Transcript Week 6 MNCs, labor relations and labor markets in

Sara Hsu
 Labor
is prior to, and independent of, capital.
Capital is only the fruit of labor, and could
never have existed if labor had not first
existed. Labor is the superior of capital, and
deserves much the higher consideration. -Abraham Lincoln
 Dignify
and glorify common labor. It is at the
bottom of life that we must begin, not at the
top. -- Booker T. Washington
 Multinational
Corporation (MNC): A
corporation that manages production or
delivers services in more than one
country..
 Labor Market: The market in which
workers compete for jobs and employers
compete for workers.
 Elimination
of forced and compulsory
labor
 Abolition of child labor
 Elimination of discrimination in respect
of employment and occupation
 Freedom of association and collective
bargaining
 Labor
relations have two opposing
perspectives.
 Those who are pro-globalization argue
that MNCs provide jobs to developing
countries resulting in a rise in living
standards.
 Those who are anti-globalization argue
that labor is exploited by MNCs and that
the globalization process has increased
inequality.
 Karl
Marx believed that the working class
was always exploited by capital class. In
Marx’s Labor Theory of Value, the only
social cost of producing commodities
was labor. Capitalists strove to exploit
workers to make a profit from their labor,
driving wages downward and working
hours upward.
 In
China, labor standards have improved
overall.
 At the individual level, workers are no
longer tied to their workplaces; fluid labor
markets, and opportunities elsewhere,
afford workers a bargaining power that was
previously impossible.
 However, lack of legal enforcement in China
has made it difficult the ensure that labor
standards are actually being implemented.
 The
All-China Federation of Trade Unions
was founded on May 1st, 1925, and is
organized under the Communist Party.
The ACFTU is the leading body of trade
union federations at local level and
industrial unions at national level. The
ACFTU is the only legal trade union
federation in China, and membership is
mandatory.
Indian labor laws are some of the most complex
and restrictive in the world. These regulate the
work day, minimum wage, overtime, government
approval for firing, and more.
 India's labor unions are strong--Ex: On November
5, a 45-day strike by 3,000 workers at Rico
Automotive Industries in Haryana, a state in
northern India, adjacent to Punjab was called off
by the AITUC (All-India Trade Union Congress). A
settlement between Rico, AITUC and the Haryana
state government was reached just hours before
thousands of workers at other plants were
expected to hit the bricks in a sympathy strike in
support of Rico workers.

 Labor
supply is the number of total hours
that workers wish to work given the going
wage rate and other working conditions.
 Labor demand is the relationship between
the number of job opportunities which exist
at a given wage rate and other conditions.
 Labor supply meets labor demand at a
certain point, and excess labor supply is
called unemployment.
Declining competitiveness and rising wages. Ex:
While in the 1980s Indonesia maintained its
competitiveness vis-à-vis its regional neighbors
through relatively low unit labor costs, it began to
lose this advantage in labor-intensive industries after
the adoption of a minimum wage policy in the 1990s.
Concerns over the impact of the minimum wage
policy have increased since decentralization started
in 2001, as minimum wages are now set by the
regional governments.
 Large informal sector, Ex. In the Philippines, most of
the job generation can be found in the informal or
unorganized sector. Informal sector occupations are
characterized by low productivity, modest fixed
assets, long hours of work, and low wages.

 Rural
to urban migration, transition from
agriculture to manufacturing, Ex: During
the 1980s and 1990s, China underwent
considerable employment restructuring
as a result of economic development. In
particular, employment growth was rapid
in the country’s manufacturing industry.
As such, labor migrated from rural to
urban areas.
 <>
 Thanks
to the openness of global trade
and foreign investments advocated by
WTO and responded by national
authorities, together with the
advancement of transportation and
communication technologies, MNCs are
able to rapidly expand with fewer
obstacles than before.
John Kenneth Galbraith was a famous Canadian
and American economist who believed that
economic theory in and of itself was insufficient,
particularly in the presence of greed.
 Galbraith's main ideas focused around the
influence of the market power of large
corporations. He believed that this market power
weakened the widely accepted principle of
consumer sovereignty, allowing corporations to
be price makers, rather than price takers,
allowing corporations with the strongest market
power to increase the production of their goods
beyond an efficient amount.

As the world globalizes, multinational corporations
are also coming under more scrutiny, as questions
about their accountability are also being raised.
 Multinational corporations have influenced labor
relations by:
 Tacitly supporting military interventions
 Pushing for economic policies that are heavily
weighted in their favor
 Foreign investment treaties and other negotiations
designed in part to give more abilities for
corporations to expand into other poorer countries
possibly at the expense of local businesses.
 Following an ideology which is believed to be
beneficial to everyone, but hides the realities and
complexities that may worsen situations.

 The
Asian multinational has been defined
by global brands such as Toyota, Honda,
Hyundai, Samsung and Sony — Japanese
and South Korean companies that emerged
on the global scene in the 1970s, ’80s and
’90s
 A new generation of companies emerging
from Asia Pacific is poised to have a similar
impact on the way the world does business.
Companies such as Tata Steel and Infosys in
India and Lenovo, Chery Automotive and
Haier Group in China already have become
major forces in their respective industries
This new breed of Asian multinational arrives on
the scene with some built-in advantages,
including enormous domestic markets that
provide significant scale and momentum.
 Consider that the 2009 Fortune Global 500 list
includes 145 Asia Pacific companies, 29 percent
of the total, including nine newcomers this year
from China alone. High domestic savings rates,
government support and companies’ willingness
to make bigticket acquisitions and strike highprofile partnerships also fuel outward expansion.


Ex. Haier Group is China’s largest appliance
company. Founded in 1984 in Qingdao, Shandong
Province, Haier manufactures and markets
products in more than 90 categories, including
refrigerators and freezers, air conditioners,
dishwashers, microwaves, televisions, vacuums,
mobile phones and computers. In China, Haier
has more than 30 percent market share in four
main product categories — refrigerators,
refrigerating cabinets, air conditioners and
washing machines — and it exports its products
to more than 100 countries around the world.

Ex. Tata Group companies operate in seven
business sectors: communications and
information technology, engineering, materials,
services, energy, consumer products and
chemicals. The major Tata companies are Tata
Steel, Tata Motors, Tata Consultancy Services
(TCS), Tata Power, Tata Chemicals, Tata Tea,
Indian Hotels and Tata Communications. The
companies primarily are based in India, but have
significant international operations. In 2007-2008,
the group had 350,000 employees worldwide and
total revenues of US$62.5 billion — 61 percent of
which came from business outside of India.
Child labor refers to the employment of children
in any work that deprives children of their
childhood, interferes with their ability to attend
regular school, and that is mentally, physically,
socially or morally dangerous and harmful.
 ILO estimates that there are about 250 million
economically active children (individuals below
18 years old) worldwide. Sixty one percent or
roughly 153 million of these workers are in Asia.
Around half of the economically active children
are working full time and 20-30%, or about 30 to
46 million are in exploitative conditions or worst
forms of child labor.

Gender inequality in labor markets remains a
persistent phenomenon, albeit to varying degrees
depending on regional, national and local contexts.
 Asia is unique in both its relatively low female
unemployment rate and its positive male-female gap
(the regional unemployment rate for women was 4.3
per cent in 2009, compared to 4.7 per cent for men
and well below the global female rate of 6.5 per
cent)
 But the relatively low unemployment rate for Asian
women is most likely attributable to the persisting
high demand for low-wage female labor in exportoriented manufacturing and to the fact that most
women cannot afford to be unemployed and have to
find work in the informal economy.

 Pros
and Cons?
 Questions?