( Are job losses and the degradation of working conditions in the developed world due to globalization and the offshoring of jobs? Contrary to popular beliefs and fears, most economic analysis evaluating the long-term and global implications of 5 the internationalization of employment does not support this view. Yet for workers 0 0 Offshoring and who have been displaced, a positive global and long-term impact does not remove 2 their immediate loss. m u si the Internationalization The Proceedings of the Third Annecy Symposium, which took place in April 2005, o p discuss this paradox: globalization may have enhanced the overall well-being of m y those countries that have participated, and globally reduced poverty, but it looks s more and more like a monster that devours jobs as there are few mechanisms to O of Employment L compensate those that have suffered. The book analyses trends and patterns in /I e the internationalization of employment, looks at losers and winners, and proposes c n A challenge for a fair globalization? new policies of compensation. The latter are based on rights and international la- a r F bour standards, and on a new effort to build an effective employment adjustment system that accompanies a fair globalization. Peter Auer, Geneviève Besse and Dominique Méda nt P r o c e e d i n g s y 5 e m c y e 0 o of the France/ILO l p n m 0 e n of s y m p o s i u m A 2 n o i t a z i l a n o i t a n r e t n i e h t d n a g n i r o h s ff International O Institute for Labour Studies O L I ISBN 92-9014-783-0 Liberté • Égalité • Fraternité RÉPUBLIQUE FRANÇAISE Ministère de l’emploi, de la cohésion sociale et du logement 9 789290 147831 Offshoring and the Internationalization of Employment A challenge for a fair globalization? Peter Auer, Geneviève Besse and Dominique Méda (eds.) P r o c e e d i n g s y 55 c 00 e of the France / ILO n 00 n s y m p o s i u m A 22 International Labour Organization International Institute for Labour Studies Ministère de l’emploi,de la cohésion sociale et du logement Published by the International Institute for Labour Studies The International Institute for Labour Studies (IILS) was established in 1960 as an autonomous facility of the International Labour Organization (ILO) to further policy research, public debate and the sharing of knowledge on emerging labour and social issues of concern to the ILO and its constituents — labour, business and government. Copyright ©International Labour Organization (International Institute for Labour Studies) 2006. Short excerpts from this publication may be reproduced without authorization, on condition that the source is indicated. For rights of reproduction or translation, application should be made to the Director, International Institute for Labour Studies, P.O. Box 6, CH-1211 Geneva 22, Switzerland. ISBN (Print) 92-9014-783-0 ISBN (Web PDF) 92-9014-784-9 First published 2006 The responsibility for opinions expressed in signed articles, studies and other contributions of this volume rests solely with their authors, and their publication does not constitute an endorsement by the International Institute for Labour Studies of the opinions expressed. Copies can be ordered from: ILO Publications, International Labour Office, CH-1211 Geneva22, Switzerland. For on-line orders, see www.ilo.org/publns Photocomposed in Switzerland BRI Printed in France SAD TABLE OF CONTENTS Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vii Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix Offshoring and the internationalization of employment . . . . . . . . . . . . 1 Peter Auer, Geneviève Besse and Dominique Méda Globalization and employment . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Daniel Cohen Globalization and its impact on jobs and wages . . . . . . . . . . . . . . . . 37 Michel Fouquin Service jobs on the move – offshore outsourcing of business related services . 57 Barbara Gerstenberger and R. Alexander Roehrl Trade, employment and outsourcing: some observations on US – China economic relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 Thomas I. Palley Using active and passive employment policies to accompany globalization-related restructuring . . . . . . . . . . . . . . . . . . . . . . . . 89 Bernard Gazier The internationalization of employment and the debate about offshoring in France: legal perspectives . . . . . . . . . . . . . . . . . . . . . . . . . . . 113 Marie-Ange Moreau Social accompaniment measures for globalization: sop or silver lining? . . . 135 Raymond Torres Better governance of the internationalization of employment . . . . . . . . . 143 Brian A. Langille The role of international labour standards for governing the internationalization of employment . . . . . . . . . . . . . . . . . . . . . 163 Werner Sengenberger iii Symposium France/ILO 2005 The role of labour law for industrial restructuring . . . . . . . . . . . . . . . 179 Philippe Waquet The social dimension of globalization and changes in law . . . . . . . . . . . 187 Mireille Delmas-Marty Appendix I: List of Participants . . . . . . . . . . . . . . . . . . . . . . . . . 201 Appendix II: International outsourcing, employment, and inequality: some issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 203 Malte Lübker Appendix III: Notes on the France/ILO dialogue on the social dimension of globalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 227 Leonello Tronti Appendix IV: Internationalization of employment: notes on Latin American countries . . . . . . . . . . . . . . . . . . . . . . . . 231 Adriana Marshall Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 239 iv PREFACE The World Commission on the Social Dimension of Globalization called for decent work to become a global goal, and for employment objectives to be embedded much more firmly in international economic policies. Because of the growing interdependence of national economies, employment policies and goals increasingly need to be seen in an international context. This theme of the inter- nationalization of employment was addressed in a conference, bringing together French and international researchers and organized jointly by the International Institute for Labour Studies, the Employment Sector of the ILO and the French Ministry of Labour, Employment and Social Cohesion in Annecy, France, on 11-12 April 2005. The conference was the third in a series of France-ILO debates on important current policy issues, which began in 2001. The conference had also a political follow-up, in that its theme and conclusions served as background for an informal meeting of the European Labour and Social Affairs Ministers during the ILO’s International Labour Conference in June 2005. The papers presented and the opinions expressed at the conference. Do not necessarily reflect the views of the ILO or the French Government, but rather those of the researchers and analysts participating in the meeting in their individ- ual capacity. While the conference mainly discussed the impact of globalization on the labour markets of developed countries, a global perspective was pursued and participants from the new EU member countries and from developing countries also participated in the conference and commented on the issues raised. The conference debated three related issues. A first objective was to shed light on some of the facts of the employment impacts of trade and investments abroad, including such highly controversial themes as off-shoring of the produc- tion of goods and services. The growing interlinkages in global production systems in both industry and increasingly services make a quantitative assess- ment in terms of winners and losers difficult. Delocalization of production still concerns only a minor portion of lay-offs and on the global level one might antic- ipate at worst a zero sum game between the gains and losses in employment. Among the causes of employment problems, globalization is only one of many factors. However, for popular perception what counts is not the global outcome over the long term, but the short-term experience of downsizing, plant closings, and pressures on working conditions and wages, which have serious conse- quences for many workers and their families. Decision-makers have to respond v Symposium France/ILO 2005 to the short and medium term national and local problems, even if they are created globally. A second objective was to debate the options for coping with the short term and medium term problems related to the internationalization of employment. Here a historical perspective showed that from the beginning trade liberalization was -in the developed world- accompanied by flanking socio-economic measures. There now seems to be a trend towards the development of a process and a legal frame, and the slow emergence of an adjustment management system both on the national as well as on the international (regional) level, as can be seen by the recent initiative of the European Union to introduce a growth adjust- ment fund. This adjustment system comes into play when redundancies occur but it requires policies that go far beyond it, because an answer to the increased uncertainty and volatility of labour markets under globalization requires that women and men’s the management of careers be considered over the lifecycle. These developments indicate a lifelong need for adjustment measures and protected transitions at critical moments in the life cycle. Being made redundant is one of these critical moments. A third objective was to discuss the importance of international instruments that could help to introduce a level playing field in trade and promote develop- ment. ILO labour standards are one of these instruments, and different ways of promoting been were discussed, such as international framework agreements between trade unions and multinationals. It was found that labour standards are particularly important in developing countries, as increasing south-south competition might lead – in the absence of a social floor – to a downgrading of working conditions. However, labour standards do not merely provide a level playing field; they are also key elements in growth and development inde- pendent from trade considerations. As indicated in the report of the World Commission on the Social Dimension of Globalization the conference reiterated the need for more policy coherence in the multilateral system. A common view on how to manage the short term effects of globalization and their local impact would help those negatively affected and install the conditions for long-term success. The essence of the conclusions is the urgent need to cope with the short and medium term effects of globalization and the internationalization of employment through adequate labour market policies, including permanent institutions to manage adjustment and support job transitions with security at the local, national and international levels. Notwithstanding the importance to find a direct politi- cal response to the consequences of off-shoring and trade displacement, these institutions should be regarded as public goods and be open to all those displaced, whether by globalization or other causes. In the future, worker’s adaptation to structural change should be seen as a right, to which corresponds the duty for equipping oneself with the elements of employability required to survive increased turbulence in the labour market. Such policies are important for decent work as a dynamic concept, as decency requires that protection and security go beyond a single job and extends to the transitions between jobs. vi However, such supply-oriented policies must be backed by employment- supporting macro-economic and industrial policies. Gerry Rodgers Director, International Institute of Labour Studies ILO Annie Fouquet Inspectrice Générale Director of DARES* during the symposium. The articles of this book, with the exception of the annexes have already been published in a French version at the end of last year. See: Auer, P., Besse, G., Meda, D. Delocalisations, normes du travail et politique d'emploi. Editions La Découverte, Paris, 2005. * Direction of the animation of research, studies and statistics of the French Ministry of employment, social cohesion and housing. vii OFFSHORING AND THE INTERNATIONALIZATION OF EMPLOYMENT A CHALLENGE FOR A FAIR GLOBALIZATION? PETER AUER, GENEVIÈVE BESSE, DOMINIQUE MÉDA* 1. INTRODUCTION Does globalization threaten employment? When asked this question in a public opinion poll in May 2005, a representative sample of French people answered ‘yes’in a very large majority. A total of 73 per cent of those questioned stated that they perceived globalization as a threat to jobs in France and 75 per cent of those polled said that they feared the consequences of globalization.1During the referendum campaign on the European constitution, the issue of offshoring also played an important part in the debate. It seems that almost everywhere in the industrialized countries, globalization is seen as a threat to employment and not as an opportunity. And yet, according to recent studies in France as elsewhere in Europe, offshoring – which is often considered to be the most obvious consequence of globalization – represents only a very small percentage of job losses. A recent study revealed that in France, throughout the period 1995-2001, “offshoring- outsourcing concerns at most an estimated 2,4 per cent of the industrial workforce”,2i.e. some 13,500 jobs a year, which seems very little. How then to explain the extraordinary difference between, on the one hand, the groundswell of disquiet caused by globalization and offshoring and, on the other, the relative insignificance of the figures? Are we faced by an under- estimate of the scope of the phenomenon as a result of inadequate measurement, and if so are we not in the initial phase of a phenomenon that will develop and even begin to affect service industries? Or, on the contrary, are we in the presence of a limited phenomenon, spectacularly blown out of proportion by the media because of the dramatic consequences for those affected by it? In order to * The opinions expressed in this paper are not necessarily those of DARES or the ILO. 1 Data from a public opinion poll on the French and globalization carried out by Sofres in February 2005. 2 P. Aubert, P. Sillard (2005): Délocalisations et réductions d’effectifs dans l’industrie française, Document de travail de l’INSEE, G 2005/03, April. 1