MNCs IMPACT ON LABOUR STANDARDS IN DEVELOPING COUNTRIES

Topics: International Labour Organization, United Nations, Multinational corporation Pages: 11 (2955 words) Published: May 22, 2011
MNCS IMPACT ON LABOUR STANDARDS IN DEVELOPING COUNTRIES

INTRODUCTION

Globalization has increased the economic power of the multinational corporations (MNCs), especially in developing countries where MNCs have shaped the economy through foreign direct investment (FDI), knowledge transfer, influence on employment rates and strong competition within the domestic market. Additionally, MNCs have a direct impact on the economic, political, and social landscape of developing countries; their business activities continue to have considerable effect upon human rights and labour standards, both positively and negatively.

THE DEBATE

There is great debate about the role of MNC's in developing countries. Some are optimistic arguing MNCs' operations, fuelled by superior technical know-how and modern management practices, allow them to pay higher wages and raise labour standards, while others argue they exploit cheap labour and ignore poor working conditions. Evidence of MNCs disregarding labour abuse in developing economies has fostered the rise of activism for corporate social responsibility (CSR); there is now a strong push for greater international regulation and enforcement of minimum labour standards.

The MNCs' power to control international investment and create jobs has had enormous bearing on the economies of developing countries. Critics have argued that, faced with pressures to attract such investments and lower unemployment rates, governments have had little or no alternative but to accept the terms of MNCs. Following this argument, it can be said that globalization and the activities of MNCs have simultaneously raised economic growth and inequity in developing countries. While their economies are booming because of massive FDI, the workers, especially unskilled ones, are suffering from degrading living conditions and very low wages. The level of inequality between developing and developed countries is growing, which raises the issue of balancing economic growth and social injustice. Critics argue that MNCs' activity in the developing world has enhanced the unfairness of capitalist market and further widened the gap between the rich and the poor (Mahmood, Welch and Kennedy, 2003, p.966).

MEXICO

A specific study of the involvement of MNCs in the developing economy of Mexico exemplifies how MNC's have both aided growth yet hindered labour standards. In particular, the lack of unionisation in the maquiladora sector of Mexican international business.

Maquiladoras are 'foreign owned assembly plants in Mexico...[where] companies import machinery and materials duty-free and export finished products around the world' (CorpWatch 1999, p 1). These are situated on the Mexican/US border and have had both positive effects, such as the promotion of foreign investment, and negative effects, such as cheap wages and child labour (Black 2010, pg 217). Emerging in the mid 1960's, the maquiladora factories of Mexico reflect the MNC's impact in a host country; by particularly focusing on the industry, the labour standards in Mexico can be thoroughly investigated.

In the maquiladora's of Mexico, MNC's have little knowledge or persuasion in relation to the restricted unionisation of workers; which is currently diminishing labour standards in these factories. Unionising is mandatory to large scale factory workers as it provides them with defence against dominant managers and executives, allowing them to advocate for social and economic changes. In Mexico there is an official union, the Confederation of Mexican Worker (CTM) and the Conciliation and Arbitration Boards (CAB) to enforce labour laws in Mexico. The issue for MNC's and of course the maquiladora workers, is these two organisations have strong ties to the government (Solidarity Centre 2003, p 14). Unionisation in Mexico, a significant aspect of labour standards, is not currently adequate according to the UN's International Labour Organisation (ILO). The ILO states...
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