LABOUR-MARKET FLEXIBILITY BENEFITS BUSINESS, 
STRAINS WORKERS


According to an ILO (International Labour Organisation) report, 
globalisation or internationalisation of production in the mechanical and
electrical machinery-manufacturing sector, coupled with labour-market
flexibility, has benefited business, in terms of increased production and
reduced labour costs. However, the flexible labour-market conditions have
brought increased strains to the work-force, including reduced income and
higher job instability.


By Chakravarthi Raghavan


Geneva: Globalisation or international production by outsourcing components
in a globally integrated production chain in the mechanical and electrical
machinery- manufacturing sector, coupled with labour-market flexibility, 
has benefited business, contributed to productive rise, and reduced the 
wage share of costs, an ILO (International Labour Organisation) report for
a tripartite meeting in October 1998 brings out.


But the flexible labour-market conditions brought increased strain to the 
work-force - entailing increased part-time work, reduced overtime pay, 
higher job instability, and a rise in 'unsocial' work-hours (that is, night
work, weekend work and long shifts).


The shift in employment benefited the low-income countries and high-income
non-OECD (HINO) economies (Cyprus, East Germany, Hong Kong, Israel, 
Kuwait, Macau, Singapore and Taiwan), but at the cost of the high-income 
OECD countries, and the upper and lower middle-income developing world.


The report shows that as a result of this, the high-income OECD (HIO) 
economies have been able to increase their share in the value added (in 
current dollars) in the machinery industry during 1980-1992 from 89.3% of
the total to 90%, while those of the middle-income and lower-income 
countries have been reduced.


Within the machinery sector as a whole, the value added of the HIO 
increased in the machinery-manufacturing excepting electrical sector from
88.1% in 1982 to 91% in 1992, while in the electrical sector it was 
reduced from 90.2% to 89%.


As a result of the job displacements, the share of the low-income countries
in world employment in 1992 was the largest at 32%. But their share in net
output fell from 3.7% to 2.5%.


In terms of employment, the high-income countries lost nearly a million 
jobs over the 1980-1992 period, but the industrial restructuring and the
strong economic growth since 1992 resulted in stabilising and in some 
cases even reversing the job losses.


Between 1992 and 1997, the US added some 411,000 jobs, South Korea 
117,000, the UK 85,000 and Canada 14,600.


Total employment in the sector increased since 1980 by 12% - adding some 
4.5 million jobs world-wide as production grew by 113%.


Most of the increased employment resulted from a shift in production to 
low-income countries - which in 1992 accounted for 32% of the work-force
in the industry, compared to 22% in 1980. China accounted for nearly 30% 
of the world employment in the sector.


The emerging patterns of production enabled the industry to shift 
lower-skill and lower-wage-paying parts of the production to the developing
world and former socialist countries, while retaining or expanding the 
high-technology and higher value-added production.


The changing patterns enabled business to get flexible labour-market 
conditions, and strained the work-force.


But while a consensual approach to flexibility through negotiations was 
achieved in Germany and in varying degrees in other continental European 
countries, as well as at enterprise level in Japan, in North America, the
UK, Australia and New Zealand, a market-driven approach achieved 
work-force adaptability - that is, by hiring workers with requisite skills
and dismissing those with obsolete qualifications.


The term 'flexibility' covers a range of practices - flexible organisation
of work-place with shifting job designs and boundaries; skill flexibility
on the part of the work-force; numerical flexibility or adjustment in 
number of workers employed, with downsizing and outsourcing work; flexible
or varying hours of work - part-time, shift work and annualised 
work-hours; wage flexibility by adjusting wages to changing economic 
conditions; and geographical mobility of work to alleviate regional skill
shortages and unemployment.


Parallel to the expansion of output, real wages increased over the period
1970-1995.


But labour's share in value added is generally much smaller in the 
low-income countries - where it reached 25% in 1992 compared to 45% in the
high-income countries. In the electrical sector, the labour share in 
value added in the low-income countries was half the levels in the 
high-income countries. But in the non-electrical machinery sector they 
tended to approach the OECD levels.


The ILO report suggests that this difference could be explained by the 
gender composition of the work-force in the two sectors. In the electrical
machinery/electronics sector, a large number of employees are women.


In the world as a whole, labour's chare in value added tended to decline
over 1970 and 1995.


The flexible labour-market arrangements have been promoted by governments 
as part of the 'liberalisation' process and have benefited business: 
'Companies are doing better, productivity is rising and wage costs are 
falling,' the report says.


Those hardest hit by these practices, according to the report, are workers
in Germany, Japan and the United States, accounting for 15%, 25% and 27%
respectively of global production in machinery.


But the ILO report brings out that workers in the developing world too are
facing the pressures of this flexibility phenomenon.


The various parts of the machinery-manufacturing sector covered in the 
report include general and specific-purpose machinery; domestic appliances; 
office or business machines; electrical machinery and apparatuses; 
television, radio, video and communications equipment; and medical, 
precision and optical equipment, including watches and clocks. It does not
include the automotive sector.


In the global market-place, the driving force in the industry is to stay
competitive - by searching for greater flexibility and lower labour 
costs.


Workers on the other hand are concerned with preserving jobs, dealing with
problems of coordinating flexible production systems, and coming to terms
with the long-term social implications of flexibility.


Unions are focusing on reducing working hours in exchange for more 
flexible arrangements in order to preserve employment and create new jobs.


As a result of the flexible work-hours and other changes and restructuring,
the ILO says the largest gain in competitiveness in recent years have 
been made by Canada, the USA, the UK, the Netherlands, Japan and South 
Korea. France and Germany provided a 'mixed' picture.


The fastest growth in this sector is among the newcomers - Ireland, 
Malaysia and the Philippines.


The industry is highly capital-intensive and its need to ensure high rates
of capacity-utilisation means the trend towards innovation and flexibility
is likely to accelerate in the coming years, the ILO report says. - Third
World Network Features


About the writer: Chakravarthi Raghavan is Chief Editor of SUNS 
(South-North Development Monitor), a daily bulletin, and Third World
Network's representative in Geneva.


1820/98

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