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. TNCs often choose the cheapest labour to manufacture/assemble the finished products to be sold. For in -demand skills and higher skilled labour, wages are less competitive and more elastic, with companies willing to pay very high for talents. Labour Unions Labour Unions are organization of workers intent on maintaining or improving the conditions of their employment. The union will often have representatives to negotiate on behalf of the workers. The strength of the union lies in it being a collective force if all the workers within it are united together to go against the state or the TNC in negotiating for better wages and rights (often working conditions, employment leave) for the workers. There exist a contentious relationship between Unions, TNCs and States with TNCs and States often arguing that unions are ‘bad for business’ and many corporations denying workers the opportunity to start unions. Instances of unions going against TNCs or States would be when the union organise collective strikes which can cripple the operations of TNCs and States until they give in to the union demands. For instance, the Economic Policy Institute found that Unions help to advocate for workers rights and wages against corporation and states. E.g. for the 17 U.S states with the highest union density their workers have in terms of: Income and economic protections for the 17 US States with highest union density • have state minimum wages that are on average 19% higher than the national average and 40% higher than those in low-union-density states • have median annual incomes $6,000 higher than the national average • have higher-than-average unemployment insurance recipiency rates (that is, a higher share of those who are unemployed actually receive unemployment insurance)

4 Health and personal well-being for the 17 US States with highest union density • have an uninsured (without health insurance) population 4.5 percentage points lower, on average, than that of low-union-density states • have all elected to expand Medicaid under the Affordable Care Act, protecting their residents from falling into the “coverage gap” • are more likely to have passed paid sick leave laws and paid family and medical leave laws than states with lower union densities source: https://www.epi.org/publication/unions-and-well-being/ Union against TNCs and states In these cases, Unions which are a banding together of labour often have strong negotiation power against TNCs or the state. Unions can represent workers in negotiating for better salary against TNC or against the state to mandate minimum wage law. For instance, in 2023 Teamsters Union, helped to negotiate a tentative contract agreement with UPS that secure wage increases for the 340,000 workers it represents and narrowly averted a nationwide strike after weeks of stalled negotiations. This helped ra ise wages for existing workers to no less than $21 per hour, and it is one of the most lucrative contract in labor history. However, this is not always the case across different countries or against different TNCs. There are instances where TNCs are very hard on unions. It is noted from the Economic Policy Institute that corporations spend more than US$400 million per year on ‘union avoidance’ consultants to bolster their union busting efforts. For instance, TNCs like Google spent millions to engage union avoidance consultant and also disciplined and fired employees who attempted to unionized other workers. Nevertheless, the Alphabet Workers Union organised in secret and eventually formed a union consisting o f more than 400 Google engineers and other workers. Companies like Walmart and Amazon also tries to avoid unions by actively paying workers to report on other workers trying to organise and form union within their stores/warehouses. There are also countries that actively suppress unions through legislation such as not allowing registration of new unions and there is state repression of independent union activity. For instance, countries like Belarus, Egypt, El Salvador, Jordan, Hong Kong(city-state) and Iraq; suppressing labour rights to represent. The practice of union-busting has seen more and more workers blocked from being able to form and join trade unions. In 2020, Uber, Lyft and DoorDash mounted the most expensive such campaign in California’s history, Proposition 22, to fight AB5, a new state law that classified certain categories of gig workers as employees. The ten worst countries for workers in 2021 are the following: Bangladesh, Belarus, Brazil, Colombia, Egypt, Honduras, Myanmar, the Philippines, Turkey and Zimbabwe.

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6 State and Labour In some ways, states are actually caught in the middle, government of countries want their citizens (the labour) to have good salary, employment benefits and insurance, ideally provided by the TNCs. However, if there are high demands and mandates on employer