TMJC 2025 J1H2 C1 Lecture 6 Labour

1 What is Labour? Labour generally refers to the people who work for gain, often in terms of wages. Labour is often regarded as a location-specific factor of production that affects where a firm may choose to locate its relevant operations. Labour is location-specific because different parts of the world have different types of labour- people who work for wages with different characteristics. Skills and cost are factors but there are also social and cultural factors that affect labour characteristics as well. How does labour characteristics affect TNCs’ locational decisions TNCs being footloose are willing to relocate their operations into places that help them maximise profits, with labour being one of their consideration. Skill characteristics TNCs across countries and within countries choose and operate their operations finding labour with the right skills, differences in skillsets are more apparent across DCs with different types of tertiary institutions. • TNCs related to the finance often tend to want to locate in cities/countries with good tertiary institution that produces major finance graduates - there are both traded and untraded interdependencies in such places – people with the skillset and also the networks. For instance – New York City (Wall Street and New York Stock Exchange) or London with the London Stock Exchange are cities which produce a lot of finance graduates o New York City : New York University; University of Chicago and Harvard Business School (nearby); Wharton business school o London- London School of Economics; London Business School TNC HQ located in NYC: American Express; Goldman Sachs, BNY Mellon, Blackrock, Citigroup, JPMorgan Chase TNC HQ located in London: Aviva, Prudential, Standard Chartered Higher 2 (9173) Cluster 1: Development, Economy and Environment TMJC Cluster 1 Lecture 6 Labour in the global economy 2025

2 • TNCs related to technology firm tends to locate in areas with high amount of tech graduates such as in California – California Institute of Technology, Stanford, UC Berkeley Different types of skillsets influence TNC’s locational decision -making process and we must be also be mindful of which aspect of the TNC’s GPN are we talking about, is it their headquarters or their production plants as these different aspects of the TNCs require different types of labour. The world economic forum in 2020 forecasts these to be the in demand and out of demand type of jobs (source: WEF, 2023)

3 Wages and Labour Wages of the labour are a key factor in distinguishing between labour of similar skill sets. If skill set of the workers are similar, the wages are often the tie -break factor (after considering other costs – transport, infrastructure, raw materials etc). While there used to be a race to the bottom in terms of wages, such consideration often applies more to manufacturing sector where low -skilled labour are utilised. TNC