Impact of Global Issues on Employment Law
How Employment Law Transcends Nations
Globalization is a recent phenomenon where business is no longer restricted to the borders of one nation, but now the entire world. As the world financial markets and businesses become more integrated, there is more of a need for uniformity in the international system. With growing business integration, there are many issues of employment law that arises form continued globalization.
There are many immigration challenges that can affect a domestic and international organization. Domestic organizations have the issue of whether or not they should hire a domestic or immigrant work force. Typically a domestic company will hire immigrants because they are willing to work for far less than someone that is not an immigrant. For a company that is in a country that is experiencing a depletion of workforce, may find it hard to keep workers and not lose them to a company in another nation.
An international organization may experience the same issues. An international organization may not want to set up offices or factories in certain countries because they are having an immigration issue of wither people leaving or coming. This may make the country politically unstable. For example, in the United States there are growing anti-immigration sentiments, and therefore it is harder for companies to hire immigrants that they would normally hire. The same can be for domestic or international organizations.
International Trade Relations
International trade relations can have a profound effect on domestic and international organizations. Free trade agreements are one thing that has the largest effect on any nation and their organizations. Free trade agreements are made between nations to allow goods to be sold and bought across each nation’s borders without imposing a tax on the goods.
A domestic organization may hurt from this as they may lose revenue because they can no longer tax certain goods going overseas. Another aspect is that the other nation of the free trade agreement may be able to sell cheaper goods and cost the domestic organization even more revenue. A prime example of this is the North American Free Trade Agreement (NAFTA).
The same can happen for an international organization. An international organization may have manufacturing overseas and may not be able to ship their goods to other nations for free, due to changing politics. This is most common in the third world where politics change all the time and companies are suddenly cut off from their overseas operations. This happened to the American oil companies when Venezuela forcibly nationalized the oil companies doing business there. It is a risk for any international organization to do business in a foreign nation that is not stable.
It can be argued that employee compensation is what drives productivity, that if you have happy well paid employees, then your productivity will be higher. A domestic company in any nation can have an issue of wages being too low, which makes the available workforce leave the nation in search of higher wages. However, a domestic company in a nation that has too high of a wage, can also suffer due to not being able to afford an adequate number of employees for a profitable production.
International organizations have a similar issue. Most of the time they will send the base of their manufacturing overseas because labor is cheap and there are less regulations. However, if that foreign nation that they are operating in suddenly improves wages and working conditions, then the company may leave to find cheaper labor elsewhere. This can slow production and ultimately affect the bottom line. This happens most often when a company will send their manufacturing base to a third world country.
Outsourcing is a controversial business practice of a company sending part or all of its manufacturing operations overseas. For a domestic organization it can be a bad or good phenomenon. A domestic organization could benefit from cheaper labor and therefore higher profits. A disadvantage is that other companies may do the same thing and therefore create more competition.
For an international organization outsourcing is a typical practice since they operate in different nations. The corporate officers may be in one country, while manufacturing and production can be scattered in various other countries. This can be both bad and good for an international organization. It is good for them because it creates for cheap labor and cheap products which gives the company a higher profit. It can be bad for them as having operations spread out amongst so many different countries, any issues in one of them can cause a major disruption for the company.
Fair labor is different in each nation. There has been growing pressure that companies only do business with nations that have fair labor practices. Fair labor affects companies in different ways. For a domestic organization, fair labor puts limits on what the company may do. For example in the United States, the standard work week is forty hours long. Therefore production is limited to those forty hours, or more employees are hired to keep production going longer.
For international organizations, fair labor is different because they have operations in various countries. The best example here is labor in China. Labor regulations are very loose in China, and therefore many international organizations put their manufacturing bases in China. While this provides cheap labor that can be worked for long hours, it does come with consequences. Many American organizations have recently been criticized for having manufacturing in China because of labor practices.