Globalisation and Labour Markets

Abstract

In this thesis how labour markets are a ected by globalisation is examined. The thesis takes the form of three chapters. The rst chapter looks at the state of trade unions in Europe and how they have been a ected by globalisation; the second chapter is theoretical in nature and shows how the increasing size of trade blocs and lower transport costs can help to explain the decline in trade union density; and the third chapter looks at how the ability of rms to locate production in more than one country can a ect wages and unemployment. The rst chapter describes trends related to trade unions in Europe, before examining how globalisation can a ect trade unions and how trade unions may respond. Since the 1980s there has been a general decline in trade union density and strike activity. At the same time there has been an increase in globalisation. Although common explanations have been put forward for the decline of trade union density across European countries, no cointegration has been found between trends in trade union density. Despite declines in trade union density, unions have continued to be successful in gaining wage premia for their members. The increase in globalisation has been associated with an increase in the elasticity of demand for labour. This a ects the employment/wage trade o faced by trade unions. There is also some evidence that multinationals can use their cross-border bargaining power to reduce wages. Unions have reacted to globalisation by cooperating internationally, but any progress towards cross border collective bargaining has been at best slow. A simple model is presented in the chapter in order to anticipate the issues discussed in chapters two and three. The model suggests that unions will be more likely to cooperate internationally if they are substitutes in production and if the reservation wage is low. The second chapter looks at how multinational enterprises (MNEs) can a ect wages and unemployment. While the increase in international rm mobility has been well documented, its e ects on macroeconomic aggregates and in the labour market are still controversial. MNEs bene t from an international outside option during wage bargaining, leading to a decrease in average wages. How-