What this lesson teaches
I can explain how workers, unions, states and TNCs each shape labour conditions.
Syllabus 9173, Topic 1.2, 3. Relative Influence of Actors in Shaping the Global Economy. Can labour influence economic activities?
Make a guess
A firm chooses a site where wages are higher than at a rival site. Why might that still be cheaper?
- The firm made a mistake and will soon move.
- The workers there produce more per hour.
- Wages do not affect a firm's costs.
- Higher wages are cheaper for firms.
Show the answer
The workers there produce more per hour.
A higher wage can be worth it if productivity is higher or there are fewer mistakes. Total labour cost per unit is what matters.
Workers influence production through their skills and by acting together, while firms and states shape their opportunities.
Labour means people working for pay. Labour affects where TNCs locate through wages, skills, productivity and reliability. Productivity is output per worker or per hour. A higher wage can be worth it if workers produce more or make fewer mistakes. Different jobs need different skills.
Workers may join labour unions. In collective bargaining, workers negotiate together for pay, hours or conditions. Strikes and campaigns can raise costs for firms or push governments to act. Workers have more power when they are hard to replace, well organised and legally free to bargain.
States shape labour through education, migration rules, minimum wages, social protection and union laws. Enforcement matters as much as written rights. These rules can strengthen workers' skills and protection, or restrict their options, and access to complaints matters too.
TNC decisions shape labour too. New investment brings jobs and training. Automation, relocation or pressure on suppliers' prices can cut jobs or make work harder. A lead firm's deadline can affect workers employed by a separate supplier. So labour, states and firms influence each other, with unequal and changing power.
- Labour
- People working for pay.
- Productivity
- Output per worker or per hour.
- Collective bargaining
- Workers negotiating together.
Step by step
Compare total labour cost
Wages against productivity and quality.
Explain collective power
How can unions change firm or state decisions?
Trace the response
How do rules, automation or relocation affect workers?
Real examples to use
The Bangladesh Accord, 2013
After Rana Plaza, global brands and unions signed a legally binding agreement to inspect factories and fix safety problems.
Worked example: Wages versus output
In a made-up comparison, a worker in A costs $100 a day and makes 50 good units. A worker in B costs $150 and makes 100. The cost per unit is $2 in A and $1.50 in B. So B's higher wage is not automatically a disadvantage.
Watch out for this
The lowest wage always means the lowest cost.
Compare output, quality and skills. Cost per good unit matters more than wage per worker.
Check your understanding
A supplier's union wins safer working hours through collective bargaining. What does this show?
- Workers acting together can change their conditions.
- Workers have no influence because the buyer is a TNC.
- The state and lead firm can no longer affect these workers.
Show the answer
Workers acting together can change their conditions.
Yes. Collective action gives workers influence.