Key Themes in Global Industrial Relations:: Minimum Wages and Relocation of Production

By Mark Carley

This report examines two topical issues - minimum wages and the cross border relocation of production - from the perspective of industrial relations. Drawing on comparative analysis from the European Industrial Relation Observatory (EIRO), it looks at the situation in the 25 EU Member States, in two 'developed' countries - Japan and the USA - and two 'developing' countries - Brazil and China.

It highlights the differences and points of similarities between industrial relations systems, in such areas as the respective roles of law and collective bargaining, or the input of the social partners.

Relocation necessarily involves two or more countries, and often involves a direct comparison between their industrial relations systems and the outcomes of these systems. Relocation is also the way in which globalisation is most directly and immediately felt by workers and employers, especially in those countries that lose production and jobs through outward relocation; the differences in how these processes are managed are often revealing of the distinctive aspects of national industrial relations systems

In countries with a statutory minimum wage system, trade unions seem unanimously in favour of the existence of this type of wage floor. By and large, they see it - at least potentially - as an effective way of combating poverty and low pay, both in general and in terms of closing the gender wage gap. There are also specific national arguments in favour of minimum wages - for example, Japanese unions stress the system's importance in light of the country's highly decentralized manner of setting pay and conditions, and of a perceived need to restrain wage differentials.

However, unions in many countries have two main areas of discontent: the level of the minimum wage and some of its structural features. The view that the minimum wage is currently set at too low a level, thus reducing or even almost nullifying its significance as a means of protecting employees, is shared widely among trade unions.

Trade Unions and Relocation

Trade unions in outward-relocation European countries focus principally on the management of relocation at company level. While recognising that relocation is a feature of today's economic environment, and generally eschewing protectionism, they demand full consideration of relocation's social and employment consequences. They essentially argue that, since cost competition with emerging economies is not viable, consultation procedures and collective bargaining should help identify alternatives to relocation or, if the parties agree that it is unavoidable, contribute to creating a set of measures to cushion the negative impacts on workers.

The unions want an institutional environment that is conducive to their involvement in relocation decisions at company level and that constrains - indirectly or directly - the possibilities of relocating production. They mostly consider relocation as a threat, both for workers and for the domestic economy as a whole.

European Foundation for the Improvement of Living and Working Conditions, 2006