IBUS 618, Dr.

Yang 1
Trade Unions and International
Industrial Relations
Trade unions may limit the strategic
choices of multinationals in three ways:
By influencing wage levels to the extent that
cost structures may become uncompetitive;
By constraining the ability of multinationals to
vary employment levels at will; and
By hindering or preventing global integration of
the operations of multinationals.

IBUS 618, Dr. Yang 2
Influencing Wage Levels
Although the importance of labor costs
relative to other costs is decreasing, labor
costs still play an important part in
determining cost competitiveness in most
industries.
Multinationals that fail to manage their wage
levels successfully will suffer labor cost
disadvantages that may narrow their
strategic options.
IBUS 618, Dr. Yang 3
Constraining the Ability to Vary
Employment Levels at Will
In Western Europe, Japan and Australia, the inability of firms
to vary employment levels at will may be a more serious
problem than wage levels.
Many countries now have legislation that limits considerably
the ability of firms to carry out plant closure, redundancy or
layoff programs unless it can be shown that structural
conditions make these employment losses unavoidable.
Plant closure or redundancy legislation in many countries
frequently specifies that firms must compensate redundant
employees through specified formulae such as 2 weeks pay
for each year of service.
In many countries, payments for involuntary terminations are
substantial, especially in comparison with those in the USA.
IBUS 618, Dr. Yang 4
Constraining the Ability to Vary
Employment Levels at Will (cont.)
Trade unions may influence this process in two ways:
Lobbying their own national governments to introduce
redundancy legislation, and
Encouraging regulation of multinationals by international
organizations such as the OECD, EU, UN, etc.
Multinational managers who do not take these restrictions
into account in their strategic planning may well find their
options severely limited.
Recent evidence shows that multinationals are beginning
to consider the ability to dismiss employees to be one of
the priorities when making investment location decisions.
IBUS 618, Dr. Yang 5
Hindering Global Integration of
Operations
Many multinationals make a conscious decision not to integrate
and rationalize their operations to the most efficient degree,
because to do so could cause industrial and political problems.
One observer of the world auto industry suggested that car
manufacturers were sub-optimizing their manufacturing
networks partly to placate trade unions and partly to provide
redundancy in sources to prevent localized social strife from
paralysing their network, e.g.
General Motors as an example of this sub-optimization of
integration. GM in the early 1980s had undertaken substantial
investments in Germany at the demand of the German
metalworkers union (one of the largest industrial unions in the
Western world) in order to foster good industrial relations in
Germany.
IBUS 618, Dr. Yang 6
GM Europe
Sells vehicles in over 40
markets.
Operates 10 vehicle-
production and assembly
facilities in seven countries
Employs around 54,500
people.
Additional directly related
jobs are provided by some
8,700 independent sales
and service outlets.
In 2008, GM mained a
market share of 9.3%.
GM Europe 2007 2008
Revenue $37.4 bn $34.4 bn
Earnings
(before tax)
$55 m $(1,633) m
Workforce 55,651 54,500
Vehicles produced 1,820,039 1,725,179
Vehicles sold 2,181,989 2,039,360
Market share 9.5% 9.3%
IBUS 618, Dr. Yang 7
Trade Unions Response to
Multinational
Seeing the growth of multinationals as a threat to
the bargaining power of labor because of the
considerable power and influence of large
multinational firms.
Multinationals are not uniformly anti-union, but their
potential lobbying power and flexibility across
national borders creates difficulties for employees
and trade unions to develop countervailing power.
There are several ways in which multinationals have
an impact upon trade union and employee interests.
IBUS 618, Dr. Yang 8
Seven Characteristics of MNEs as the
Source of Trade Union Concern
Formidable financial resources
Alternative sources of supply
The ability to move production facilities to other countries
A remote locus of authority
Production facilities in many industries
Superior knowledge and expertise in industrial relations
The capacity to stage an investment strike
Refuse to invest any additional funds in a plant, thus
ensuring that the plant will become obsolete and
economically non-competitive
Offshoring
IBUS 618, Dr. Yang 9
The Response of Trade Unions to
Multinationals
The response of labor unions to multinationals has been
threefold:
Form international trade secretariats (ITSs)
Lobby for restrictive national legislation, and
Try to achieve regulation of multinationals by international
organizations.
International trade secretariats (ITSs).
There are 15 ITSs, which function as loose confederations to
provide worldwide links for the national unions in a particular
trade or industry (e.g. metals, transport and chemicals).
The secretariats have mainly operated to facilitate the
exchange of information.
IBUS 618, Dr. Yang 10
The Goal of the ITSs
The long-term goal of ITSs is to achieve transnational
bargaining through a similar program, involving:
Research and information
Calling company conferences
Establishing company councils
Company-wide unionmanagement discussions
Coordinated bargaining
One of the fastest growing ITSs is European Regional
Organization of the International Federation of
Commercial, Clerical, Professional and Technical
Employees (Euro-FIET), which is focused on the service
sector.
IBUS 618, Dr. Yang 11
Limited Success of ITSs
Overall, the ITSs have limited success, due
to several reasons:
Generally good wages and working conditions
offered by multinationals,
Strong resistance from multinational firm
management,
Conflicts within the labor movement, and
Differing laws and customs in the industrial
relations field.
IBUS 618, Dr. Yang 12
Lobbying for Restrictive National
Legislation.
On a political level, trade unions have for many
years lobbied for restrictive national legislation in
the U.S. and Europe.
The motivation for trade unions to pursue
restrictive national legislation is based on a desire
to prevent the export of jobs via multinational
investment policies.
IBUS 618, Dr. Yang 13
Regulation of Multinationals by
International Organizations
Attempts by trade unions to exert influence over
multinationals via international organizations have
met with some success.
The International Labor Organization ILO has
identified a number of workplace-related principles
that should be respected by all nations:
Freedom of association
The right to organize and collectively bargain
Abolition of forced labor, and
Non-discrimination in employment
IBUS 618, Dr. Yang 14
Regional Integration: the EU Social
Dimension
The social dimension aims to achieve a large labor market
by eliminating the barriers that restrict the freedom of
movement and the right of domicile within the SEM.
Regional integration such as the development of the EU has
brought significant implications for industrial relations.
In the Treaty of Rome (1957), some consideration was given
to social policy issues related to the creation of the European
Community.
The terms social policy or social dimension are used to
cover a number of issues, such as:
Labor law and working conditions,
Aspects of employment and vocational training
Social security and pensions.
IBUS 618, Dr. Yang 15
The EU Directorates
The EU has introduced a range of Directives related to the
social dimension.
The most contentious Directive is the Seventh (Vredeling),
with requirement of disclosure of company information to
unions.
Strong opposition led by the then conservative British
government and employer representatives argued that
employee involvement in consultation and decision-making
should be voluntary.
The European Works Councils (EWC) Directive was
approved on 22 September 1994 and implemented two
years later.
IBUS 618, Dr. Yang 16
Implications from the EU
The EU aims to establish minimal standards for
social conditions that will safeguard the fundamental
rights of workers.
Obviously, all firms operating in the EU need to
become familiar with EU Directives and keep abreast
of changes.
While harmonization of labor laws can be seen as the
ultimate objective, the notion of a European social
community does not mean a unification of all social
conditions and benefits, nor for all social systems.
IBUS 618, Dr. Yang 17
Pan-European Pensions
The EU Council of Ministers has approved the pension funds
Directive that sets standards for the prudential supervision of
pension plans in the EU.
Member States need to implement the Directive by the middle
of 2005.
The Directive covers employer-sponsored, separately funded
pension plans. The Directive provides pension funds with a
coherent framework to operate within the internal market and
allows European companies and citizens the opportunity to
benefit from more efficient pan-European pension funds.
Once implemented, the Directive will ensure a high level of
protection for both members and beneficiaries of pension
funds.
IBUS 618, Dr. Yang 18
Difficulty in Implementing the EU
Social Policy
Taxation differences among Member States
Many member countries tax laws do not recognize contributions to foreign
pension plans.
This creates unfavorable tax circumstances for employees working outside
their home countries and contributing to pension plans in their host
countries.
The issue of social dumping
The impact of SEM on jobs Member States that have relatively low social
security costs would have a competitive edge and that firms would locate in
those Member States that have lower labor costs.
The counter-alarm was that states with low-cost labor would have to
increase their labor costs, to the detriment of their competitiveness.
There are two industrial relations issues here: the movement of work from
one region to another, and its effect on employment levels; and the need for
trade union solidarity to prevent workers in one region from accepting pay
cuts to attract investment, at the expense of workers in another region.
IBUS 618, Dr. Yang 19
Chapter Summary
In this chapter, we have reviewed and discussed
differences in industrial relations across borders,
and highlighted the complexity in international IR.
We have also identified unionization trends and
some key factors
Combining recognition of the overt segmentation
effects of international business with an
understanding of the dynamics of FDI yields the
conclusion that transnational collective bargaining is
likely to remain a remote possibility.
IBUS 618, Dr. Yang 20
Chapter Summary
Trade unions should opt for less ambitious strategies in
dealing with multinationals, such as
Strengthening national union involvement in plant-based and
company-based bargaining
Supporting research on the vulnerability of selective
multinationals, and
Consolidating
With regional economic integrations, it is likely that trade
unions and the ILO will pursue these strategies and
continue to lobby where possible for the regulation of
multinationals via the European Commission and the
United Nations.