GENEVA (ILO News) - Employment in wholesale and retail trade, stimulated by technology, consumer demand and trade liberalization, continues to grow despite consolidation of the industry, according to a new ILO report * issued here today.
Mergers and acquisitions are primarily motivated by business considerations, and often take scant account of employment and labour issues. The report says, however, that unlike other industries, where the effect of mergers and acquisitions has been mostly negative, consolidation in commerce has not necessarily led to job cuts in the merging companies.
Mergers nevertheless have a destructive effect on jobs in small and medium-sized enterprises as they get crowded out of the market by their newly combined and bigger competitors. Although small and medium-scale enterprises still employ the majority of commerce workers, they are ceding ground to their more powerful - most often multinational - competitors.
The report is to be discussed at a tripartite meeting here on 7-11 April 2003, which will review the effects of consolidation and other factors on employment and working conditions among commerce employees and exchange experiences with positive employment outcomes of mergers and acquisitions in commerce.
The past 20 years' trend towards consolidation and concentration in the sector is reflected by the fact that 61 of the world's 500 biggest companies by revenue are multinational enterprises in commerce, the majority in retail trade. Big multinational or national retail chains such as Wal-Mart, The Gap, and Toys'R Us in the United States, Metro group AG in Germany, Carrefour SA and Pinault-Printemps in France and Ito-Yokado (Japan) today rank among the largest businesses in many industrialized countries.
By 1999, merger value had reached about US$2.3 trillion, representing 24,000 deals for the year. Beginning in early 2000, however, both merger volumes and merger values began to decline, reflecting the general worldwide downturn in economic conditions and stock value erosion. By November 2002, the value and volume of global mergers and acquisitions had fallen steeply (according to some estimates the drop was over 50 per cent) from their highs of 2000 down to levels last seen in 1997.
Despite layoffs following consolidation and concentration in the commerce sector as a result of mergers and acquisitions, the report says, growth and employment potential remain higher than in many other sectors. In the United States, employment in retail rose from almost 21.9 million employees in 1997 to an estimated 23.3 million in March 2002, the report says. In 1997, commerce accounted for a considerable share of total employment: 16 per cent in the European Union, 19 per cent in the United States, and 18 per cent in Japan.
The report cautions, however, that although commerce is one of the fastest growing industries and one of the largest sources of new jobs in the world, the hopes it raises for better working and living conditions are frequently balanced by contradictory concerns, mainly related to fears of an emergent global social order almost entirely directed by market forces. Among the features of work in the sector, the report cites a large proportion of female employees, high labour turnover rates and a high proportion of workers in employment relationships that are neither full time nor permanent.
Especially in developing countries, the scale of transnational corporations puts local enterprises out of business. In Thailand, some 200,000 of the 500,000 locally-owned retail stores have been pushed out of business by foreign-led competition since 1998. Big retailers in Brazil have been taking over national and regional chains to increase market share and enhance operational results by cutting costs. Six of the seven largest chains in the country have foreign capital.
An important issue in the context of mergers and acquisitions relates to the right of workers to be informed and consulted about fundamental changes affecting their employment and working conditions. Workers complain that even where this right is prescribed by law it often remains unfulfilled. The report cites examples in some countries, such as the Netherlands and the Nordic region, where information and consultation led to an organizational environment conducive to labour-management cooperation in the post-merger period.
* Employment effects of mergers and acquisitions in commerce , report for discussion at the Tripartite Meeting on the Employment Effects of Mergers and Acquisitions in Commerce. International Labour Office, Geneva, 2003. ISBN 92-2-113518-7. Price: 15 Swiss francs.
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