UK Business Vulnerable To Globalization
August 29 2006 - A new TUC report acknowledges that UK employees undoubtedly benefit from cheap goods and greater prosperity resulting from globalization, but are more vulnerable to its negative effects than others in Europe. In a submission to the government's 2007 comprehensive spending review, the TUC says that priorities for funding should include support for workers who are adversely affected and for British companies to increase their competitiveness on the global market.
The TUC report says that UK employees are more vulnerable to negative effects of globalization than their European counterparts for three main reasons:
- Britain buys more than it sells on the global market.
- The UK is home to more multinational companies who can easily relocate overseas.
- UK business strategy typically keeps down costs in areas such as wages and investment in skills and training, which risks work being outsourced to countries where it can be done more cheaply.
TUC general secretary Brendan Barber said:
"Globalization has made a real difference to the quality of life of working people in the UK and across the world but there are victims as well as winners. Too many British workers are losing their jobs when companies move abroad or fail to compete. Cheap DVD players and clothes are scant compensation if you are being downgraded to poor quality, insecure, low-paid work.
"Of course we can't say 'stop the world I want to get off' and turn back the tide of globalization by erecting barriers to try and protect industries and jobs. But that does not mean we are powerless in shaping its impact. The government must provide support to older and unskilled individuals to help them adapt to the opening up of world markets and ensure that all UK workers benefit.
"But the UK also has a responsibility, mainly through international trade agreements, to make sure that workers in developing countries have access to decent work."
The TUC report highlights economic trends that may adversely affect UK workers. While the EU as a whole has a trade balance, Britain imports 25 per cent more than it exports. Germany accounts for 27 per cent of EU exports compared to 12 per cent from the UK. UK trade in services as a percentage of gross domestic product (GDP) has grown in line with EU figures. However, trade in goods has fallen in the UK while increasing across the EU, reflecting the decline in UK manufacturing and growth in GDP. UK companies are more vulnerable to international variations such as price changes, and are failing to capitalize on growing world markets. Only the USA is more popular for foreign direct investment than the UK. Such investment is good for jobs and economic growth, but multinational companies can easily move jobs overseas.
The TUC argues that fewer UK jobs are at risk from globalization than is often assumed, but 'displaced' employees earn less in future work - if they can find it. They are also more affected if they are older, have been in their jobs a long time or have had to change industries. Eight months after being laid off, only half the former MG Rover workers were in full-time work and on average were earning £3523 less a year.
Reducing taxation, regulation and public spending are not the most important factors in managing the effects of globalization. Only Germany and some Canadian provinces have lower business taxes than the UK and the UK labour market is one of the least regulated. The biggest global traders among OECD nations have large public sectors and high government spending.
The TUC argues that government could balance costs and benefits of globalization if they prioritized:
- increasing skills levels to raise productivity
- developing a modern industrial strategy for the global market
- securing UK energy supply and investing in environmental technology
- improving transport links in growth areas of the country
- promoting lifelong health to increase employment chances for older workers
The TUC makes the following specific proposals:
- Establish a UK fund to provide training and job search support administered at regional level, to partner the EU Globalization Adjustment Fund set up in 2005.
- Develop a 'responsible restructuring' model that would require companies moving jobs abroad to insure redundant UK workers for 70 per cent of any fall in earnings for up to two years. It would include consultation with trade unions and help employees find work or set up their own business.
- Invest in the employability of workers in industries threatened by global competition. This would include various measures to improve UK skills levels across the workforce and to keep older and disabled workers in employment.
- Promote industrial and service sectors that employ high-skilled, well-paid workers to improve international competitiveness.
- Extend government support for science and industry.