MNCs, regulatory systems and employment rights
Tony Royle and Brian Towers
Introduction
This final chapter offers a summary of the findings and arguments of previous chapters. It also attempts to locate the book within the wider empirical and theoretical debates around the concepts of globalization and the role of MNCs. There is no doubt that the fast-food industry is growing in significance not only in terms of sales but also in terms of employment. It could be argued that fast-food is also promoting a particular perspective on employment which is encouraging employment ‘flexibility’ in its worst sense:
insecure, low skilled, poorly paid work. In other words the opposite of a more positive form of ‘flexibility’ where employees can develop skills, earn a good living and have a large degree of control over balancing the work and non-work aspects of their lives. In addition it is a form of work that provides little or no opportunity for employee voice and often takes place in a non-union environment. This situation is undoubtedly driven by the nature of the business itself, i.e. with labour costs forming a large proportion of the overall cost of the business, with the minimization of such costs becoming the paramount objective of management. In addition such chain operations are dominated by systems that in classic scientific management terms have no room for employees other than as simple and interchangeable units of production. The notion that employees should have democratic rights that would allow them to shape the ‘system’ is generally a non-starter in this context without trade union and/or state intervention.
Furthermore, these systems are culturally embedded in the industry particularly in the large Anglo-Saxon multinational ‘burger’ chains. Careful selection and training of management help to maintain a strong corporate culture of which McDonald’s’ activities in Russia are a prime example. Its ‘leave Russia at the door’ policy and its ‘summer camps’ for workers show the extent to which companies of this kind can persuade their managers to adopt and promote corporate values regardless of societal norms. This is not to say that large-scale MNCs do not allow some autonomy for their operations under different regulatory regimes in different societies. But this is strictly limited given the over-riding imperative of maintaining efficient, globally profitable systems: excessive autonomy would undermine the organizational logic of MNCs in the fast-food industry.
Franchising drives much of the expansion in this industry but although some authors have alluded to seemingly autonomous employment practices in franchises, what is clear is that these are largely a matter of form, not substance. Overall, such well-established and powerful systems create considerable problems for independent and effective employee
representation even in the countries of mainland Europe where legislation supporting employee rights is comprehensive and more strictly applied than elsewhere. The following summary of the findings revolves around two main themes: first, that of the characteristics of the fast-food workforce and the pay and conditions in the industry; and second, the issue of employee representation.
The fast-food workforce
In part, fast-food companies are able to pursue these employment practices because they are able to target weak and marginalized segments of the labour market, employing workers likely to be acquiescent to managerial prerogative. In Chapter 2, Leidner, reporting on the US, suggests that most fast-food employees are likely to be young, female and part-time, and in many other countries workers are also likely to be young with little previous experience of work and often no knowledge or experience of trade unions. Many simply move on to other jobs after a short time and, because of the transitory nature of this employment experience, they may have little interest in joining unions or in taking even limited collective action to improve their pay and working conditions. Indeed, Leidner points out that in the US, where individualism and meritocracy are deeply embedded in the culture, fast-food workers receive little support from the wider public or even other workers. Fast-food employment is also seen as an
‘appropriate’ first work experience for teenagers. Hence, there is little sympathy for older fast-food workers who stay with the company because they are seen to have ‘failed’ and therefore deserve what they get. Of course this perspective overlooks the fact that labour is not homogeneous; individuals in the labour market are not equal, they vary widely in their characteristics and opportunity of access to employment. It is also a mistake to think that fast-food restaurants are entirely staffed by young workers and that labour turnover is always high. As we saw in Chapter 5, in countries like Germany, labour turnover is much lower than in countries such as the US, Canada, the UK, Australia and New Zealand.
This is because a large proportion of fast-food workforces are made up of ethnic minorities (such as those of Turkish descent) and economic migrants (mostly from Eastern Europe) who cannot find work elsewhere and are also more likely to be older workers, some of whom are highly qualified. 1 Additionally, Royle (2000) points out that in Austria the situation is similar to that in Germany and regions such as the south of Italy where unemployment amongst fast-food older workers is high, the workers are older and stay longer in the industry.
Furthermore, in ethical terms, why should workers regardless of age, ethnic background, qualifications and experience be required to endure poor working conditions and low pay simply because there is no other work available to them? And why should young workers, who often lack previous experience, be discriminated against in terms of rights, pay and conditions of work when previous experience is irrelevant for this kind of work? There is no inexorable law of labour market behaviour that precludes intervention by trade unions, and especially the state, to promote and protect good pay and conditions in employment. Nor are employers themselves necessarily exempt from introducing and maintaining good employment practices. Indeed there are many instances of employers
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outside the fast-food sector in large MNCs doing so without damaging, and even contributing to, their commercial success. Even within the sector, as Royle (2000:160) suggests, there are examples where conditions are somewhat better than elsewhere. Due to the intervention of trade unions and state legislation the disposable income of McDonald’s employees in Norway in 1999 was 90 per cent of the average for all workers with Denmark and Sweden not far behind with more than 70 and 65 per cent respectively.
Yet McDonald’s remains a profitable enterprise in Scandinavia. By contrast, the worst example, perhaps not surprisingly, where trade union intervention is non-existent and legislation minimal, was the US with a figure of 40 per cent.
Pereira’s chapter on Singapore also illustrates the extent to which fast-food companies are able to target acquiescent sectors of the labour market. When adequate numbers of young workers could no longer be hired in Singapore, McDonald’s was able to make use of ‘McAunties’ and ‘McUncles’ (i.e. older workers) who were only too pleased to find work in air-conditioned surroundings. In this way the company, with no additional cost to itself, improved its public image as it provided employment for a particularly vulnerable segment of the labour market (older workers) experiencing high levels of unemployment.
In a similar way in Chapter 6 Benders and colleagues point out that the promotion of female and ethnic minority employment at McDonald’s coincided exactly with the Dutch government’s employment policies. In Russia McDonald’s specifically targeted young workers from amongst the vast numbers of people applying for jobs with the company.
These workers were much more likely to take on the values of the corporation than older workers who may still harbour the vestiges of collectivism and worker solidarity. In all these cases workers are likely to be acquiescent: either workers need the job and are therefore unlikely to put their jobs at risk by questioning managerial prerogative; or they have no previous experience and know nothing else; or simply have no interest in criticizing management because they will move on to something else before long. In the case of disabled workers McDonald’s is a proactive employer with its ‘McJobs’
programme. However, the US government subsidizes the corporation for each disabled employee at an average rate of $800 (Royle, 2000). These workers also form part of the acquiescent workforce in some restaurants, as those who, in many other cases, cannot find work elsewhere. Such opportunism in hiring practices may well not be unwelcome to those employed, but it should not be confused with altruism.
Employee representation in fast-food
One important lesson to be drawn from this study is that whatever the systems of employee representation in countries—and these vary widely from the least regulated of North America, Britain and Singapore to the highly regulated systems of continental Europe—large MNCs have in many cases been able to tame, neutralize or subvert these systems, particularly at workplace level. Some countries rely more on trade unions and collective bargaining to advance and defend employee rights whilst others rely on a combination of both legal regulation—including statutory works councils and collective bargaining. There is also the supranational form of regulation in the EU, notably the European Works Council and the forthcoming EU directive on information and
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consultation for works councils at national level. Other forms of intervention such as the EU working time directive and directives on health and safety also have implications for employee representation. Nor is the balance between collective bargaining and state intervention stable. As trade union membership and collective bargaining retreat most countries have sought to regulate the labour market directly through the law, including the US.
Yet in the US and the UK, fast-food corporations still have the ability to promote their interests virtually untrammelled by trade unions and legal regulation. In the UK, despite the Employment Relations Act of 1999, according to the Prime Minister the UK still remains ‘the most lightly regulated labour market of any leading economy in the world’.
Nor is there any evidence that the new statutory recognition procedure will have any impact on the UK fast-food industry, given the bargaining unit determination constraints, continued employer opposition and the absence of an effective union presence. As Chapter 4 indicates there are, as yet, no recognition agreements in the sector and only a small number of union members in one or two firms. In the US there is a similar situation. Although according to Leidner (Chapter 2) there have been a few sporadic and determined attempts to unionize individual fast-food restaurants but ‘no broader movement to unionize McDonald’s or the rest of the fast-food industry has yet materialized. This outcome is not unconnected with American labour law, which, despite its aim of encouraging collective bargaining, under the central statute enacted as far back as 1935, has, if anything, done the opposite (Gould, 1994; Human Rights Watch, 2000).
In Canada, the nature of the work and the characteristics of the workforce have been strong impediments to union organization. Despite some successes—such as KFC in British Columbia, where, though its workers had an existing agreement inherited from the previous owner of the restaurants—the industry remains almost entirely non-union. The labour laws in all Canadian provinces are not universally union-friendly, despite the generally more favourable legal contexts in Canada relative to the US and the much higher incidence of union membership and collective bargaining. Nor do Canadian employers behave significantly more sympathetically towards unions, who, Reiter (Chapter 3) suggests, are faced with the ‘usual combination’ of legal, quasi-legal and sometimes illegal practices. Perhaps the collective lesson to be drawn from the entire North American experience is the ability of employers, as elsewhere, to avoid the strictures of even reasonably favourable labour law even where the law defining the bargaining unit and the availability of card counts is more favourable to unions. 2 In countries like Singapore (Pereira, Chapter 8) there is no state provision for mandatory unionization or employee interest representation. Given strong employer preferences, it is hardly surprising that the fast-food industry in Singapore is completely union free.
In Russia, McDonald’s is the only major fast-food MNC and it has not so far been significantly challenged by its employees or the Russian trade unions. As Sheksnia and colleagues point out:
McDonald’s has been criticized for steadfastly refusing to deal with trade unions seeking to represent its employees and has also refused the implementation of a collective agreement that would undoubtedly improve conditions and wage levels.
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(Sheksnia et al., Chapter 7 this volume: 134) Significantly, they also note on the same page that ‘the less than fully developed state of Russia’s legislation and legal practices may have helped the corporation to implement its strategies in this regard’. More recently McDonald’s, after the intervention of the Russian parliament, has recognized a small union of seventeen workers in its Moscow
‘McComplex’ processing plant. However, this agreement only provides union representatives with an office space and a small administrative budget and two hours per week to work on union activities. There is as yet no sign of an agreement on terms and conditions of work despite the recognition of the union (York, 2001). This is typical of the kind of employer delaying tactic found in the US and Canada and not only in the fast-food industry. Employers know that the longer they wait to start meaningful negotiations towards a contract, the more likely it is that the union’s influence will diminish and leave it vulnerable to a de-certification challenge. It is also significant to note that the very limited trade union success in Russia followed the intervention of a state institution, and that even this small victory is likely to be short lived. In this newly emerging ‘democratic’
society, the Russian government is planning to introduce restrictions on the rights and benefits of workers in the interests of attracting inward investment. York (2001) reports that the Kremlin is planning to draw up a new labour code which will remove many of the Soviet-era trade union guarantees that still exist and, in a way which will undoubtedly delight many employers, will slash maternity leave, lower the minimum working age and allow a ‘voluntary’ 12-hour workday.
Ostensibly the more highly regulated systems in Australia and New Zealand should provide less favourable contexts for MNCs in the fast-food industry. However, as Allen and colleagues (Chapter 9) illustrate, Australian unions have felt obliged to make significant concessions. In order to gain recognition the unions have had to agree to lower rates of pay and no premium rates for weekend work. There are also instances of the state siding with MNC fast-food operators as, for example, in Queensland where special award conditions have been granted to fast-food companies on the grounds that the industry employed a low skilled, predominantly student workforce. In 1983 following an award, MNCs such as McDonald’s, Hungry Jack’s and KFC returned to their familiar, aggressive non-union practices, which included the termination of all check-off agreements. In New Zealand, following government deregulatory intervention introduced in the 1991 Employment Contracts Act, bargaining power shifted decisively towards employers, seen in the early elimination of weekend and statutory holiday employment followed by the adoption of lower rates of pay for young workers. However, and significantly, after concerns about its image brought on by industrial action carried out by some of its employees, McDonald’s dropped the lower rates of pay for young workers. This antiunion climate, not of course confined to fast-food, eventually attracted the attention of the new government, which, in 2000, introduced the more protective Employment Relations Act. Whilst it is too early yet to assess the impact of the new legislation, it is probable that the anti-union culture established in the 1990s will take some time to erode, if at all. Employers in the industry remain powerfully entrenched faced with the very limited organizational strength of employees and their representatives.
Germany, because of its highly juridified industrial relations system, the formal Labour relations in the global fast-food industry 176
legitimation of the trade union role and the extensive system of works councils, may be seen as one of the more favourable contexts for the development of effective employee representation in the fast-food industry. Yet, as Royle (2000: chapter 5) indicates, the German unions continue to have difficulty in raising basic pay levels, ensuring adequate adherence to collective agreements and establishing union supported works councils, particularly amongst Anglo-Saxon corporations. Indeed, despite companies such as Burger King, McDonald’s and Tricon (Pizza Hut, KFC) easily meeting the statutory thresholds for numbers of workers, they have no supervisory boards and very few, or no, works councils. Low pay remains a feature of a labour market that has high levels of unemployment amongst unskilled workers and absorbs large numbers of economic migrants (mostly from Eastern Europe) desperate to find work in the West. Royle illustrates how companies such as McDonald’s have successfully managed to avoid collective agreements for 18 years, and continue to resist works councils. Indeed McDonald’s appears to have developed a whole range of ‘avoidance strategies’ (Royle, 1998, 2000). These include, for example, changing ownership of restaurants; buying out workers en masse; capturing works councils by appointing company-friendly employees and managers; and various other effective stratagems. There is much evidence to conclude that though most German national fast-food companies tend to adopt more cooperative relations with unions and works councils, there are some who take an anti-union stance. However, it also evident that even some of the more anti-union-friendly companies are also becoming less willing to accept unions and statutory works councils as they adopt increasingly systematized working methods, removing more experienced and more expensive skilled workers as the sector as a whole consolidates into a smaller number of larger scale operations. What remains surprising is the extent to which Anglo-Saxon fast-food MNCs, in particular, are able to avoid key elements of seemingly strict regulation and impose their own employment systems and corporate cultures.
In the Netherlands, until the Accoord of Wassenaar in 1982, relations between McDonald’s and the Dutch unions were highly conflictual. However, the outbreak of peace following Wassenaar was conditional. The Accoord which was partly designed to promote the employment of ethnic minorities and women, did in fact, perfectly match McDonald’s employment profile. Furthermore, the incomes policy aspects of the Accoord favoured the Corporation’s aim of controlling its labour costs. Since that time relations with unions at sectoral level have been reasonably cooperative. However, throughout the 1990s McDonald’s continued to resist works councils in its restaurants, so that by 1998 only three or four works councils existed in over 160 restaurants. More recently the Corporation, presumably mindful of its public image, has agreed to the establishment of a company-level works council although the council represents only 10 per cent of its total workforce employed in company-owned restaurants, and it is too early as yet to see how effective it will be in practice. What is clear is that in a country characterized by consensual industrial relations any inward investor has to appear to be cooperative. However, as Benders (Chapter 6 in this volume: 116) and colleagues argue,
‘this policy change must not be mistaken for a humanitarian concern for democracy’.
EU level regulation promoting employee consultation and information rights through legislation such as the European Works Council (EWC) Directive has been much vaunted but in practice has been largely ineffective in the fast-food sector, especially when one
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consider such cases as the EWCs at McDonald’s (Royle, 1999b, 2000) and PepsiCo/Tricon. To begin with, the EWC directive does not cover franchise operations and therefore excludes the majority of employees in fast-food MNCs in Europe. 3 Second, the voluntary arrangements provided for in the directive have allowed deter-mined employers such as PepsiCo/Tricon and McDonald’s to infiltrate and control the process of establishing the councils to suit their own interests and agendas. Both corporations have specifically excluded, unless unavoidable, the involvement of national unions and international union organizations. As further insurance, employee representatives are often, where possible, hand picked to ensure adherence to corporate values and strategies (Crowley, 1996; Hazan, 1996; North, 1996; Royle, 1999b, 2000).
Some wider considerations: globalization and the MNC
This volume appears at a time of fierce political and academic debate, reflecting widespread dissatisfaction with the claimed inevitability and beneficence of a globalizing economy, increasingly dominated by MNCs. At the same time there is a continuing debate as to the meaning and extent of globalization to which both industrial relations academics and others of varying disciplines have contributed. Some of these debates have involved a revival and re-working of the convergence and divergence theses. Recent work in the industrial relations field has included that of Locke (1992, 1995); Frenkel (1993); Katz (1997); Katz and Darbishire (2000).
The question we consider here is to what extent do the findings on the global fast-food industry, detailed in these pages contribute empirically and theoretically to the debate on the nature of global industrial relations transformation, including the role of the MNCs within that transformation? That there is some form of global transformation is not seriously contested; however, partly drawing on the authors cited above, we argue that this transformation is largely driven by a ‘convergence’ across seven main dimensions: 4 1 An increasing domination of the enterprise, mainly in the form of the MNC, and,
driven by the relocation of sites to cheaper production areas, contracting out and (in this study) franchising. This form of convergence can also be associated with a shift towards the management of global commodity chains.
2 The relative decline in the significance and regulatory power of national systems.
3 The often non-existent, weak or ineffective nature of supranational regulation.
Examples are: the relative failure of public and corporate codes of conduct; NAFTA’s virtual exclusion of social policy clauses; and the ‘menu’ driven nature of EU regulation, which often leaves many loopholes that MNCs can exploit.
4 The growth of HRM employment practices and associated forms of work organization and flexibility. These may not necessarily advance employment rights and in fact may lead to the opposite.
5 A tendency towards low wage employment.
6 A global, though uneven, decline in trade union membership.
7 A continuing divergence of practices within national systems associated with particular sectoral requirements and modes of production, as Locke (1992, 1995) suggests.
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