Low wages for profit.

Many industries in Canada have gone into decline as work has been shifted to low-wage countries. The garment industry, shipbuilding, toy manufacturing, and many others have gone offshore. Over the last few decades, most of the jobs that have moved from their home base to places such as Mexico and China have been in manufacturing, but increasing numbers of service-industry, technology-oriented jobs are shifting overseas now, primarily to India

The Canadian steel industry is among the casualties. Stelco Inc. in Hamilton, Ontario has joined other giants with cutbacks that have left the company with fewer employees, lower wages, and substantially reduced pensions for thousands of retirees. Forty years ago, Stelco had 20,000 employees. By 2004, it had 4,800. It's a dramatic shift for Canada's largest steel producer. The company lost more than $206 million in 2003 when it was hit by higher costs, the soaring value of the Canadian dollar, and intense competition. And, some say this is just the beginning; that much more radical changes are down the road.

In the past, the rust-belt industry workers could find gainful employment in the knowledge industries, but now these jobs are being outsourced also.

Technical support call centres are opening at a furious rate in India--Bangalore is a hub for this activity with two to three Western high-tech companies opening operations every week. They join companies such as Google, Unisys, and Accenture who are already set up in India, and are expanding their back-office, call-centre, and research-and-development operations there. Revenues from call-centre businesses grew by 46 percent to nearly $4 billion (U.S.) from April 2003 to March 2004. The number of workers in India's technology sector is thought to have jumped by 23 percent to more than 800,000, according to the National Association of Software and Service Companies (Nasscom) in India. And, India's exports of software and services are expected to increase by more than 30 percent in the next fiscal year. The country's main offshore competitors are China and Malaysia, but the cost of operations in India are about 37 percent lower than in China and 17 percent lower than in Malaysia. So, India is expected to continue being the most appealing location: according to one report, it has about two million college graduates every year and 80 percent of them speak English.

Many companies say they would not survive without outsourcing because they wouldn't be competitive. They're lured by lower salaries, which can cut costs substantially: an experienced computer programmer earns $96,000 a year in Britain, $75,000 in the U.S., and $26,000 in India. The less skilled call-centre jobs pay a lot less in India too--about a tenth of the $20,000 workers earn in Britain for example. All the new jobs may be a boon for workers in India, but not such good news for workers in developed economies of the north.

As an article in Time magazine pointed out in March 2004, "the white-collar middle class is feeling the sting of insecurity that manufacturing workers know so well." The article goes on to explain that even as the economy improves, companies are reluctant to bring the jobs back home because they don't want to commit to hiring full-time workers with full fringe benefits in case another economic slump hits. Instead, they're expanding overseas--outsourcing to India jumped 60 percent in 2003 compared with a year earlier, creating 140,000 jobs there.

Forrester, a U.S. research group, estimated in 2002 that 3.3 million white-collar American jobs (500,000 of them in information technology) would move to offshore locations such as India by 2015. The types of jobs at risk of being sent overseas include telephone call centre, computer operator (data entry), business and financial support, paralegal and legal assistant, diagnostic support services, and accounting, bookkeeping, and payroll. While Forrester reportedly thinks this is good for everyone, creating jobs in poorer countries and making western companies more competitive, others aren't happy to see a growing trend to transfer high-wage jobs offshore.

The Economist reported in December 2003 that Washington had tightened up on "the granting of visas that allow foreign workers to enter America for training and temporary employment." And individual states are on the alert: New Jersey wants to stop firms using foreign workers on state contracts, and others are cancelling offshore contracts in favour of using local companies and workers. In February 2004, U.S. President George W. Bush signed a bill forbidding the outsourcing of federal contracts overseas.

The same month, while economists optimistically predicted that the U.S. economy would create 130,000 new jobs, the actual number was 21,000, less than 20 percent of expectations. The previous month, 125,000 new jobs were expected; 95,000 developed. December 2003 numbers were 130,000 and a dismal 8,000 respectively. Between December and March 2004, economists overestimated the pace of job creation by 317,000.

According to one estimate, the U.S. accounts for more than 70 percent of all off-shoring business. But, the U.S. is not alone in its outsourcing trend. The second biggest market is in Britain. In October 2003, HSBC banking group announced that it was taking 4,000 jobs from Britain to India; two months later Aviva (the Norwich Union insurance group) said it was planning to transfer 2,350 jobs to India as well.

While the British government doesn't expect the practice to create massive unemployment, it still has commissioned an independent study on the competitiveness of Britain's call centres. Others want the European Parliament to study the possible impact of off-shoring on Europe's economy.

One Canadian thinks Canada's growing trade with China is doing much more harm than good. In an article in The Globe and Mail in April 2004, Jim Sanford, an economist with the Canadian Auto Workers union, said our imbalance of trade with China has cost Canadians about 50,000 jobs. "A decade ago," Mr. Sanford writes, "we had a modest, balanced trading relationship (with China). Since then, our exports to China have grown by $2 billion, but our imports have grown eight times as much. That makes China our second-largest trading partner, and our $15 billion bilateral deficit with China is our largest anywhere." And, he expects the situation to worsen "as Chinese exports become more diverse and technically sophisticated."

A lot of Japan's manufacturing has also been moving to China, where wages are a fraction of those in Japan. The country is also feeling threatened by the growing technological strength of South Korean firms such as Samsung and Hyundai. Many companies are trying to outsource only the low-end jobs and holding on to higher-end segments. They do this by building complex manufacturing systems and protecting trade secrets and by not cooperating with other countries that could end up copying, and in some cases, surpassing their domestic production. In response, some Japanese companies are moving production back home where specially trained workers, low defect rates, and lean operations hold down inventory costs. This also boosts production flexibility because there's less employee turnover and workers can master several different tasks. At the same time, big consumer electronics companies have to keep shifting production to China to stay competitive.

SUGGESTED ACTIVITIES:

1. Some people think that businesses should share their savings and create funds for wage insurance or retraining for employees who lose their jobs to overseas markets. Some expect that those who do lose their jobs will probably have to take a pay cut in new jobs. One group suggested that about five percent of a company's savings should be used to compensate displaced workers for part of the difference in wages paid by their old and new jobs. Research some of the industries that have been hardest hit by free trade and how they have handled job losses among their employees.

2. Proponents of outsourcing say it doesn't change the overall level of employment in advanced economies any more than labour-saving technology does. It just changes the pattern of employment, or the types of jobs, and that can be addressed by investing, privately and publicly, in skills development and lifelong education. On the other side are those who say the only way to protect jobs is to keep them at home. Discuss the arguments on both sides of this issue.

3. According to the 2001 census, more workers now leave Hamilton, Ontario each day than work in its factories, which used to employ tens of thousands. Now, 56,000 people--a quarter of the city's workforce--commute to jobs outside the city, compared to 40,000 a decade ago. Analyze how employment has changed in your community and what effect continued globalization might have.

SWEATSHOPS

Several years ago, George Heller, the chief executive officer at Hudson's Bay Company, started working to correct conditions at overseas factories. But, Mr. Heller figured he couldn't do it on his own, that a global effort in monitoring factory working conditions was needed in the form of an ethical sourcing pact. In May 2004, he hosted a meeting of the International Association of Department Stores, which includes major international retailers in 18 countries around the world, to work on such an agreement. Retailers at the meeting included U.S.-based Federated Department Stores Inc., which owns Bloomingdale's and Macy's, and Galeries Lafayette (France), as well as HBC. Praised for taking the matter seriously, HBC is now considered a leader among large Canadian retailers for its strong code of conduct, patterned on the code from the United Nations' International Labour Organization. Gap Inc. also recently released a report on its monitoring and enforcement of labour standards among its suppliers by region. The company says it will adopt ILO standards for worker rights, including the right of freedom of association that is key to the formation of independent unions.

On 24 June 2004 more than 400 leaders from around the globe, including chief executive officers, government officials, and heads of labour and civil society, attended the UN-sponsored Global Compact Summit in New York to discuss global corporate citizenship. Nearly 1,500 firms in about 70 countries have agreed to participate in the Compact, which was formally launched on 26 July 2000 at the United Nations. While there are no formalities involved in joining the group, companies that do join are expected to show they're taking corporate action to support the core values of the Compact. These involve upholding human rights, labour standards, environmental stewardship, and anti-corruption policies.

As a voluntary initiative, many activists have dubbed the project a "blue wash." They accuse global corporations of paying lip-service to social responsibility solely for public relations purposes.

One quick rummage around for "sweatshops" on any Internet search engine shows why some corporations have become concerned about the anti-sweatshop movement: in addition to any corporate conscience some of them may have, there is growing pressure on them. This comes from human rights, as well as shareholders', groups and more knowledgeable consumers concerned about the working conditions of the people who make many of the products they buy.

George Heller's view is that a global economic model that is driven by ruthless cost cutting involves a race to the bottom that is simply not sustainable for companies or people.

FREE TRADE TALLY

How has the North American Free Trade Agreement affected work? After a decade of the agreement being in place, an assessment can be made.

According to a report in The Globe and Mail in February 2004, Canada has enjoyed some export-driven economic prosperity as a result of the agreement. However, many Americans and Mexicans consider it a failure.

The U.S. Department of Labor estimates that NAFTA, which took effect in 1994, was responsible for the loss of more than 500,000 American jobs by 2002. To put that in perspective, millions of jobs are created and lost every year on home turf in response to the country's own economic cycles. But, that's little comfort to those who have lost their jobs to Mexico. General Electric cut 1,400 of its 3,000 jobs at its Bloomington, Indiana plant. RCA television moved its entire factory, which once employed 8,000 people, to Mexico. Along with other factory moves and cutbacks, NAFTA has nearly wiped out the city's blue-collar district in the last five years.

Still, many of Bloomington's displaced workers took advantage of training programs that ultimately landed them better-paying jobs at the state university, the hospital, or new high-technology industries, and the city's unemployment rate is less than 3.5 percent.

Things change as you move south into the Mississippi Delta region, where living conditions are so poor they've been compared to those of developing nations. There are so many unemployed that people welcome even low-paying jobs.

Mexico is another story. Many believe that companies drawn to Mexico's low wages and lack of workplace and environmental protections have done little to lift the country out of its third-world status.

NAFTA has quadrupled exports and raised wages in manufacturing in Mexico. However, the border region between the United States and Mexico has gone from being largely agricultural to mainly industrial in 30 years. During the 1990s, its population grew by 30 percent. GDP growth averaged between five and seven percent a year according to a 2001 report in The Economist. "Yet despite its prosperity, it cannot provide electricity, roads, schools, or housing fast enough, it is riddled with crime, and large parts of it risk running out of water in the next couple of decades."

Maquiladoras are assembly plants that operate in duty-free zones. By 2001, border-state maquiladoras employed more than a million people, an increase of 150 percent since 1990. But, even this region is losing jobs to lower-wage towns within Mexico--more than 240,000 jobs since 2001--and also to China and southeast Asia. And, for the unemployed here, there are no retraining programs.

David Bacon insists the effect on workers in Mexico has been devastating. In his 2004 book, The Children of NAFTA (ISBN: 0520237781), Mr. Bacon describes the poverty, repression, and struggle that he says have resulted from NAFTA. He writes about the harsh conditions of child labour in the Mexicali Valley, the deplorable housing outside factories in cities such as Tijuana, and corporate retaliation faced by union organizers.

In May 2004, Mexican garment workers spoke at a labour hearing in Toronto. They told of unsafe working conditions and harassment when they try to enforce their rights, despite "safeguards" in NAFTA. Measures aimed at protecting workers simply are not enforced, with the result that some employees work long hours in unsafe factories where they are threatened and intimidated.

FACT FILE

According to The Economist, the off-shoring business is predominantly English-speaking, dominated by American and British companies outsourcing their internal operations to places such as Ireland, Canada, and South Africa, but mostly India.

FACT FILE

By March 2004, employment in manufacturing in the U.S. had declined for 43 successive months, hitting blue-collar states such as Ohio, Indiana, and Pennsylvania particularly hard.

WHAT'S GOING ON?

Some observers say there's no reason to panic over job losses in the U.S., that most of them are due to cyclical changes in the economy, not shifts outside the country. (About seven million to eight million jobs are lost in the U.S. every business quarter through "job-churning.") And, they think the situation will change within the next year, perhaps dramatically. They say the doomsayers forget to mention that only a tiny proportion of all jobs lost go overseas.

The Information Technology Association of America calculated that offshore locations have captured just three to four percent of all American companies' outsourcing.

According to one estimate, even at their peak in 2001, the number of all trade-related layoffs represented just 0.6% of American unemployment. And, many maintain that the jobs that are lost are low-paying ones that would be lost to automation if not overseas markets.

FACT FILE

Some U.S. companies allocate as much as 30 percent of their information technology budgets offshore; one investment banking company plans to increase the number of its employees in India this year from 1,500 to 2,500 while its U.S. workforce will go from 30 to 100.

FACT FILE

The Bureau of Labour Statistics estimates that demand for computer-support specialists and software engineers will double between 2000 and 2010, and demand for database administrators is expected to rise by 60 percent.

Websites

International Labour Organization--http://www.ilo.org

UNITE--http://www.uniteunion.org/sweatshops/sweatshop.html