May 25, 2011

The US as Europe's slum

Last month I wrote about how the Swedish corporation IKEA became transformed from a model employer in Sweden to an abusive one in the US and that this was because the US does not provide the same level of protections for workers that Sweden does.

Harold Meyerson writes that IKEA is just one example of a trend in which foreign companies see the US as the new home for sweatshops. Deutsche Bank, for example, has been accused of becoming the largest slumlord in Los Angeles, doing things it could never have done in its home country of Germany.

But slumming in America is fast becoming a business model for some of Europe's leading companies, and they often do things here they would never think of doing at home. These companies — not banks, primarily, but such gold-plated European manufacturers as BMW, Daimler, Volkswagen and Siemens, and retailers such as IKEA — increasingly come to America (the South particularly) because labor is cheap and workers have no rights.

In their eyes, we're becoming the new China. Our labor costs may be a little higher, but we offer stronger intellectual property protections and far fewer strikes than our unruly Chinese comrades.

As a report released by Human Rights Watch late last year documents, companies that routinely welcome unions, pay middle-class wages and have workers' representatives on their corporate boards in Germany and Scandinavia have threatened their U.S.-based employees with permanent replacement by other workers as the penalty for protesting wage cuts (that was the German manufacturer Robert Bosch), ordered workers to report on fellow workers' pro-union activities (that was T-Mobile, a subsidiary of Deutsche Telekom) and disciplined workers who couldn't show up for unscheduled weekend shifts announced on Friday night (that was IKEA, according to a Los Angeles Times story).

In Germany, Robert Bosch, according to Human Rights Watch, has never threatened a single worker with losing his job for protesting wage cuts, and Deutsche Telekom repeatedly touts its “social partnership” with its union. In Sweden, IKEA, like the vast majority of Swedish companies, is unionized and affords its workers a range of rights and benefits that are all but unimaginable to American retail workers.

The advantage of the US over Asian countries as the site for sweatshops is the high levels of worker education and productivity here, coupled with the removal of worker protections and elimination of unions. So expect to see a rise in the future in low-level jobs with appalling conditions.

Meanwhile, this article lists 36 statistics that illustrate the steady decline of the American middle class. One telling indicator is the fierce competition for low-level jobs that were once considered temporary fall back positions, to fill time until something better came along. For example, when McDonalds ran its "National Hiring Day" on April 19, nearly one million people applied for 50,000 jobs.


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It,s unfortunately a product of a strategy where there is a 'Race to the bottom'. Everyone tries to strip out costs at the expense of value so we end up in an economy where workers with no welfare support are forced to accept whatever work and conditions are available.

Governments want overseas investment and jobs so they turn a blind eye. For every country that introduces workers protection and rights there will be another that just wants the jobs and investment at any cost.

Things are turning in world economics and once great economies have priced themselves out of the market through a combination of unsustainable materialism, overly powerful unions, and a blinkered focus on costs.

We have to focus consumers and employers on value not on cost. As a Business Coaching company it is our mission to help businesses recognise this is the only sustainable way forward.

Posted by Business Coaching on May 25, 2011 10:29 AM

Meanwhile, in an article recently published on World Economics, Kenneth Austin, an International Economist with the US Treasury Department, and a professor at the University of Maryland, analyzes the flow of capital, commodities and goods and concludes that the US is a colony of China (in macroeconomic terms and in the same sense that India or Kenya used to be a colony of UK).

Posted by Vincenzo on May 25, 2011 07:39 PM

Worker's rights can be a double edged sword! Now I'm not trying to down play the need for worker's rights you understand? The instances you mention are clearly unfair, disrespectful and in come cases even border on human rights violations.

But I used to work for a major US based multi-national. It has a presence in just about every industrialized nation on the planet. But it's European operations are centred more on the UK than in any other European country.

It was never said officially, but I'm convinced the strong UK presence was due to the fact that the UK has less stringent employment laws than other European countries. It's easier to fire poor performers in the UK for instance. It's cheaper to downsize.

There is an obvious trade off between worker's rights and business benefits. I'm not saying that's the way it should be; I'm just saying that's the way it is.

Posted by Ray Whittaker on September 4, 2011 07:09 AM