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The
social and labour impact of globalization in the manufacture of transport equipmentGeneva, 8 - 12 May 2000
International Labour Office Geneva
Copyright ©2000 International Labour Organization (ILO)
Cover photographs: ILO/J. Maillard
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In absolute terms, in 1996, the value of TEM exports was the highest in Germany at US$103,696 million, followed by Japan with $94,054 million and the United States with $78,801 million (table 1.4a). Italy, Belgium, France, Spain and the United Kingdom also have a high level of exports in the TEM sector. Exports have increased for most countries, with the exception of Japan, where they decreased from 1995 to 1996. This could be attributed to the shift of production to plants in other geographical locations.
An analysis by country reveals that in shipbuilding Japan takes the lead; however, many developing countries are involved in ship breaking (for example, India, Pakistan and Bangladesh): this will be dealt with in more detail in Chapter 4. In motor vehicles, Germany, Japan, Canada, the United States and France are the export leaders; in aircraft, the United States and France are in first place, followed by the United Kingdom, Germany and Canada. In general, exports in all categories show an increasing trend (see tables 1.4a, 1.4b and 1.4c).
Many trade economists have noticed that there is a large volume of trade between countries with similar factor proportions and that significant trade overlap exists within industries. In 1996, the 15 countries of the EU exported a little over 2 trillion dollars’ worth of merchandise and imported a similar amount. About 65 per cent of this trade was within the EU. At the same time, their imports from Japan exceeded those from all of Africa and were more than twice as high as those from the entire Middle East. Evidently, the EU countries trade with countries that are similar to themselves more than they trade with the very different economies of Africa and the Middle East. Broadly speaking, the industrialized countries trade with each other much more than they do with the developing countries. [1]
The same is true for North America, i.e. the United States and Canada. Both are examples of regionalism. The EU Single Market (EC-92) programme and the Maastricht Treaty are examples of “deep” integration arrangements. In principle, this means that member States cannot restrict imports of EU goods or services at the border or by means of domestic health, safety and environmental standards, nor can they restrict intra-EU capital and labour movements, or inhibit the establishment of firms from EU nations. NorthAmerica comes under the category of “shallow arrangements”. Most recent examples of these arrangements are free trade agreements (FTAs), such as the Canada-United States FTA (CUSFTA), the North American FTA (NAFTA) and the Southern Common Market (MERCOSUR). Shallow integration often involves little more than tariff and quota liberalization. These regional blocs weaken the opponents of free trade while simultaneously strengthening its key proponents, i.e. the exporters. [2]
In most major manufacturing countries motor vehicles make up the majority of exports in the TEM sector (see figure 1.2). Aircraft exports account for over one-quarter of the value of TEM exports in France and 31 per cent in the United Kingdom. In the UnitedStates, the shares of aircraft and motor vehicles have been more or less evenly balanced over the ten-year period. As pointed out in the previous section, the production of aircraft has decreased in the past years in the United States, but a look at exports shows a rising trend, indicating that the United States is increasingly manufacturing aircraft for the external market, while domestic demand has fallen.
Table 1.1a shows that the United States, Canada, Japan and some Western European countries, as well as the Republic of Korea and Mexico, owe a high proportion of manufactured exports to the TEM sector. In Austria, Belgium, Germany, Spain, France, the United Kingdom, the United States, Japan, Canada and Sweden, the share of TEM exports ranged from 14 to 32 per cent, accounting for an average of one-fifth of manufacturing exports.
The relative importance of trade in TEM is obvious from the above, especially in the case of Canada, whose TEM exports have made up between 30 and 40 per cent of the value of all manufacturing exports during the last ten years. Exports are also very important for Spain, where TEM constituted 31 per cent of manufactured exports in 1996, and in Japan and Mexico (with 24 per cent each), followed by France and Germany (with about 20 per cent each). In value terms, however, the EU is the largest TEM exporter (with Germany as the export leader), followed by Japan and North America (table 1.4a).
In the United States the TEM share of exports dropped between 1985 and 1996, and the same is true of Canada, the only difference being that in Canada the relative importance is double that in the United States (31.7 and 15.2 per cent, respectively, in 1996). Overall, there are slight troughs in the TEM share of exports in most countries, reflecting production shifts to other geographical locations, for a couple of years before they start stabilizing again (see figure 1.3): in most cases they start picking up again in 1996. With an increase in exports of OECD countries, many countries are beginning to shift production to large emerging markets such as China, India, Viet Nam and Central and Eastern Europe. [3] As a result, parts from home account for a smaller share of the total bill of materials for each TEM industry as global sourcing to other assembly plants increases. However, despite this shift, aggregate demand has increased, and the traditional producers, for example in Germany, do not feel threatened by the ongoing competition.
Quite often, big emerging markets become peripheries of larger existing markets, which explains the rapid increase in exports from Spain and Mexico. This is also foreseeable in Central European countries such as the Czech Republic, Hungary and Poland, as well as in Japan, where, as the economic crisis began to hit, the virtual collapse of the domestic market was only mollified by expanded exports, as Japan exceeded its “voluntarily” set export limit to the United States for the first time since 1990. [4]
Table 1.1b shows different trends. There are countries which have an increasing share of motor vehicle exports out of total manufacturing exports over a period of ten years, the most typical cases being Spain and Portugal: the share of motor vehicle exports almost doubled for Portugal between 1990 and 1996 and has undergone a huge increase in Spain (from 14.8 per cent of total manufacturing exports in 1985 to 22.9 per cent in 1990 and 27.2 per cent in 1996). The majority of exports from Spain go to EU countries: 88 per cent in 1985, 94 per cent in 1990 and 88 per cent in 1996. The same is true for Portugal, whose motor vehicle exports to the EU range from 93 to 95 per cent of total manufacturing exports to the EU for the years 1985, 1990 and 1996. The main reason for this is that auto makers based in Europe (including the European subsidiaries of United States firms) tend to invest in these countries based on their proximate low-cost location. Traditional motor vehicle producers such as Germany, Italy, Sweden and France show a more or less stable trend, as can be seen from table 1.1b. The structure of their export markets is not the same: German exports of motor vehicles to EU countries represent from 53 per cent in 1985 to a maximum of 65 per cent in 1990 of its total exports of motor vehicles. The United States is still an important market for Germany, although its importance is diminishing year by year (from a share of 23.5 per cent in 1985 to 11 per cent in 1996). Italy and France have a slightly higher share of their motor vehicle exports going to the EU, ranging from a minimum of 61 per cent in 1985 to a maximum of 75.2 per cent in 1990 for Italy and from 64 per cent in 1985 to 80 per cent in 1996 for France. [5] Both Italy and France have a consistent part of their motor vehicle exports going to non-OECD countries, although these shares are decreasing. This share for Italy was 21.4per cent in 1985 and 15 per cent in 1996; and for France 23 per cent in 1985 and only 11 per cent in 1996.
The share of motor vehicles in total exports from the United Kingdom remained more or less the same (between 1985 and 1996). Her export market structure is similar to that of Italy and France: the EU share is increasing, from 46.5 per cent of exports in 1985 to 70per cent in 1990 and 65.5 per cent in 1996, while the non-OECD share is going down, from 23.7 per cent in 1985 to 11 per cent in 1990 and 12 per cent in 1996.
The United States and Canada show a decreasing share of motor vehicle exports in total manufacturing exports (table 1.1b): 9.4 and 37 per cent, respectively, in 1985 and 6.8and 27.5 per cent in 1996. This reflects the fact that auto makers are moving their production plants towards countries with cheaper labour – in this case Mexico. A look at Mexican exports clearly shows that the decrease of the share of motor vehicle exports in the United States and Canada coincides with a sharply increased share in Mexican exports, from 8 per cent in 1990 to 20 per cent in 1996. Canada represents the biggest market for the United States, although its share decreased from 74 per cent in 1985 to 55 per cent in 1996, while the share of the EU is increasing, from 5.6 per cent in 1985 to 10.5 per cent in 1996. The overwhelming majority of Canadian motor vehicle exports go to the United States: 98 per cent in 1985, 98.3 per cent in 1990 and 98 per cent in 1996. This reflects regional trade arrangements, [6] and the fact that Canada takes advantage of the proximity of the huge United States market and low transportation costs.
In Japan the share of motor vehicles in manufacturing exports decreased in 1996 compared with 1985, from 24 to 19 per cent, and this is reflected in the fact that the value of TEM exports dropped by 16 per cent over the same period. Japanese auto makers embarked on a wave of plant construction in the United States during the 1980s and by 1995 were manufacturing locally most of the passenger vehicles sold there. A similar movement in Europe led to a wave of Japanese transplants that began in 1986 with Nissan’s plant in the United Kingdom and picked up momentum soon afterwards. By 1995 Japanese auto makers were manufacturing locally nearly one-third of the passenger vehicles they sold in Europe. In 1986, as transplant production ramped up, Japanese exports began a long decline. During the late 1980s, the automotive sector in Japan expanded rapidly, but as the home market shrank during the 1991-93 recession, domestic production went down from 13.5 million units in 1990 to about 10 million units in the mid-1990s. As more European transplants penetrated the market and North America expanded its capacity in the mid-1990s, a slight recovery in domestic demand was not sufficient to offset falling exports. [7]
For France, the United Kingdom and the United States aircraft exports represent an important share of total manufacturing exports – respectively 5.3, 5 and 8 per cent in 1996, compared to 3.5, 6 and 8.6 per cent in 1985 (see table 1.1f). The share of aircraft exports more than doubled for Sweden in 1996 compared to 1985, from nearly 1 to 2.3 per cent. The table shows that in 1990 this share peaked for many countries. In absolute terms United States aircraft exports far exceed those of other countries (table 1.4a), amounting to more than US$40 billion in 1996, compared to $14.2 billion for France and $1.2 billion for the United Kingdom for the same year. Exports from the United States increased by 175 per cent between 1985 and 1996, while in France and the United Kingdom they rose by 160 and 106 per cent, respectively.
The structure of aircraft exports for the United States has changed in the past ten years: in 1985 the biggest market was the EU, with a share of 31 per cent of the total, while the share for non-OECD countries was 28 per cent, but by 1996 most aircraft exports went to non-OECD countries (38 per cent) while the EU share remained the same at 31 per cent. For France, the United States was the biggest export market in 1985, absorbing 41 per cent of total exports, followed by non-OECD countries with 26 per cent and the EU with 18.5per cent. In 1996 non-OECD countries came first with 34 per cent, followed by the United States with 22.5 per cent and the EU with 19.5 per cent. The United Kingdom also exports most of its aircraft products to non-OECD countries. [8]
Table 1.5(a). Value of TEM imports (industrialized countries)(in million US$)
Table 1.5(b). Value of TEM imports (developing countries)(in thousand US$)
Table 1.5(c). Value of TEM imports (in millions of national currency)
The data for TEM show a big increase in imports for almost all the developed countries as well as for other countries such as India, Argentina, Brazil, etc. (table 1.5a). Motor vehicles represent the overwhelming part of total TEM imports for most OECD countries (see figure 1.4). The majority of imports are intra-industry imports. For example, Spain and Portugal exported most of their motor vehicles to the EU and the same is true for their imports. The same applies to trade between Canada and the United States: Canada imports most of its motor vehicles from the United States, and the share of Canadian exports to the United States is increasing.
Motor vehicles represent an important part of total Spanish manufacturing imports (table 1.1b), rising from 9 per cent in 1985 to 17.8 per cent in 1996. The same is true for Portugal, where the share increased from 16 per cent in 1990 to 18 per cent in 1996. This can be explained by the fact that these two countries are importing parts and accessories and exporting assembled vehicles in return. Most of their imports are from EU countries (92.5per cent in 1985 and 90 per cent in 1996 for Spain and 78 per cent in 1985 and 90 per cent in 1996 for Portugal). [9]
As in the case of exports, the share of motor vehicle imports to the United Kingdom, France and Italy follows a relatively stable trend, increasing slightly from 1985 to 1996. These countries import most of their motor vehicles from EU countries: 82.8 per cent in 1985 and 84.5 per cent in 1996 for the United Kingdom; 88.4 per cent in 1985 and 89.7 per cent in 1996 for France; 90.7 per cent in 1985 and 89.2 per cent in 1996 for Italy. This shows the importance of intra-EU trade in this category.
The case of German motor vehicle imports is slightly different: 75 and 76 per cent of imports were from other EU countries in 1985 and 1996, respectively, with 16 and 10 per cent coming from Japan for the same years. In Canada the motor vehicle share of total manufacturing imports has been going down, from 34 per cent in 1985 to 22.8 per cent in 1996. The share of Canadian imports from the United States was 86, 77 and 85 per cent for 1985, 1990 and 1996, followed by Japanese imports – about 7, 14 and 6 per cent for the same years. The United States imports a large share of its motor vehicles from Japan (40,38 and 29 per cent for 1985, 1990 and 1996) and from Canada (34.6, 35 and 38.5 per cent for the same years). The share of Canadian imports is increasing, while that of Japanese imports is shrinking. The share of United States imports from the EU has decreased from 20 per cent in 1985 to 15 per cent in 1996. [10] The trends in exports and imports show a multifold increase in trade in the last two decades.
Table 1.1f for aircraft shows that the share of aircraft out of total manufacturing imports in Australia was over 6 per cent for 1996, a big jump from 1985, when it was a little over 1 per cent.
Other OECD countries have shown a downward trend in the aircraft share of imports in the past ten years. Thus for the years 1990 and 1996 this share was 4.8 and 3.3 per cent in the United Kingdom, 2.9 and 2.1 per cent in Germany, 1.9 and 1.1 per cent in Italy, and 2.7and 1.4 per cent in Japan. There are a few exceptions such as the United States, which has seen a negligible increase of 0.4 percentage points in the aircraft share of imports for 1996 compared with 1990. This is also reflected in the import values. [11] The aircraft industry worldwide was hit harder by the recession than the vehicle sector or any other sector, with the lowest volume of trade occurring in 1995-96.
The period 1990-96 also saw a decline in aircraft import values (table 1.5a) in Germany by 12 per cent, in the United Kingdom by 22 per cent, in Italy by 13 per cent and in Japan by 35 per cent; the same is true for Belgium, Denmark, the Netherlands, Portugal and Norway. The opposite trend characterized aircraft imports in the United States, which increased by over 100 per cent, Canada (by 50 per cent) and France (by 10 per cent). Bilateral trade data show that OECD countries trade with each other: 92 per cent of United States aircraft imports in 1996 came from OECD countries (57 per cent from the EU, 24 per cent from Canada and 8 per cent from Japan). Canada has the same structure of aircraft imports: 70 per cent from the United States and 25 per cent from the EU. In France the trend has changed over the years: in 1985, imports from the EU represented only 16per cent of its total aircraft imports, but by 1996 this figure had tripled to 48 per cent. The opposite trend can be seen in the United Kingdom, where the share of EU imports in 1996 was 8.5 per cent, compared to 22 per cent in 1985. In Germany, 60 per cent of aircraft imports were from the EU and 30 per cent from the United States in 1996, compared to 53 and 15 per cent in 1985.
Table 1.6. Total TEM employment (number of employees)
In 1997, the TEM industry is estimated to have directly employed between 7 and 7.5million workers worldwide. Despite minor declines in employment in some countries, the sector still provides a significant share of employment (over 10 per cent) in the manufacturing industry in the major industrialized countries: 13 per cent in Canada and Germany, 12 per cent in France and Sweden, 11 per cent in the Republic of Korea, 10 per cent in Spain, the United Kingdom and Mexico, 9.5 per cent in the United States and 8.3per cent in Japan. Five million of these workers were in the Triad alone, with the EU accounting for half, followed by the United States with a third and Japan with 16 per cent. In the EU, the 2.5 million represented an increase of over 135,000 or 5.5 per cent with respect to 1994, after the third consecutive year of growth, although the data reveal a long-term decreasing trend (see table 1.6; figures calculated by the ILO).
During the 1990-94 period, TEM employment in the United States decreased by almost 10 per cent, and a negative trend can be observed in Japan too (see table 1.9), but in 1997 employment advanced more slowly in the United States (4.1 per cent), while it declined in Japan by 1.6 per cent. Until the recent economic crisis, Japanese automotive firms had shed workers who were made redundant through attrition, but as we near the year 2000, it appears that the industry in Japan is on the brink of massive lay-offs reminiscent of the United States during the early 1980s. The cost of failing to downsize sooner has contributed to the huge debt load accumulated by Japanese automotive firms, especially Nissan and Mitsubishi, making them susceptible to acquisition by cash-rich firms such as Renault, Ford [12] or General Motors.
Another important aspect of the labour market trend is the fact that in North America and Europe a large percentage of the shift in demand is intra-industry and not inter-industry. At all levels of industrial classification, the majority of United States manufacturing industries during the 1980s employed a higher proportion of high-skilled workers than in the 1970s even though their wages had risen.
Employment in the automobile industry alone constituted almost three-quarters of total employment in TEM in the EU [13] – slightly lower than the share of value of production accounted for by this activity. In 1997, employment in the rest of the TEM industry went down in Germany and in France (-6.9 and -2.1 per cent respectively), while the United Kingdom registered an increase of 7.8 per cent. The growth of employment in the automotive industry in Italy and Spain (14.4 and 5.2 per cent, respectively, with respect to 1996) was sharply higher than the changes observed in other large Member States of the EU.
A decrease in the TEM share of manufacturing employment, and specifically the MV share, could be indicative of many factors, including manufacturers shifting to lean production to minimize costs and using cross-trained production workers who rotate jobs (see tables 1.1a and 1.1b).
In the United States alone, nearly a million people – 5 per cent of the entire manufacturing workforce – work in the motor vehicle and equipment industry. More than three-quarters of these employees are production workers. This sector is highly organized, with nearly 36 per cent of employees unionized (the TEM unions are one of the strongest in the United States and Canada) compared to only 16 per cent of workers in the overall manufacturing sector in the United States. [14]
The most recent contraction of employees in the MV assembly plants in the United States began in the mid-1980s and lasted until 1990-91. The 1991 level of employment (313,200 employees) was only two-thirds of the peak employment level reached in 1978. The last time employment dropped below 313,000 was during the 1960-61 recession. There was a slight improvement in 1992, as assemblers hired more people, followed by a modest increase in 1993. In the assembling industry the number of employees grew by 6.8per cent in 1994, then by 4.7 per cent in 1995, increasing the workforce to a total of 357,400. Employment in the industry then fluctuated, but could not recover the loss in the past years: in 1998, it employed 341,800 workers – only 73 per cent of 1978 peak employment levels. [15]
Employment on the suppliers’ side has followed a different pattern. The number of employees in the United States parts industry rose every year after the 1981-82 recession except 1986 and 1990. The industry hired 223,500 workers and experienced an average increase in employment of 3.3 per cent per year from 1982 to 1998. The fastest growth was achieved in the 1990s. From 1990 to 1998, employment in MV parts grew at the rate of 4per cent per year, reaching a new high in 1998 of 546,800 workers. The number of people working in the parts industry surpassed that in the assembly industry for the first time in 1981 and has remained higher than assembly employment since 1987.
By way of contrast, employment in temporary work agencies, which supply labour to the auto industry, grew from 0.6 per cent of the total private economy in 1982 to 2.7 per cent in 1998 – a rate of growth surpassing even computer and data processing employment. [16] Despite its small size, the industry accounts for a large portion of increased work activity over the past few years. Temporary workers are sought by firms where economic activity follows an arbitrary pattern and firms are reluctant to hire permanent staff only to be forced to cut employment later if the increased activity is not sustainable. This market is extremely volatile, as the role of this industry is to act as a buffer for changes in economic demand, with automobile manufacturers turning to temporary help supply agencies when they are not certain of a lasting economic recovery. Under such circumstances, these workers may be counted as service sector employees in national statistics, rather than as automobile workers.
This sector grows as the economy comes out of recession and this tendency is enhanced by a large pool of available labour; it then shrinks when the economy enters the later stages of an expansion. The workers employed in it tend to be young, i.e. under 35years of age, and these jobs are a temporary step in their move towards a more permanent career.
The share of MV employment in total manufacturing is much smaller than the share of the industry’s production and exports/imports. This is because motor vehicles are capital-intensive goods. Germany has the highest share of MV employment, which went from 10.9per cent in 1985 to 11.2 per cent of total manufacturing in 1996. [17] It is followed by Mexico, with a 9.6 per cent share in 1995 – an increase of almost 50 per cent from 1985. Although employment in this sector fell by 28 per cent between 1990 and 1995, since total manufacturing employment has gone down the MV share seems larger (see tables 1.1a and 1.1b).
The only available data for Germany for the period 1995-98 show a slight but stable upward trend (9.8 per cent). The MV share of employment in France is almost stable, with a decline of only 0.4 percentage points in 1995 compared to 1985, while the number of employees dropped from 325,500 in 1990 to 289,200 in 1996. MV employment in the United Kingdom shows a downward trend in the early 1990s, which is reversed in 1994, and until 1996 employment grew by almost 22.5 per cent.
Similarly, in the United States there was a downward trend until 1992, when it reversed: after reaching a low of 815,000 employees in 1991, the MV sector counted almost 977,000 employees in 1994. Canada and Sweden also have an important share of MV in total employment: 9.4 and 9.2 per cent, respectively, in 1995, which is higher than in 1985 and 1990. This is also reflected in the number of employees, which increased by 11 per cent in Canada and 15 per cent in Sweden in 1995 as compared to 1990.
In the United Kingdom, Australia, Italy, Japan and the United States, the share of MV employment changed little over the years. Employment in Spain increased in 1996 compared to 1990 and 1985, as did MV production during this period.
The aircraft manufacturing sector employs a significant number of employees in some countries, such as the United States, the United Kingdom and Canada. In the United States this sector accounted for almost 40 per cent of TEM employment in 1985. This share reached its peak in 1990 at 43 per cent but retreated in 1994 to 31 per cent (figure 1.5), while the number of employees decreased, from 746,000 in 1985 to 534,000 in 1994 (-28per cent). This is a more or less general trend: in the United Kingdom too the number of employees in the aircraft manufacturing sector fell from 173,937 in 1990 to 156,000 in 1992 (-10 per cent), while the share of aircraft employment in total TEM employment increased by 1 percentage point over the same period. The other important producer, Canada, also shows a downward trend in the sector for the period 1990-94, from 46,000 in 1990 to 36,000 in 1994 (table 1.6). This is reflected in a decreasing share of aircraft employment for the same period, from 23 to 19 per cent.
The data for Finland and Indonesia show how the importance of this sector has increased during the years 1985-95 (figure 1.5). Indonesia has a share of 17 and 12 per cent, respectively, for 1990 and 1995, compared with virtually zero in 1985. Similarly, in Finland, the share of aircraft employment increased from 6 per cent in 1985 to 13 per cent in 1994.
A look at the employment figures for TEM shows that for most countries the MV industry has the largest number of workers (figure 1.5). This is evident for countries like Mexico, where the MV sector accounted for 91 per cent of total TEM employment in 1990 and 96 per cent in 1995, Spain, with a share of MV employees of 70 and 73 per cent for the years 1985 and 1992, Canada, with 69 per cent for 1985 and 1994, etc. In the UnitedKingdom this share grew from 49 to 51 per cent over the period 1990-92, while in the United States, after remaining relatively stable during the period 1985-90 (47 to 46 per cent), the share of MV in total TEM employment jumped to 57 per cent in 1994.
In India the railroad equipment industry accounted for 40 and 32 per cent of total TEM employment in 1985 and 1994, showing the importance of this industry for this country; in other countries, on the other hand, the share of the shipbuilding industry is considerable. In Finland it represented 55 and 46 per cent, respectively, of total TEM employment in 1985 and 1994, in Spain 18 and 14 per cent, in Indonesia 32 and 14 per cent and in Portugal 53 and 36 per cent for 1985 and 1993. The share of employment in the shipbuilding industry is decreasing steadily (figure 1.5).
The data on the number of women employed in the TEM industry show that their share is almost negligible in developing countries, while they make up on average around 15 to 20 per cent of the workforce in some major industrialized countries (such as Austria, Canada, Denmark, Finland and the United States (see table 1.7). By and large, most of the women employed in the sector are in the motor vehicle and aircraft industries, owing to the large size of the industries as well as the nature of the jobs involved.
In most countries there has been an increase in the participation of women in the sector over time. The figures are quite high in Thailand, with over 24,447 women working in the MV sector in 1998. [18] In the United States the percentage stayed around 20 per cent. There are high percentages of women in the TEM sector in countries such as Finland, Denmark and the United Kingdom. Surprisingly, the share of the female TEM workforce engaged in the aircraft industry is relatively high: about 17 per cent on average in some major producers such as the United States and France.
Indonesia recorded one of the highest percentages of women (30 per cent) in motorcycle and bicycle manufacturing, along with Malaysia (24 per cent on average).
Figure 1.7 indicates the differences in the level of employment between men and women. On average, female participation in the sector is still low compared to that of men when observed in absolute terms. This is also true for developed countries such as the United Kingdom and the United States.
Table 1.7. Female employees as percentage of total TEM workforce
Automotive sector wages, on average, are very high in countries with large existing markets and lower in emerging economies and countries providing peripheral markets, which makes them attractive low-cost locations for exporting vehicles to their bigger neighbours (along with their spatial proximity). [19]
Income gaps have widened not only amongst developed countries but also in developing countries. For example, research reveals that trade liberalization in Mexico in the mid-to-late 1980s led to an increase in the relative wages of high-skilled workers.
A look at the wages in the MV industry and total manufacturing in the United States reveals that the earnings for MV workers are significantly higher than those in the manufacturing sector. [20] The MV assembly industry has the highest earnings within the TEM industry with aircraft following closely behind. Wages in the TEM industries are also growing faster than those in manufacturing as a whole. A number of empirical studies carried out on trade and wage issues all find some impact of trade on the labour market in both the United States and Europe. The consensus range of the impact that trade has on the wage gap is perhaps 10 to 20 per cent, while migration accounts for another 30 to 40 per cent in the lowest skilled United States workers. The rest could be attributed to technological change. [21]
Data collected by the United States Bureau of Labor Statistics for selected countries have been used here because they are readily available. Hourly compensation costs,[22] which include in addition to actual pay, a number of (but not all) social charges, are used instead of merely hourly wages since they better reflect the cost to an employer of a worker. On the whole, the hourly compensation of workers in the motor vehicle industry is higher than the TEM average in a group of countries including the United States, Germany, Italy, Mexico and Canada. In the United States, the average hourly compensation in the motor vehicle sector over the period 1990-96 was US$25.3, while for the entire TEM sector it was $23.6; in other countries the difference is smaller. Canada has an average hourly compensation rate in the motor vehicle sector of $20.5 and $19.7 for TEM for the period 1990-96; Germany has $34.9 for motor vehicle employees and $34.2 for TEM; Italy has $18.2 for motor vehicle employees and $18 for TEM; and Mexico has $3.1 and $3.01 for the period 1990-96 (table 1.8). Germany thus has the highest hourly compensation cost for motor vehicle employees and Mexico the lowest.
The Republic of Korea has the highest rate of increase of hourly compensation in the motor vehicle sector: in 1996, it was almost seven times as much as in 1986. Other countries show a strong upward trend in hourly compensation costs as well as in total wages for the motor vehicle sector. By 1996, German workers were costing $43 per hour, compared to only $16.7 in 1986. Japan has seen an increase of more than 200 per cent for the same period. The other countries also follow a strong upward trend in both hourly compensation costs and total wages paid to MV industry employees: in France and the United Kingdom the hourly compensation cost almost doubled between 1986 and 1996, while Italy and Canada experienced a 70 and 58 per cent increase, respectively, for the same period. In the United States the upward trend was weaker, with an increase in hourly compensation cost in the MV sector of 35 per cent in 1996 compared to 1986. Spain saw an increase of only 12 per cent for the period 1990-96, while total wages for this sector more than doubled between 1994 and 1985. [23]
Figure 1.8 shows the highest number of hours worked per week in Argentina, Mexico, the Republic of Korea and the Philippines. The hours worked by female employees were less than those of male employees, except in Mexico and the Philippines, where they were higher, reaching a peak of 60 hours per week.
Weekly hours follow a stable trend in most countries: 38 to 40 on average in Canada, the United States, Finland, France, Greece, Netherlands, Norway, Sweden, the UnitedKingdom and Australia, with a marginal difference between the number of hours worked by men and women.
France, Austria, Spain, Belgium, Poland, Portugal and Romania show a lower average ranging between 35 and 37 hours. The hours worked by female employees are even lower in Spain and Austria (under 35 hours a week), followed by the RussianFederation and Turkey (30 hours) (see table 1.11).
Hours worked are higher in the automotive industry than in the rest of TEM on average, with the exception of Mexico and Australia. Hours have increased over time in almost all countries in the TEM sector as the industry becomes competitive. This is probably beneficial from the productivity point of view, but may often have adverse social impacts as well.
Figure 1.8 shows Japan, the Republic of Korea, Spain, Australia and Thailand (with the exception of shipbuilding) maintaining a steady range of hours worked as well as a constant ratio between those of male and female employees. Although Japan is known for increasing hours of work, the figures are higher for the Republic of Korea in the TEM industry.
Table 1.9. Total value added in the TEM sector (in million US$)
Table 1.9 on total value added reveals that the motor vehicle sector represents the largest share of value added in total manufacturing. Traditional producers of TEM show a mixed trend of changes in value added during the period 1985-96. In the United States, a drop in value added was observed in 1996 compared with 1985 (from US$137 billion to $131 billion), while other countries (such as the United Kingdom, Germany, France and Italy), after a decline in value added during the years 1992-94, display an upward trend for the period 1995-96; compared to 1985 the figures are still higher. Comparing the changes between developed and developing countries which are included in the tables, it can be clearly seen that the increase in value added for the latter is much more significant than for the former.
Table 1.10 shows research and development (R&D) spending by motor vehicle manufacturers and aerospace companies. They alone accounted for over 20 per cent of global spending on R&D by the world’s 300 largest companies. Surprisingly, the top three spenders in the world were automobile companies, followed by the electronics giants Siemens and Matsushita (much of whose sales in fact also go to the industry), with automobile companies taking over the rankings once again from place six onwards. Not so surprising, however, is the fact that suppliers to the industry consistently spend a higher percentage of their sales on R&D (between 6 and 9 per cent) than the automobile companies themselves (industry average 4.3 per cent).
On the one hand, this is a result of global pressure to be competitive and to continuously offer new products, designs and features to the consumer. On the other, it is an indication of where future employment will be found, of the skills required and where these jobs may be located. For example, in Nissan’s restructuring, which could result in 21,000 jobs being cut, it was emphasized that there would be no reductions in R&D spending.
The high cost of R&D also prompts companies to undertake joint research, even if they do not formally merge. Such alliances for research can often be seen as a strategy by smaller companies to ward off unwelcome takeover bids. Studies on other industries have found that such specific-purpose strategic alliances rarely end in full-scale mergers, [24] since they strengthen each partner’s ability to maintain a separate identity. Ford and Peugeot’s joint development of new diesel engines is an example of this. [25] If Jaguar (owned by Ford) introduced diesel it could benefit from the development of such an engine by its parent. Another area of joint action is agreement on a common standard for wiring dashboards [26] in order to receive e-mail, surf the Internet and access other data via satellite, or play computer games. Such industry-wide standards also simplify the task of suppliers.
Environmental pressure is also fuelling research as companies race to develop new vehicles which use fuel cells, batteries or other technologies to meet low emission standards. Much of this research is undertaken jointly (for example, by Ford with DaimlerChrysler and General Motors with Toyota). Given the initial difficulty in providing adequate infrastructure, the first generation of new vehicles are likely to be hybrids using new and old technologies.
Should the MV industry ever move away from the gasoline- or diesel-powered internal combustion engine sometime in the next century, a whole series of employment effects will be felt throughout the energy supply and distribution sector.
Table 1.11. Hours of work (weekly)
[1] Elhanan Helpman: “Explaining the structure of foreign trade: Where do we stand?”, in Weltwirtschaftliches Archiv, Vol. 134(4), 1998, p. 581.
[2] Richard Baldwin: The causes of regionalism (unpublished document, 1998).
[3] Timothy J. Sturgeon: “Globalization and jobs in the automotive industry: A locational typology”, paper presented at GERPISA’s Seventh International Colloquium on Internationalization: Confrontation of Firms Trajectories and Automobile Areas, Paris, 18-20 June 1999.
[5] All data on export destinations are taken from the OECD STAN database: Bilateral trade data.
[6] See, however, the recent WTO ruling on the 34-year-old Canada-United States auto pact, which will have future implications for trade and employment.
[8] All data on export destinations are taken from the OECD STAN database: Bilateral trade data.
[9] All data on import origin are taken from the OECD STAN database: Bilateral trade data.
[10] Data assembled and inferred from the OECD STAN database.
[11] Averages used, bearing in mind the nature of the aircraft industry, which involves a long buying period.
[13] EUROSTAT data (Nov. 1998), op. cit., p. 71.
[14] United States Department of Labor: Report on the American workforce (Washington, DC, 1999), pp. 8-10.
[17] United States Bureau of Labor Statistics (BLS) database 1998 and OECD STAN database.
[18] Data received in response to questionnaires sent by the ILO to governments.
[20] Data based on United States Department of Labor, op. cit., and OECD STAN database.
[21] Richard Baldwin and Philippe Martin: Two waves of globalisation: Superficial similarities, fundamental differences, Working Paper 6904, National Bureau of Economic Research, Cambridge, Massachusetts, Jan. 1999.
[22] Hourly compensation costs have been defined to include: (1) hourly direct pay, consisting of (a)pay for time worked (basic time and piece rates plus overtime, shift differentials and other premiums and bonuses) and (b) other direct pay (vacations, holidays, irregular bonuses, etc.); (2)employer social insurance expenditures for legally required insurance programmes or contractually agreed private benefit plans; and (3) other labour taxes on payrolls or employment (where they exist). Compensation is measured on an hours-worked basis for purposes of comparison. The United States BLS definition of hourly compensation costs is not the same as the ILO definition of total labour costs, which would include the cost of recruitment, training and welfare services. These additional labour costs – which are not readily available – are estimated not to amount to more than 4 per cent of total labour costs.
[24] John Hagedoorn and Bert Sadowski: “The transition from strategic technology alliances to mergers and acquisitions: An exploratory study”, in Journal of Management Studies, Vol. 36, No. 1, Jan. 1999, pp. 87-107.
[25] Tim Burt: “Ford and Peugeot in diesel link-up”, in Financial Times, 9/10 Oct. 1999, p. 11.
[26] Jeffrey Ball: “Five of the world’s top auto makers agree to develop wiring standard”, in Wall Street Journal, 29 Apr. 1999, p. 11.
