China and Indonesia is in relation to labour markets is the issue of child labour. Child labour is termed as the employment of children to undertake activities that in a way deprives them of their childhood and also in a way it interferes with the children's ability to go to school regularly. This practice is seen as exploitative by a significant number of international organisations. A great number of legislations all over the world are against the use of child labour1. Indonesia is rated among the most populous countries in the globe with a population nearing 220 million. A great number of the children start working at an early age and thus many of them are vulnerable to exploitations in the form of child labour. Currently, it is estimated that about 3.2 million children between the age of 10 years and 17 years in Indonesia are working with some being exposed to the worst forms of child labour. A good example of MNC that have in one time used child labour in Indonesia is Nike. An Indonesian labour advocate has accused the American shoemaker of employing children under the age of 16 years to make their athletic sneakers and the children are forced to work in the sweatshops as slaves. This supports earlier reports by a lobbying group based in America that stated that children were compelled to work as slaves in the sweatshops. In reference to this case, Nike is seen as an exploiter rather than a helper of the country. This impact of MNCs in the local labour markets is seen as being a negative one since it deals with the exploitation of the young children.2 Despite the significant advances that have been made in China in regard to reducing and ultimately eradicating child labour, the practise is still prevalent and actually in appears to be on the rise. To a great extent, child labour seems to be very difficult to assess since a significant number of cases are not reported. Apple and Nike are good example of an MNC that applies child labour in China. Apple is accused of employing children who are underage to assist them in their assembly plants where mobile phones, iPods and computers are built3. About eleven children who were 15 years old were found in 2009 working in three factories that supply their products.4 Nike, on the other hand, makes use of child labour in China to produce their products. The main reason as to why child labour is used is because it is cheap as compared to other sources of employment such as the skilled workers and through its use companies are more likely to gain higher profits since the production cost is low.5 Another company that have been accused of child labour is a corporation that supplies Samsung. Based on the child labour watch there were a number of children working in the same departments as the investigators. This further supports the argument that a significant number of MNCs make use of child labour and student workers in their factories and they are usually underpaid as compared to the formal employees. 6 Creation of job opportunities This is another major impact that MNCs operating in china and Indonesia have in the local labour markets. This can be seen as a positive impact to the countries since the two countries have a high population which cannot be accommodated by the local industries. MNCs in China and Indonesia contribute greatly to employment opportunities.7 The two countries are endowed with high low wage labour forces as well as high levels of unemployment The MNCs mainly come in to equip the host countries with the intrinsic knowledge to ensure that they have a skilled workforce in their respective industry. Countries such as china and Indonesia cannot be able to break the cycles of poverty from within since the level of investment that is needed so as to raise the incomes and productivity is very high thus the need of MNCs.8 MNCs need to view their host countries as appropriate sources of their labour supply; since they are able to tap into the market correctly they will be able to create greater value for the stakeholders. MNCs offer employment opportunities to the local people in China and Indonesia though their wages are lower and people in these countries value their jobs since they are better as compared to other available jobs. In both countries a good percentage of people work in the MNCs for example in Apple companies, Nike stores and in MacDonald. Most of the local people are posted in jobs that do not require skills thus making it easier for them to attain the jobs.9 Threat to the environment Some MNCs offers some dangers to the environment of the host countries. The rules on environmental protection in the developed countries are strict and are mainly followed than those in the developing countries. There is a common believe that most MNCs most their operations to developing countries since the countries offer slipshod environmental standards. It is also believed that the developing countries are after the MNCs so as to create job opportunities in their countries. Additional there are legal disputes as to which laws need to be applied. For example, in Indonesia Sinar Mas and Raja Mas made use of Riau province as their operational sites. It is estimated that about 170,000 hectares of forests was cleared for the mill and pulp production. Looking back on issues related to deforestation a great number of multinational have been accused to engage in it. Though MNCs play an essential role in conserving and enhancing environmental sustainability in China and Indonesia they only do so in relation to the binding regulations.10 Poor working conditions, harassment and wage differences Based on Anita Chan 1998 who is a sociologist noted that it is very common for workers to work two or three hours in a day and they are only given only one or two off day in a month. Further she documents instances of corporal punishment, schemes of cheating workers of their pay, dangerous health and safety conditions, a system of deductions, financial penalties and fines for small mistakes or actions such as laughing or talking, forgetting to turn off lights and littering in the workplace.11 Similar reports have also been made by the local Chinese newspapers and other international newspapers such as the Washington Post and the New York Times has featured posts workplace abuse in most Chinese firms. Irrespective of the fact that these problems are not unique to MNCs based in China, these problems are unheard of in home countries. Additionally workers working in MNCs located in China are paid inadequate wages as compared to their counterparts in already developed countries or the parent country performing the similar task. Thus, it would be essential to note that though MNCs have advantages their also have adverse effects. The case is also similar in Indonesia since it is among the countries that companies such as Nike has its major operations. In Indonesia, Nike has been accused of using probationary or training wages and offering workers with wages that are below minimum with the pretext that they are providing vocational or technical training to the employees.12 A significant number of jobs in Nike factories do not qualify or meet the standards of being termed as technical vocations at the same time the Nike factories are not vocational schools. By making use of such an approach to underpay the employees it is unethical and illegal. The wages that are already offered are at the rock bottom and instead of lowering their salaries they should be planning on how they can increase it.13 Nike factories based in Indonesia are engaged in violation the human rights and those they do not conform to the health and safety standards in the working place. Workers are forced to work with chemicals and toxic glues without masks, gloves and adequate level of training. Workers in these factories also have to endure abuses and humiliation 60 to 70 hours in a week. The internal monitoring done at Nike is not of any benefit since it does very little in helping the situation of the employees. The monitors are not able to discover any problems since the managers clean up the mess before the visits and the employees are not allowed to speak to the monitors.14 In some Indonesian sweatshops, women are also faced with numerous instances of sexual abuse. The managers have also been accused of making false promises for better jobs in exchange for sexual favours. Some managers have also been charged with engaging on corporal punishment and this makes the workers fear since they may be fired from their jobs if they report these cases to the relevant authorities.15 Recommendations A major recommendation that needs to be adopted relates to legal enforcement. Countries need to enforce the existing legislations that ban child labour. There seems to be a need for increased forms of punishment for employers who are found breaking the law. Many countries have some legislation in place prohibiting child labour but they are not enforced adequately. The laws need to be accompanied enforcement mechanisms and also improving children access to education and offering the poor families with other means of survival.16 The multifaceted reporting procedure also prevents a high number of employers from being punished17. The reporting systems need to be made as simple as possible to encourage people to report child labour cases since it is evident from the above discussion that most cases are not reported due to the complex reporting mechanisms. The host countries need to ensure that the MNCs have the right working conditions and that they offer favourable wages to the employees. Factories with poor working conditions should be closed down and given time to improve the working conditions. For instance they may be required to provide protective wears for the people working with hazardous chemicals and cater for medical costs arising from work-related illnesses. Additional managers who are found abusing women working in their companies should face the full force of the law and even loss their jobs and in case they are from other countries they should be deported. The other recommendation relates to the aspect of job creation. Countries need to embrace MNCs operating in their countries and make laws favourable for them to operate. This will act as a means of attracting other MNCs in the country which will mean additional job opportunities for the local people hence improvement in their living standards since a good percentage of them will be working. In relation to the environmental laws MNCs need to act with a lot of transparency and this will act as an effective risk management strategy. It will also help them in creating and improving the company’s image. Countries such as china and Indonesia also need to formulate environmental protection laws and ensure that all companies operating in the area adheres to them. By doing so, they will be enhancing environmental protection. Also penalties such as the one imposed on BP after the oil spill should be used to ensure that MNCs conform to the laws.18 This will be an essential step for all countries to continue within the main agenda of mitigating climate change. Conclusion From the above discussion it would be crucial to note that MNCs have both positive and negative impacts, it would also be essential to take note of the disadvantages that they pose to the developing countries. Some of the disadvantages include poor working conditions, inadequate wages, sexual harassment of women and inappropriate fines for small mistakes. Additionally they have positive impacts which include job opportunities for the locals. In regard to these, MNCs need to ensure that they do away with child labour, improve the working conditions in the workplaces and shun away from any form of harassment. By doing so, they will be increasing their position in the local markets as good employers and thus they will not be affected by adverse criticism from international media. 2569 words. Bibliography Bean, Richard. Comparative Industrial Relations: An Introduction to Cross-National Perspective. London: Routledge, 1994. Carbaugh, Robert. International economics. Mason: South- Western Cengage Learning, 2009 China Labor Watch. “Samsung’s Supplier Factory Exploiting Child Labor,” China Labor Watch, August 8, 2012, accessed August 21, 2015 http://www.chinalaborwatch.org/newscast/172 Corporate Watch. “Still Waiting for Nike to Respect the Right to Organize.” Corporate Watch. 28 June 2001. http://www.corpwatch.org/article.php?id=619 Enderwick, Peter. Multinational Business and Labor. London: Croom Helm., 1995. Farnham, Daniel. Employee relations in context. London: Institute of Personnel and Development, 2000. 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