labor rights and standards

FDI

(Foreign Direct Investment) a company opens and operates a factory abroad

Capital-intensive, highly-skilled

What type of labor does FDI want?

Subcontracting

When a company purchases its products from a supplier and brands/markets/sells it

Labor intensive

What type of labor does subcontractors want?

Higher

Does FDI lead to higher or lower wages and standards?

Lower

Does subcontracting lead to higher or lower wages and standards?

To attract best of skilled labor

Why does FDI grant higher wages?

cut costs, increase profits

Why does subcontracting give lower wages?

Workers rights

Elimination of child labor and forced labor, minimum wage law, right to organize, right to strike, worker’s comp,

Labor standards

Safe working environment, reasonable working hours, benefits, overtime pay

Firms’ capacity to exit

Why has worker bargaining power become eroded?

Race to the bottom

Firms lowering labor standards and costs to make themselves look more desirable to invest in

EPZ (export processing zone)

Area in less developed countries that is separate from the rest of the country and exempt for local taxes and regulations

Meant to bring jobs, technical expertise, and technology to LDCs by attracting firms to cheap labor

What is the purpose of EPZ?

Higher standards of living

What was the desired effect of EPZs?

Race to the bottom in labor standards due to local firms having to compete with EPZs

What was the actual effect if EPZs?

They cannot accumulate wealth

Since EPZs allow firms to avoid taxes, what is the long term implication for workers?

A necessary form of development

Powell examines that child labor is…

Free market spurring economic growth

What does Powell believe will remove child labor?

Will drive firms away and workers into less desirable jobs

What effect does Powell believe that over regulation will have?

firms should raise prices so that consumers pay towards higher wages

What does Silverstein believe is the solution to poor labor standards and sweat shops?

Consumers

Silverstein believe that higher wages create…

enforceable labor provisions

What was included in FTAs (Free Trade Agreements) that led to an improvement in labor standards?

training and resources

What did the US provide to LDCs that signed an FTA with the US?

labor inspections

It was found that countries that signed the FTAs had more…

no

Are CSR initiatives effective in improving labor standards?

bluewashing

a deceptive practice where companies join initiatives like the United Nations Global Compact (UNGC) to present a socially responsible image without making substantive changes to their actual practices, thus distracting from poor human rights or labor records

firms solve superficial, non-costly issues to look like they are improving worker rights

Why don’t CSR initiatives work?

CSR (Corporate Social Responsibility)

initiative is a business's voluntary action to act ethically and contribute to society's well-being, going beyond legal requirements

brands will take their business elsewhere if it becomes too costly to produce

Regarding CSR, how are suppliers constrained?

they worry about firms exiting and they don’t have the resources

Regarding CSR, why don’t LDC governments enforce labor standards?

democracy

What do labor unions need to be effective?