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Labor Relations, Weakened Unions and Market Dualism Essay

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Updated: May 15th, 2021

Introduction

The relevance of labor unions is increasingly becoming diminished in various developed countries around the world. Many employers have realized that different employees have varying importance to their organization based on their skills and talents. Keating (2013) explains that many companies are currently willing to pay their top talents high salaries as a means of convincing them to stay with the firm for as long as they remain instrumental in their departments.

A section of employees, especially the top talents, have also realized that trade unions are not representing their interests effectively. However, these emerging changes have not eliminated the relevance of trade unions. Thelen (2014) explains that these unions may be weakened by the emerging forces, but they are still playing a critical role in representing the interest of employees. It is argued that weakened unions in rich democracies play an important role in enhancing labor market dualism (Zhang, 2014). Even in emerging economies such as India and China, these unions tend to represent the insiders instead of the masses. In this paper, the researcher seeks to discuss whether the trade unions support the dualization process.

When and How Unions Support Market Dualism

The unions are often meant to represent the interest of workers who, as individuals, cannot voice their concerns to the employees with the desired results. However, a section of society now argues that these unions are playing a critical role in promoting market dualism. One of the ways through which this condition is promoted is by championing the minimum wage. As Keating (2013) admits, it is appropriate to ensure that the minimum salaries earned by individuals should meet their basic needs.

If a person is spending much of his or her time working for a given company, the pay should be enough to pay the bills for primary needs based on the level of the economy. However, this approach that seems to focus on promoting fairness is also acknowledging the fact that the labor market is divided into two segments. The first segment has those who are permanently employed and earn relatively high salaries based on their skills and expertise.

The second segment has semi-skilled individuals often hired in the informal sector or in large companies on a contract basis. They are the low-wage employees who need the protection of the trade union. When the unions fight for the increment of salaries for these low-pay individuals, they are validating the existence of the two segments of the labor market. They are affirming the decisions made by many companies to avoid hiring people on a permanent basis.

This problem is very common in China and India. The two countries have a large labor force divided into the above two segments. In India, so many people work in the informal sector, where they lack job security. They are poorly paid and can only work when they are needed by the company. The same case is also common in China. It is worrying that this is happening in countries that have trade unions meant to fight for the interest of the employees. Apparently, officials of these unions are only interested in making money at the expense of their employees. Publicly, they remain critical of the rich and powerful employers.

However, they are practically representing the interest of the insiders. Thelen (2014) explains that soon after getting power, most of these union officials find themselves at the same table with the rich and powerful they are expected to fight. They end up doing nothing in the interest of those in the informal sector. They set minimum wage based on the advice of the employers. It explains why in India, a large section of the employees working in the informal sector are unable to lead a decent lifestyle. They are struggling to pay their bills for basic needs.

Reasons Why Unions Support Dualism

According to Zhang (2014), unions’ support for market dualism varies. Some of the reasons are valid, while others point to selfish interests on the side of union officials. One of the main reasons that unions give in their support for dualism is the stiff competition in the global market. Local firms can only compete fairly in the global market if their production cost is lower than the rivals. China is in stiff competition with its neighbor Japan and North America. The unions argue that the existence of the local companies depends on their ability to compete globally. As such, when trying to protect the interest of the local labor force, it should not be forgotten that when these companies collapse, the job market will shrink. Many people will be left jobless as these companies are forced out of their operations.

The unions are, therefore, keen on creating room for their prosperity to ensure that more jobs can be created. It explains why the job market is divided into two, the formal and the informal sector. In cases of the boom, the local companies are able to recruit more part-time employees who are expected to work within a specific period as long as their services are still needed. Although this approach may seem undesirable, it has helped China to emerge as one of the largest economies in the world.

Companies around the world, including the United States’ Apple Inc., have considered moving to China because of the reduced cost of production. It is true that some of the employees may complain that they are earning minimal wages, but the approach has helped in reducing the problem of unemployment.

It is important to note that some of the reasons that make unions support dualism are selfish and driven by personal interests. Keating (2013) claims that most of the union officials in India often struggle to get to the highest office because of their personal interests. They know that as the representatives of the employees’ union, they are able to demand benefits from employers to avoid cases of the strike. Most of them earn a lot of money in their official capacities as heads of the trade unions. They further use their influential positions to get other personal benefits. Such practices are common in corrupt countries where leading companies would find it cheaper to bribe the few top officials than to increase salaries and wages of a large number of employees.

The Extent to Which They Support Dualism

Dualism is common in India and China, and Thelen (2014) explains that trade unions are responsible for its promotion. The trade union officials often promote the existence of dualism in the labor market to the extent that they are convinced it is in their interest. First, Keating (2013) explains that the larger the number of workers in their trade unions, the better for these officials who rely on the contributions from their members to earn salaries.

It means that these officials would prefer having a large number of underpaid workers than a fraction of well-paid workers. Secondly, these officials are getting direct financial benefits, besides their normal salaries, from the employers who are keen on weakening the unions. As stated above, the outcome is a situation where the unions represent the interest of the insiders instead of the underpaid workers, some of whom are hired on a short-term basis depending on the interest of the employers. The more these unions keep fighting for the interest of the employees, the more they become irrelevant in modern society, where workers can argue for their benefits based on their expertise.

Importance of the Nation-State during a Time of Economic Globalization

The world market is becoming increasingly globalized as companies struggle to find a market outside their parent countries’ borders. The Coca-Cola Company, an American firm, currently operates in almost every country in the world as it seeks to maximize its profits. However, as the globalization of the market continues to take its root, the relevance of the nation-state is growing then it has ever been.

This paradoxical situation is a major problem in many developed economies around the world, especially in the United States and European countries such as Germany. Instead of promoting a globalized society for employment where a worker can be hired in any part of the world, governments are keen to restrict those who get employment in their countries. The United States has been specified in warning against economic immigrants who travel to the country for reasons of seeking employment without following the right procedures. The systems and structures put in place by these governments are meant to restrict the movement of people into these countries as a way of protecting the local labor force (Ritzer, 2015).

However, it is paradoxical that these same countries keen on limiting the number of foreign workers in their economies are keen on selling their homemade products in the international market. The international market remains attractive to them, but they are unwilling to allow international workers to take advantage of the local opportunities in the job market. It is necessary to evaluate the situation and to determine if it is fundamentally different or similar across rich democracies and emerging economies.

Importance of the Nation-State in Rich Democracies

The rich democracies are the worst affected by the problem of the economic immigrants, and the labor unions are putting a lot of pressure on the government to take measures to address the problem. The nation-state for employment relations has become more relevant than ever before in these countries. A good example is the United States. In a report by Caramani (2017), this North American state is still the most preferred destination for economic immigrants from all over the world.

The American dream is still attracting people from developing nations and others from developed economies to immigrate into the United States with the goal of improving their lives. In the state of California, the United States, the minimum wage has been set at $ 11 per hour. It means that an employee working for a standard 8-hour a day will earn $ 88 per day. In Zimbabwe, the minimum wage has been set at $ 85 per month, though the figure can be smaller if one is working in the informal sector. It means that in one day, a worker in the United States is making more money than what it takes a worker to earn in a month. Some of these Zimbabwean workers in the informal sector earn less than half the earning that an employee in developed democracies makes in a day.

The problem that the rich democracies face is that if there is no regulation, workers from the developing economies can flood the local labor market. It is possible that an employee from Zimbabwe can accept 10% of the minimum wage that is set in the United States because it is several times what they earn in the home country. However, it is also important to consider the cost of living. If these rich economies fail to regulate the flow, there is always the fear that employees in these rich countries may be rendered jobless. Employers may be tempted to hire cheap labor coming from the developing nations as a way of lowering their cost of production.

With time, it may also force the locals to accept lower payments based on the forces in the market. If the cost of living remains constant despite such reductions in earnings, the locals may not afford some of the basic needs. Having a decent house for an average American worker may become a problem. The political class in these countries is often keen to avoid such occurrences as a way of protecting the interest of the electorates. It explains why these countries have strict policies that limit the entry of economic immigrants.

According to Coleman and Sajed (2013), another problem that makes it important to promote the nation-state in labor relations is the tendency of the immigrants from the developing economies to send money back to their home countries. Some of them come to the United States with a clear mind of making money, investing it back home, and leaving the country after a specific period. It means that in such cases, a significant portion of the money they earn does not flow back to the economy in the form of expenses.

Ritzer (2015) notes that some even opt to live in vans instead of renting a decent apartment as a way of reducing the expenses so that they can complete their projects back at home. Such individuals bleed the economy, and if they make a significant portion of the local labor force, it may not take long before their impact is felt. The growth of the economy will be slowed.

Importance of the Nation-State in Emerging Democracies

The nation-state in labor relations is not as important as it is in the developed economies. It is not common to find a case where workers move from a country such as the United States or Canada to go and work in Nigeria or Zimbabwe. This is specifically so among the semi-skilled employees who are likely to fall in the category of minimum wage workers. These emerging democracies have laws and policies that must be observed by the immigrants.

However, most of these policies are meant to regulate illegal immigrants, especially those who may pose a security threat to their countries. Finding a work permit in the developing democracies for an immigrant coming from a developed country is relatively easy. In many cases, these immigrants are welcome in the upcoming economies because they are viewed as job creators other than job seekers. However, Caramani (2017) warns that immigrants moving from the developed economies to emerging democracies are not entirely beneficial. Some cases exist where they can also be a threat to these local economies if proper care is not taken.

Ritzer (2015) explains that some foreign firms fail to hire locals and instead employ home-country nationals for various reasons. They pay the home-country nationals attractive salaries, sometimes without even paying the required tax to the local government. They spend only a fraction of their earnings in the host country, and the rest is sent back to the home country for purposes of development or saving. Such actions deny the local labor force a perfect opportunity to achieve career success.

Given that a significant number of the top companies are owned by citizens of the developed democracies, such practices can be hurtful if they are not regulated. It explains why many developing countries have policies that specify the number of foreign nationals a company can employ. In some countries such as South Africa and Nigeria, there is a low stating the composition of employees at both management and non-management levels. The law is meant to ensure that these foreign companies do not deny the locals employment opportunities as long as they are operating in the local economy.

References

Caramani, D. (2017). Comparative politics. Oxford, England: Oxford University Press.

Coleman, W., & Sajed, A. (2013). Fifty key thinkers on globalization. New York, NY: Routledge.

Keating, M. (2013). The crisis of social democracy in Europe. Edinburgh, England: Edinburgh University Press.

Ritzer, G. (2015). Globalization: A basic text. Hoboken, NJ: Wiley-Blackwell.

Thelen, K. (2014). Varieties of liberalization and the new politics of social solidarity. Oxford, England: Oxford University Press.

Zhang, L. (2014). Inside China’s automobile factories: The politics of labor and worker resistance. Oxford, England: Oxford University Press.

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