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Wrapup of the Virtual Roundtable on Global Labour Governance of January-February 2007

"A coming swing in the pendulum of economic power from capital to labor", par Michèle Rioux

The first Virtual Roundtable on Global Labour Governance (GLG–VRT) invited comments and analysis on the prospective view that announces a shift from capital to labour politics in the US and abroad. This view was expressed by Stephen Roach, Managing Director and Chief Economist of Morgan Stanley, who wrote the following on January 12, 2007 :

"By a vote of 315 to 116, the US House of Representatives has overwhelmingly approved a two-year 41% increase in America’s minimum wage — the first change in the pay floor in 10 years. The bill is likely to pass the Senate and be signed into law by President Bush. This is only the beginning of what could well be a major pro-labor swing in the US political pendulum. But there is an important twist to labor’s comeback : Lacking in bargaining power in the face of an increasingly powerful global labor arbitrage, American workers are in no position to take action on their own. Instead, they have put pressure on their elected proxies to do the bidding for them. This pattern is global in scope. It is likely to be a significant feature of the coming swing in the pendulum of economic power from capital to labor."

The GLG–VRT questions were :

  • Is this analysis right about the shift in politics ?
  • What are the impacts of such a shift on labour laws and on the Labour global governance ?

First GLG-VRT participation

Four well-known international specialists contributed to the first Virtual Roundtable with very insightful responses. In this respect, the Project would like to thank Brian Langille (Professor of Law, University of Toronto), Harry Arthurs (President Emeritus, Professor of Law and Political Science, Osgoode Hall Law School), Lance Compa (Senior Lecturer, Cornell University’s School of Industrial and Labor Relations) and Alan Hyde (Professor of Law, Cornell University/Rutgers University) for their collaboration in the realization of this first GLG-VRT

Summary of the VRT

In his response, Brian Langille considers Roach is on to something when he predicts a shift from labour exercising market power to exercising political power. He stated that Roach’s argument rests on the idea that law matters and can improve the deal that labour gets. He then asked the question : is the "increasingly powerful global arbitrage" that affects direct negotiations also true in the case of labour laws ? This is the point made in the "race to the bottom"/"social dumping" analysis which views labour law as a "tax" on production which mobile capital will seek to avoid. In this light, Langille then went on to ask : "isn’t the move from the bargaining table to the legislature just a move from the frying pan to the fire ?" His answer was "no", and for two reasons. The first one is that law actually matters. The second is that the “regulatory arbitrage/ race to the bottom” analysis does not hold water. According to Brian Langille, labour law is no a tax and, even if it were, it is the price of civilization and while capital might prefer not to pay the taxation, it still needs civilization. On the point made by Roach concerning the challenge that this shift of pendulum might represent for financial markets, Pr Langille says that : “The challenge will be, as always, to construct a labour law which is part of the policy package required to construct an economically successful, just and durable society”.

Commenting on Brian Langille’response, Pr Harry Arthurs offered a less optimistic view. As he stated “I stand with Mackenzie King : optimism if necessary, but not necessarily optimism”. This standpoint is based on three points. The first is that this shift depends on labour solidarity and worker identity and the capacity and willingness of political parties to respond to labour issues. These two conditions seem to be absent. The second point made is that the support for minimum wage legislation is “the one” labour issue, unlike that of collective bargaining, that allows for convergence. The third point made pertains to the claim that law matters. Pr Arthurs noted that, contrary to Weiler’s hypothesis related to Canada’s superior labour regime protecting fundamental rights to freedom of association, one could inversely say that Canada’s labour laws might be stronger because unions have retained political leverage through their alliance with political parties.

Lance Compa agreed, although adopting a more optimistic attitude, that the shifting of political bargaining power is not sufficient to revive labour’s strength as political power must be joined to workplace organizing and bargaining power.

On the political dimension, Pr. Compa insisted that it takes new public policies to provide social protections for workers. The US has shifted away from a manufacturing-based to a services-based economy and this requires innovative solutions, including managed trade policies. But it is also true that the United States still has the world’s biggest manufacturing sector in terms of value-added production and that : “Three-fourths of the value of manufactured goods purchased in the United States is produced in the United States. Obviously these mostly are capital-intensive products, not brassieres and underpants. But that’s OK ; as long as US workers can move toward higher value-added and higher-paid jobs. If stronger labour law matters, along with stronger enforcement, workers also need to be more active mobilizing, organizing and even striking to bring about social change. On this point, Lance Compa, actually disagrees with Stephen Roach’s view that the union situation in US and global arbitrage is desperate.

On his part, Alan Hyde, made a the point that unions can turn to legislation for a wide range of reasons (because they are strong, because they are weak, because their party is in power, because conservative parties in power seek to buy off unions, etc...). Having said that, Pr. Hyde believes that it is unlikely that the US labour movement will achieve significant legislative victories. However, he notes that there will be victories involving immigrant workers (ex : Smithfield Packing) and possibilities for interesting labour rights provisions in the pending free trade agreements with Colombia, Peru, and Panama.

In conclusion

  • There seems to be an agreement around the idea that if labour laws matters, legislative victories and, more generally, social change depend strongly on labour solidarity and union’s mobilization.
  • Disagreement is evident on the “desperate” union situation depicted by Stephen Roach.
  • On the possible impacts for the Global Labour Governance, Pr Hyde pointed to victories being made on other fronts, for example in free trade agreements’ labour rights provisions. Perhaps, one way to gain political and market power “at home” is to seek higher labour standards and conditions “abroad”.
  • One might also want to consider how labour laws’ strength will depend on international and transnational regulatory systems and enforcement mechanisms, and how labour laws interact with them. The trajectory towards a dynamic of race to the bottom versus one that lead to a process of ratcheting up might well be traced at that level, wherever the economic or political leverage might be at any given time.

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