SAJC Cl 1.2 Lec 14 Notes: Role of Labour in Governing Global Economy –Relative Role of Key Actors II

St. Andrew’s Junior College H2 Cluster 1: Development, Economy and Environment H2_DEE_lecture14_2025/pg 1 Lecture 14 Relative Role of Actors in Governing the Global Economy (II): Role of Labour KEY QUESTION: Can labour influence economic activities? With the completion of this lecture, attached readings and tutorial, you should be able to discuss the: - influence of labour characteristics on TNCs’ locational decisions; - influence of labour unions on TNCs and states; and - influence of TNCs and states on labour. Lecture Outline 14.1 Introduction 14.2 Influence of Labour Characteristics on TNCs’ Locational Decisions 14.3 Influence of Labour Unions on TNCs and States Box 1: Financial Performance at Amazon and Fedex, Versus UPS Demonstrates The Value Unions Can Bring – case study Box 2: Tripartism in Singapore 14.4 Influence of TNCs and States on Labour 14.4.1 Regulation of Labour by State Box 3: Attracting Global Talents to the United States - case study 14.4.2 Impact of TNCs on Labour 14.5 Concluding Remarks Bangladeshi garment workers lobbying for higher minimum wages in 2023 Once every five years, the Bangladeshi government revises the minimum wage. The current minimum wage, set in 2018, is 8,000 taka, or $121 a month. The proposed 2023 revision was to 12,000 taka, or $181; less than half of what unions say a living wage would be. A living wage is the theoretical income level that allows individuals or families to afford adequate shelter, food, and other necessities. The clashes echoed past protests over minimum wage increases in 2013 and 2018. Workers demanded an increase that factory owners said they could not afford, and tense negotiations ensued that ultimately boiled down to economics dictated by companies not in the room: fashion brands that express support for decent wages but won’t pay more for the products they ask factories to make. That’s the widespread consensus among union organisers and labour researchers who followed the events in Bangladesh, which is the second-largest garment-producing country in the world but pays among the lowest wages in the industry. The effective government of the global economy entails that workers work in safe conditions and can expect regular payments of a fair wage for their labour. The garment workers protests showcases the complexities in governing the global economy. To what extent does labour play a role, vis-à-vis more powerful actors such as TNCs and the state?

St. Andrew’s Junior College H2 Cluster 1: Development, Economy and Environment H2_DEE_lecture14_2025/pg 2 14.1 Introduction • In Lect 12, we learnt that TNCs re-organise their operations between locations on an international or even a global scale. • Like all firms, TNCs re-organise to maximise profit and reduce losses. • As one of the factors of production (the others being land, capital and entrepreneurship), labour plays a role in determining where TNCs choose to locate their businesses. As we have learnt, when TNCs locate internationally, they lead to flows of material and capital, connecting places in the global economy. This is one way that labour, through its influence on TNCs, shape the global economy. • Where TNCs locate, they, in turn, can have an impact on labour characteristics (see Section 12.6 and 12.7). This would affect development levels across space. • Labour can influence the global economy through its impact on the types of economic policies that states adopt. Recall from Lecture 13 that states may pursue economic clusters or export - processing zones, depending on the dominant labour characteristics in a country. This is another way that labour, through its influence on states, which then influences TNCs could shape the global economy. • In this lecture, when we examine labour and its impact on states and TNCs, we are primarily concerned with how labour can shape the global economy. 14.2 Influence of Labour Characteristics on TNCs’ Locational Decisions • The learning outcomes for this lecture specify three similar terms, labour, labour characteristics and labour unions. - Labour is a factor of production. - Labour characteristics refer to different aspects of labour. Key labour characteristics include skill level, cost, size of the labour force (labour supply) and degree of organisation or unionisation. - Labour unions refer to an organized association of workers in a trade, group of trades, or profession, formed to protect and further their rights and interests . In other words, labour unions affect one labour characteristic, degree of organisation or unionisation. • Labour is fairly immobile, and labour characteristics differ across different places. Therefore, TNCs seeking to maximise profits and minimise losses would make locational decisions to take advantage of those geographical differences. 14.2.1 Labour Skills • Recall how TNCs locate their headquarters and R&D in areas with highly-skilled labour, while they locate their branch plants in areas with less skilled labour. 14.2.2 Labour Wages

St. Andrew’s Junior College H2 Cluster 1: Development, Economy and Environment H2_DEE_lecture14_2025/pg 3 • Labor costs are typically higher in developed economies due to several interconnected factors. These factors combine to create a situation where labor costs in developed economies are generally higher than in less developed countries. However, it's important to note that higher labor costs are often offset by higher productivity and the production of higher-value goods and services, allowing developed economies to remain competitive in the global market. i. Shift in economic structure: Developed economies have largely transitioned from labor - intensive agriculture to more capital -intensive manufacturing and service sectors. This shift has reduced overall labor intensity and increased the value of skilled labor. ii. Cost of living: Developed economies often have higher costs of living, which necessitates higher wages for workers to maintain their standard of living. iii. Labor regulations: Advanced economies typically have more robust labor laws and regulations, including minimum wage laws, which can contribute to higher labor costs. Developed countries often also have more comprehensive social security systems, which can increase the overall cost of labor for employers. iv. Education, skills and productivity: Workers in developed economies generally have higher levels of education and specialized skills, commanding higher wages in the labor market. Higher levels of education and specialised skilled also allow workers in developed economies to be generally more productive, which justifies higher wages. v. Tight labor markets: When labor markets in developed economies are tight, with low unemployment rates and low rates of population growth , this can drive up wages as employers compete for workers. • In contrast, LDCs are often able to offer lower labour costs. o There exists a large reserve pool of labour in LDCs. Many LDCs have high natural increase rates that provided a large population to be tapped for labour-intensive work. o Furthermore, the introduction of improved agricultural production methods (such as those linked to the Green Revoution), especially in Southeast Asia liberated many people from subsistence rural life. o Higher supply of labour leads to lowering of labour costs. o Moreover, because of the size of the labour supply, the TNCs can afford to select their employees according to age, skill, and particular factors suited for their production (for example, female labour in clothing factories in Indonesia and Vietnam, or you ng English- speaking graduates for call centres in India and the Philippines). • Often, when the cost of production increases in an area, TNCs may shift certain components of their production network from