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Global aspects of labour
This tutorial was written by
Rachel Mules
Head Teacher HSIE
Newtown High School of the Performing Arts
Outcomes
Overview
Review exercises
More
Outcomes
HSC Topic: The Global Economy is covered in the Board of Studies NSW Stage 6 Economics Syllabus (1999) on pages 31-33. The specific outcomes for this tutorial are:
| H1 | demonstrates understanding of economic terms, concepts and relationships |
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| H2 | Analyses the economic role of individuals, firms and governments |
| H7 | evaluates the consequences of contemporary economic problems and issues on individuals, firms and governments |
| H8 | applies appropriate terminology, concepts and theories in contemporary and hypothetical economic contexts. |
Students of Economics should be aware of contemporary economic issues. The international division of labour is a major contemporary economic issue. Division of labour and international migration are an important source of economic growth and development. The impacts of globalisation on labour, however, can be positive as well as negative. There are therefore a number of opportunities and challenges for economies, international organisations and governments around the world to manage. To enhance your understanding of the impact of globalisation in relation to labour, go to the ‘More’ section at the end of this tutorial.
Overview
This tutorial will enable students to apply their knowledge and economic skills to analyse trends and relationships to assess the role of labour in the global economy and the economic impact of globalisation on labour.
Globalisation and Labour
The globalisation of labour as a factor of production is significantly different to other factors of production. This is because labour involves employees who are human beings, consumers, and part of society – the people we are thinking about when we say that the purpose of economic growth is to increase the material wellbeing and living standards of the population.
Therefore, in studying labour and globalisation we need to consider the role and use of labour as a factor of production in the global economy, as well as the implications of the international division of labour on employees, economies and communities.
London Photo R.Mules
The international division of labour
The international division of labour refers to the breaking up of the production process in different locations around the world. It can involve a firm setting up offshore branches or divisions in different countries, outsourcing tasks to businesses in other countries, or outsourcing employment to individuals in other countries using technology.
Firms have a range of options available to them globally: choosing to produce in a rich country versus a poor country, an urban area versus a non-urban area, outsourcing different functions to different locations, using technology to outsource functions without relocation.
Firms can still outsource routine tasks to low wage countries whilst retaining more complex tasks in high wage countries. However, it is not just routine or low skill tasks that can now be outsourced: marketing, software development, web page design and computer programming, for example, can all be done remotely.
The globalisation of labour occurs via international migration but also via the use of technology in outsourcing services such as call centres in India and Ireland, computer programming done by an expert in Russia, or marketing campaigns designed in an office in the Philippines.
Implications of the international division of labour
| Advantages | Disadvantages |
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Whilst the integration of economies around the world has led to impressive increases in world trade and world GDP and the economic development of emerging economies such as China and India, the economic gains of globalisation have still not been realised for many of the world’s poor countries and their people. The liberalisation of international trade has led to structural unemployment for many workers in industrial and agricultural industries, and the employment gains created through government welfare spending and structural adjustment programs have not been sufficient to relocate these employees and find them decent work.
There is still a large gap in per capita incomes between industrialised countries and developing countries. According to the Director-General of the International Labour Organisation (ILO): “If you look at the global economy from the perspective of people, its biggest structural failure is the inability to create enough jobs where people live”. Indeed, according to the UN and World Bank, in 1975, incomes in high-income nations were 41 times greater than incomes in low-income nations; by 2000 they were 66 times higher.
Employees in low skilled and semi skilled employment around the world are vulnerable to fluctuations in the international business cycle. Employees in developing countries and low wage migrant workers are the most vulnerable.
Migration
International migration occurs when a person moves from one country to another to undertake an activity for payment in a country of which they are not a national. Recent decades have seen an increase in the volume of migration as well as the reasons people migrate. The number of international migrants is at its greatest level ever with 214 million people living outside their country of birth. International migration is partly a result of global income inequality, as the benefits of integration of the global economy have not been evenly distributed around the world. At the same time, advanced industrialised economies are facing an ageing population and shrinking labour supply. Increases in migration have been facilitated by developments in technology: more people have access to information about the global labour market, such as available job opportunities, how to apply for them and how to obtain a work visa; transport technology has improved making travel cheaper and easier; and people have access to more information about differences in incomes, working conditions and living standards around the world.
The reasons why people migrate are numerous and rising, and include:
Who are the migrants?
There are three main categories of migration:
Permanent migration: this includes mostly highly skilled migrants and migrants entering under family reunification and refugee programs
Temporary migration for all types of employment: this includes migrants entering for a specific type of job where there are vacancies, often referred to as ‘guest workers’;
Temporary migration for time-bound employment: this includes migrants entering to fill seasonal jobs that will end with the completion of a project such as a construction project, service providers, trainees and students.
Characteristics and Trends
- Migrants from developing countries are found in most types of jobs, are typically found at the bottom and top end of the labour market, but the majority are found at the bottom end, performing jobs that are often dangerous, ‘dirty’ and low paid.
- The majority of migrant professionals (75%) move between industrialised countries and are usually transferees within transnational corporations (TNCs). Still, a significant number of professional migrants move to poor countries along with foreign investment, contributing their knowledge and skills and so enhancing economic development.
- Women are increasing as a % of international migrants, up from 47% to 49% in the 2000s. This is due to family unification but also the feminisation of the workforce, with more women travelling alone as their family’s main income earner, and the increase in women in labour-intensive manufacturing and service industries.
- 3% of the population, (200 million people)live outside their country of origin; of this more than 86 million are economically active (have a job or run a business); 32 million of these are in developing countries; this figure is growing faster than world population growth each year.
- Almost half of all migrants move from one developing country to another where wage differentials are not large, eg. From Haiti to the Dominican Republic.
- Migration from developing countries to industrialised countries has been rising, although still a small % of industrialised countries’ workforces, on average.
- Many countries are both sources and destinations for migrants, eg. Australia receives migrants from all over the world, but Australians also migrate to other countries.
- 100 million new entrants join the world’s labour market each year, mostly in developing countries; this exacerbates unemployment in these countries, with an estimated 1 billion people unemployed or underemployed around the world; but it also provides a pool of labour for the global economy.
- Number of ‘irregular’ migrant workers is rising rapidly, at around 15% of the global foreign workforce (3.3million people), facilitated partly by commercialisation of the migrant process, eg. people smuggling and trafficking; and creating new challenges for global organisations and national governments around the world.
The term ‘irregular’ in relation to migrants was adopted at the International Symposium on Migration in Bangkok in 1999 to cover a range of unofficial migration channels and to remove the notion of ‘criminality’ associated with other terms such as ‘illegal immigrant’. Irregular migrants refer to people who enter or work in a country without legal authorisation. This includes people who enter a country without official approval or documentation such as asylum seekers, people who enter the country with tourist documents but then violate their visa by working, people who overstay their visa, people moved by traffickers entering with false documents, people brought in by people smugglers.
Economic Benefits of migration
Migrant workers are of economic importance to their country of origin:
- major source of income to families via remittance of wages, which can be used for daily living, investment and job creation;
- migrants who return are a source of new technologies and ideas;
- international migration can lead to a ‘virtuous circle’ such as in India where ‘recruitment, remittances and returns’ led to the development of the IT sector in that country, an important source of export income;
- Migrant workers can benefit from better employment opportunities, higher wages, skill development, learning new technologies and ideas, higher living standards.
Restaurant in Angkor, Siem Reap, Cambodia Photo N.Mules
Migrant workers are of economic importance to their host country. They
- contribute productive effort, creating goods and services, increasing economic growth
- bring new ideas, improving technology and business and work practices
- introduce new industries, such as food and restaurants, expanding the range of goods and services for the population and improving quality of life
- often have great ambition and drive, working hard to succeed, which improves productivity and stimulates economic growth
- spend money in the economy leading to an increase in aggregate demand
- pay taxes, contributing to government revenue.
- Perform jobs that nationals do not want to do
Problems and challenges associated with labour migration
International migrants can face a number of difficulties, particularly migrants from developing countries with limited skills or qualifications. Migrant workers face abuse and exploitation in the following ways:
- Temporary workers often have restricted legal rights and most can only access employment in low wage industries and are often unable to access welfare assistance if they lose their jobs
- Global trends towards more flexible employment places migrants in vulnerable positions; for example people who do not speak the language of the host country would find it difficult to negotiate an individual employment contract
- Migrant women face gender discrimination often without recourse due to lack of legal rights; women are becoming an increasingly larger proportion of the international migrant population and face particular problems as they are often working in gender-segregated and unregulated industries and are more vulnerable to abuse including trafficking, physical and sexual abuse
- irregular status migrants are particularly vulnerable to human rights abuse and exploitation under flexible employment arrangements and lack of legal recourse
- irregular status migrants who lose their jobs during a downturn have no access to government welfare assistance
Migrant workers on boat, Dubai. Photo R.Mules
Migrants comprise 90% of the labour force in the United Arab Emirates. They benefit from employment and wages and the remittances they can send home to their families. They have contributed significantly to the impressive economic development of Dubai and the UAE. However, there is a downside. Global organisation Human Rights Watch hi-lights concerns over the treatment of migrant workers in Dubai, including:
- Unsafe work environments
- Employers restricting their movement by withholding travel documents
- Migrant workers cannot obtain an exit visa without approval by their employer, leading to cases of forced labour
- Many workers were sent home during 2009 GFC on unpaid holidays to avoid paying them their contract entitlements
Impact of the GFC
The global financial crisis and subsequent recession had a significant impact on migrants around the world, such as:
- Falling remittances to developing countries by around 10%
- Migrant workers suffering racial abuse and ‘scape goatism’ – being blamed for unemployment
- Migrant workers are concentrated in vulnerable industries hit hardest by global recession, such as construction – more likely to lose their jobs
- Migrant workers often have less rights as workers, for example lack of access to safety nets such as unemployment benefits
- Many countries have tightened immigration policies including greater restrictions on irregular migrants such as refugees: this has reduced global movement of unskilled labour in particular, and can also make existing migrant labour more vulnerable to racial abuse and discrimination
- Reduced flows of international migration could hamper longer term economic growth and development
In February 2010 the Australian Government announced its intention to reform the permanent skilled migration policy to ensure that only highly skilled migrants, in areas of high demand such as healthcare, engineering and mining, would be eligible for that particular visa.
Global challenges ahead:
Migration has become one of the key issues for the global economy now and into the future. Growth in international migration is rising faster than ever before. Falling fertility rates and ageing populations in particular mean that international migration will be an important source of economic growth and development for all countries, rich and poor, around the world. Immigration can be an important part of addressing ageing populations in some countries around the world, in terms of providing an adequate supply of labour ensuring continued economic growth and maintaining and improving welfare levels for those no longer in the workforce.
As indicated previously, migrants bring benefits not only to the host country but also the country of origin. These benefits include wage remittances, as well as flows of technological, social and human capital back home. Remittances of wages back home to developing countries are the second largest source of capital flow, behind foreign direct investment, into developing countries (IMF). The United Nations sees migration as playing an essential role in reaching the Millennium Development Goals.
The GFC aside, the long term trend is for international migration to continue to rise. Global warming, lack of food security, lack of water security and lack of human security in a number of countries are also set to trigger an increase in international migration. International organisations such as the World Bank and the United Nations, as well as national governments around the world, will need to have effective and coordinated policies to deal with the economic and social impacts that this migration will create, and harness this as a source of economic growth and development into the future. So, the challenge for the global community is the management of migration so that it acts as a driver of economic growth and development around the world.
Review Exercise 1
Watch the YouTube clip from UNITES Professionals, an employee organisation (union) based in India and answer the questions that follow.
Indian union video. http://www.youtube.com/watch?v=aZTk13wbUrM&feature=related 
- Outline the employer perspectives on unions in the IT industry in India
- Outline the employee perspectives on unions in the IT industry in India
- Outline the UNITES (union) perspective on unions in the IT industry in India
- What activities are undertaken by the UNITES professionals and how might this impact upon employers and employees in India and other countries?
Review Exercise 2
Watch the YouTube clips below. Use the information in this tutorial, the YouTube clip and your knowledge of Economics to answer the following long response question:
Evaluate the economic and social impacts of globalisation of labour in the global economy.
Migration and the crisis: http://www.youtube.com/watch?v=SdXzWrsiN6g
Immigration Karmavision: http://www.youtube.com/watch?v=0aDB0wVCb_U
Review Exercise 3
Answer this short response question using information in this tutorial and your own research and knowledge of Economics:
Outline the challenges for governments around the world in relation to international migration and the division of labour.
Review Exercise 4
Addressing global inequality in relation to international migration
Governments: best practice can be modelled by governments in establishing institutions to supervise the recruitment and migration procedures for migrant workers; providing information and assistance in areas such as industrial relations rights and responsibilities; legislation outlawing racial and gender discrimination; governments also have a responsibility to enforce this legislation
Businesses: model best practice in workplaces at home as well as global branches; take measures to ensure that globally outsourced production contracts are not awarded to businesses which abuse human and labour rights such as employing child labour; global firms such as Cadbury’s have become Fair Trade certified with the Fair Trade Labelling Organisation (www.fairtrade.net ), making a commitment to purchase inputs which benefit local farmers in developing countries; global firms such as Puma and Bonds have signed up to the Ethical Clothing code of practice.
Employee organisations such as trade unions can take action within nations as well as on a global level, eg. Global Unions, International Textile Garment and Leather Workers Federation; local unions can take action against mistreatment of migrant workers including irregular migrants and workers suffering from racism and discrimination. Scroll down to the ‘More’ section of this tutorial to find links to campaigns and activities of other employee organisations in relation to global labour.
Consumers can also take action by choosing to purchase products from businesses with a commitment to labour rights and ethical practice; consumers can access this kind of information using the internet, at websites such as www.ethicalclothingaustralia.org.au
Read the passage above and peruse the websites to complete the following:
- Make a dot point summary of action that can be taken by governments, businesses, employee organisations and consumers to help reduce the negative impacts of globalisation on international migrants.
- Explain how the above action could lead to an increase in productivity, economic growth and quality of life in the global economy.
Sources
United Nations Population Fund, International Migration and Development Key Issues for the High-Level Dialogue 2006
Media release, UN General Secretary Ban Ki-moon, 11/12/09
Towards a fair deal for migrant workers in the global economy, International Labour Conference 2004, ILO Geneva
More
You can read more from the UN’s population division at: http://www.un.org/esa/population/migration/
The Global Labour Monitor is developing a website to provide up to date statistics on labour trends around the world. At the time of writing this tutorial the website was under construction. You might like to see if it’s online yet:
The ACTU has a department that works towards helping workers in developing countries. Go to: http://www.apheda.org.au/
China Labour Watch is an organisation that monitors the treatment of workers in China and emails stories to people on their email list with links enabling people to send protest emails. Go to: http://www.chinalaborwatch.org/
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