Globalization is a term that understandably intimidates many of us. Current events sections of well-stocked bookstores hold dozens of titles on globalization, and newspapers, news magazines, and public affairs journals regularly devote meaty articles to the topic. It all sounds so, well, imposing.
But you don’t have to wade through academic tomes and hefty journal commentaries to understand how globalization affects the labor markets and everyday workers. This aspect of globalization can be boiled down to three basic propositions:
1. Globalization of markets is driven by the need to expand profits.
2. One way to expand profits is to discover and develop new customer bases for goods and services. Reducing the costs of producing goods and providing services — which, in turn, allows price cuts — is a favored approach.
3. A prime route toward expanding profits and reducing prices for goods and services is to reduce labor costs. This means finding the cheapest competent labor working in the least regulated countries.
From North to South to…China, perhaps?
In the U.S., we saw this dynamic play out during the latter part of the 20th century. As labor unions helped workers negotiate better wages and working conditions in northeastern and midwestern manufacturing plants, many companies moved their plants to less union-friendly southern states where they could pay lower wages and not worry as much about governmental regulation.
But that wasn’t good enough. Companies eventually realized that they could pay even lower wages — as in fractions of the American minimum wage — by closing their U.S. plants and transferring manufacturing operations to other countries, especially developing nations where workers were eager for work and governmental regulations were either nil or hardly enforced. China, Mexico, and others became popular destinations for multinational corporations.
And now to Bangladesh!
It turns out that at least in China, the workers are getting too uppity. Stirrings of an independent labor movement have now grown into a genuine force, and wages of Chinese workers are improving as a result. In other words, they’re getting too expensive.
As costs have risen in China, long the world’s shop floor, it is slowly losing work to countries like Bangladesh, Vietnam and Cambodia — at least for cheaper, labor-intensive goods like casual clothes, toys and simple electronics that do not necessarily require literate workers and can tolerate unreliable transportation systems and electrical grids.
Race to the bottom
For many years, labor and human rights activists have invoked the phrase “race to the bottom” to describe the practice of companies opening and closing plants in a constant search for the lowest-paid workers. This path of economic destruction has left devastated communities and impoverished lives in its wake, all in the name of higher stock values and inexpensive VCRs and t-shirts.
A better way?
Times labor reporter Steven Greenhouse reports on an American-owned garment factory in the Dominican Republic that pays its workers a living wage and doesn’t oppose unionization:
Industry experts say it is a pioneer in the developing world because it pays a “living wage” — in this case, three times the average pay of the country’s apparel workers — and allows workers to join a union without a fight.
The article goes on to question whether a doing-well-by-doing-good strategy can work:
“It’s a noble effort, but it is an experiment,” says Andrew Jassin, an industry consultant who says “fair labor” garments face a limited market unless deft promotion can snare consumers’ attention — and conscience.
It is a sad commentary that in today’s global economy, we cannot say for certain that paying a living wage to workers and financial viability are mutually compatible. Stay tuned.