Multinationals versus domestic firms: Wages, working hours and industrial relations

Download PDF:
DownloadDownload Amsterdam, the Netherlands: University of Amsterdam, AIAS Working Paper 85. (EN)

Abstract

This Working Paper aims to present and discuss recent evidence on the effect of Foreign Direct Investment (FDI) on wages, working conditions and industrial relations. It presents a. an overview of the available literature on the effects of FDI on wages, particularly in developed countries; b. the outcomes of own research comparing wages, working conditions and workplace industrial relations in Multinational Enterprises (MNEs) versus non-MNEs or domestic firms. These outcomes include seven EU member states: Belgium, Finland, Germany, the Netherlands, Poland, Spain, and the United Kingdom, and five industries: metal and electronics manufacturing; retail; finance and call centres; information and communication technology (ICT), and transport and telecom. The data stem from the continuous WageIndicator web-survey, combined with company data from the AIAS MNE Database. The analysis took place in the framework of the socalled WIBAR-2 project, funded by the European Commission under the Industrial Relations and Social Dialogue Program (VS/2007/0534, December 2007-November 2008). The project was led by the AIAS, with the European Trade Union Confederation (ETUC); the European Metalworkers’ Federation (EMF); Ruskin College (Oxford); WSI im Hans-Böckler-Stiftung (Düsseldorf), and the WageIndicator Foundation as partners.

Both from others’ and our own evidence, the picture emerged that the wage advantages emanating from working in an MNE in Northwestern Europe recently have become rather small, with our evidence for Germany, where we found considerable MNE wage premia, as the exception. In the majority of Polish and Spanish subsidiaries of MNEs these premia were still considerable. By contrast, in the retail trade and in transport and telecom MNEs seemed to exert outright wage pressure in some countries. Besides pay, workers mostly perceived advantages in working in an MNE where these were to be expected, in training and internal promotion, but also –rather unexpectedly— in workplace industrial relations. Here, on all three yardsticks used (union density, collective bargaining coverage and the incidence of workplace employee representation) MNEs scored higher than domestic firms. MNEs scored less favourably on overtime compensation, working hours, and experienced and expected reorganisations. Where MNE wage premia show up, they have much in common with ‘efficiency wages’, meant to buy higher productivity and extra commitment from (skilled) workers.