Chapter 6 Activity Feedback
Activity 6.1 Models of the EU
1. Which of the models of EU organisation (single market, federalist,
integrationist) would best describe the view of the following political parties in
the UK?
a)
b)
c)
d)
New Labour
Conservative
Liberal Democrat
UK Independence Party
2. Why do the other members of the EU feel that true implementation of the
Single Market also requires harmonisation of taxation, and why does the UK
oppose this?
Feedback
1 (a) New Labour is prepared for some federalist elements in the EU (it signed
up to the Social Chapter in 1997, for example). It is even prepared to
accept some integrationist elements – it recognises the supremacy of EU
law over domestic law, for example. But in practice New Labour is
suspicious of federalist moves like a common foreign policy, and even
more of integrationist measures like the euro (in favour in principle but not
yet…). It even opposes some single market elements like the Schengen
Agreement.
(b)
The Conservative party’s official policy is euro-sceptic – not to go beyond
the single market (although John Major signed the federalist/ integrationist
Maastricht Treaty in 1992), and like New Labour it opposes the Schenegn
Agreement. However, the Kenneth Clarke wing of the party is more euroenthusiastic than New Labour. On the right of the party, some extreme
euro-sceptics want to leave the EU altogether.
(c) The Liberal Democrats are the most euro-enthusiastic of the major parties,
and would accept many federalist/integrationist elements.
(d)
UKIP’s policy is simple – leave the EU.
2
As noted in the previous feedback, tax differentials discourage free
movement of goods and hamper competition. For this reason, most
members of the EU see tax harmonisation as an essential part of the
Single Market. At present the only tax which is harmonised to some extent
is VAT, because a portion of VAT receipts forms part of the EU budget.
The UK sees tax harmonisation as an unacceptable infringement of UK
sovereignty, and if formed one of the UK ‘red lines’ (key issues) in the EU
Constitution negotiations. After lengthy argument, the UK succeeded in
retaining its veto on taxation within the EU. For the foreseeable future,
therefore, tax will not be harmonised.
Activity 6.2
EU institutions and power
1. Why do you think that ultimate power in the EU lies with the Council of
Ministers rather than the Commission?
2. You work for a FTSE-100 company. Your company is concerned about a
possible change in EU social policy which could lead to legislation in the next
few years. How can your company influence forthcoming EU decisions on
this change?
Feedback
1. The Council of Ministers is under the direct control of the governments of
member states. In general, the member states have no desire for a fully
integrated EU, and so resist any attempt to transfer real power to the
Commission. At the same time, the Council of Ministers has some democratic
credibility as the member governments themselves have all been elected,
while the Commission does not.
2. There are several ways in which a UK company can influence EU policy:

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Your trade association, or employers;’ body like the CBI or IoD, will either
be a member of UNICE, the employers’ social partner, or will have access
to it for lobbying purposes.
Your local MEP could raise the issue in the European Parliament. This will
at least ensure that the issue receives a public airing. Although the
Parliament does not have direct decision-making powers, the Commission
is sensitive to its opinions.
You could lobby the relevant UK government department, probably the
DTI, which will have representation on the Council of Ministers when the
final decisions are taken.
Activity 6.3
EU enlargement
What do you think is the likely impact of EU enlargement on your own
organisation or sector?
Feedback
Your own organisation or sector could be affected in the following ways:
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Well-educated migrants from the accession states could fill skills gaps in the
UK. The ex-communist entrants on the whole had excellent education
systems, and the typical migrant is young, probably English-speaking, and
with a tertiary education (contrary to the impression put out by the
eurosceptic tabloids!).
The new entrants will represent export opportunities.
Some work could be outsourced to the new entrants.
EU-15 markets will be opened up to imports from the new members.
Activity 6.4
The EU constitution
The opinion polls after the announcement of agreement on the Constitution
suggested that there would have been a two to one majority against it in a UK
referendum. Why do you think this is so?
Feedback
There are some genuine fears that the UK has given away too much sovereignty
in the Constitution, but it is important to remember that significant elements of
the media in the UK are virulently eurosceptic, led by the Sun and the Daily Mail.
These newspapers, and others, whipped up considerable hysteria in the period
just before expansion in May 2004 with a fear that the UK would be ‘swamped’
by an immediate flood of immigrants from the new member states in Eastern
Europe.
A Leading Article in The Guardian on June 21 (Leading Article, 2004) pointed out
that the same poll which showed a 2:1 majority against the Constitution also
showed that if their anxieties were met, voters would support the Constitution,
albeit by a narrow majority. Crucially, their anxieties included fears that the EU
would be able to increase taxes in Britain, that the UK would have to join the
eurozone, that the British passport would be replaced by an EU one, and that
Britain would lose its seat on the Security Council to the EU. None of these are
true. This suggests that opposition to the Constitution is a combination of
genuine concern over a perceived loss of sovereignty, xenophobia whipped up
by the eurosceptic press, a fear of the unknown, and ignorance.
Activity 6.5 Is comparative advantage good for you?
The theory of comparative advantage suggests that everyone gains from free
trade. Why then do so many countries protect their own domestic industries?
Feedback
There are a number of objections to free trade:

The law of comparative advantage encourages countries to specialise in a
small number of products – bananas in the Caribbean, cocoa in Ghana, for
example (this is an example of globalisation, which we will analyse later in
this chapter). This makes these economies very vulnerable, both to a
downturn in the market and to natural disasters, like disease or hurricanes.

Comparative advantage works superbly in a grossly over-simplified model of
the world economy – particularly when we only consider two countries. In
practice, international trade involves many players, not just two. For example,
the Windward Islands do have a comparative advantage in bananas
compared with the UK, but Honduras has an even bigger comparative
advantage (see the case study on the banana war).

Free trade is static – it tends to freeze the world economy at one point in
time. Free trade suits the dominant industrial economies at any one time, as
it denies developing economies the opportunity to develop their own
industries. They are forced to specialise in extractive or agricultural sectors
where they have a current comparative advantage. Protection thus tends to
be in the interests of developing economies. In the early eighteenth century,
the UK put tariffs on imports of Indian cotton goods, thereby destroying the
Indian cotton industry, and allowing the growth of the UK cotton industry to
world dominance. Once UK industry was dominant in the early nineteenth
century, the UK switched to free trade, while countries like the US and
Germany built up their industries behind protective barriers. The pattern
continues today – in the late twentieth century, the US favoured free trade,
while China built up a highly competitive industrial sector behind protective
barriers.

In developed countries, weak industries will press for protection from foreign
competition. Although there are strong economic arguments against this,
there may be good social arguments in favour. Thus the rapid destruction of
the coal industry in the UK in the 1980s may have made economic sense, but
it caused enormous social disruption through the decimation of long-standing
mining communities.
In a recession, there is sometimes a temptation for countries to cheat on free
trade, by selling their products overseas at below their cost of production. This is
known as dumping, and is against the rules of the WTO. Member states are
therefore permitted to impose tariffs on goods which they can prove have been
dumped.
Activity 6.6 Debt relief
Can you put forward any arguments against either the principle or the practice of
debt relief for the Third World?
Feedback
One objection to the principle of debt relief is the concept of moral hazard, which
we discussed earlier in this chapter. If poor countries know that their debts are
likely to be cancelled, they may become more irresponsible in running them up in
the first place. As the for the practical application of the debt relief, except for the
extremely slow progress of debt relief, and the onerous terms attached to it, the
main problem here is one of arbitrary definition. The HIPC initiative only apples
to 52 countries, and excludes some countries which most people would define as
extremely poor, including Bangladesh and Haiti.
Activity 6.7 Why do people hate the WTO and globalisation?
Throughout the west, there is deep suspicion, on many cases verging on hatred,
of the progress of globalisation in general, and the activities of the WTO in
particular. Why do you think this is?
Feedback
Globalisation and the WTO are opposed for many reasons:

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
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There is a perception that it operates in the interests of huge, global
corporations, who are only interested in their own profit. This view tends to be
supported by the Banana War, when the interests of the American banana
barons won out at the expense of small Caribbean producers. Big
corporations can afford the best lawyers, and they also represent the status
quo in terms of the distribution of economic power.
That it is destroying democracy by imposing the will of unelected elites within
the international financial institutions on the rest of the world. The IMF and
the World Bank make no pretence to be democratic. The WTO is democratic,
in the sense that it is one country, one vote, but it is still seen to be
undemocratic, and dominated by faceless and unaccountable power brokers.
That it undermines workers rights and environmental protection by
encouraging a ‘race to the bottom’ between governments competing for jobs.
Thus British textiles are made in Mauritius and Bangladesh, footballs in
Pakistan, etc, often in conditions and for wages which would be totally
unacceptable in the West. However, there is a positive side to this.
Multinational companies operating in the Third World are usually better
employers than locally-owned sweatshops, and the countries involved do
benefit from the exports of textiles.
That it is destroying British jobs. In a free trade world economy, jobs will go
where there is a comparative advantage. Thus many British manufacturing
jobs are moving to the Third World, where the population is highly educated
but cheap. In the long run, this will benefit both the UK and India, although
there will be short-term disruption.
That it harms the poor. Certainly insensitive IMF and World Bank policies
during the 1990s did harm the poor in developing countries, who were forced
to pay for basic social and welfare services. This practice has been heavily
criticised, and the IMF/World Bank is in the process of becoming less
interventionist.
That globalisation is basically Americanisation. Although many people in the
Third World positively like Coke and McDonalds, there is widespread
resentment at the spread of American culture, brands, values and power,
particularly within the Islamic world.
Activity 6.8 Globalisation and your organisation
What impact, if any, has globalisation had on your own organisation?
Feedback
There is likely to be both an economic impact on your organisation, and a
professional impact on your HR role.
If you work for a large public company, the shares of your company will probably
be traded in New York as well as in London, and increasingly share prices in the
UK follow those in the US. If you work in the public sector, the impact of
globalisation is likely to be more indirect, but most parts of the public sector have
experienced the worldwide pressure towards privatisation, public-private
partnerships and best value.
We also all feel the impact of globalisation as the world economy becomes more
integrated, and at the same time more vulnerable to random shocks, whether
they are the financial crisis in Asia in 1997, or the terrorist attacks on the US in
2001. If there is a major recession in the US, there is virtually no chance of the
UK avoiding it.
As an HR professional, you are likely to experience pressures to outsource. (see
the Call Centre Case Study). You may thus be called on to evaluate labour
market conditions, local employment law, and cultural norms, in places like
Bangalore or Warsaw. At the same time, particularly in London and other big
cities, many skilled jobs are being filled by foreign nationals. This can only
increase now that membership of the EU has expanded. You will increasingly
need to be aware of requirements for work permits, and regulations on the
employment on asylum seekers.
Activity 6.9 Jaguar-Land Rover: a cultural football
Few companies have been through as many different international owners as
Jaguar-Land Rover. Both Jaguar and Land Rover became part of British Leyland
(BL) in 1968. In 1975 BL was nationalised, and in 1988 it was sold to British
Aerospace (BAe). In practice Jaguar and Land Rover, along with the rest of the
group, was managed by Honda under a strategic alliance with BAe. In 1994, the
whole group was sold to BMW, which itself sold out to Ford in 2000. Finally, in
2008, Ford sold Jaguar and Land Rover to Tata. Land Rover has thus
successively been under British (both private and public), Japanese, German,
American and Indian management.
The Dutch guru Geert Hofstede has identified what he calls his cultural
dimensions, which he says accurately describe national characters. His
dimensions are:
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Power Distance (PD). The extent to which societies accept that power is and
should be distributed unequally. Organisationally, high Power Distance will
lead to hierarchical organisations with large wage differentials.
Individualism (IDV). The degree to which individuals are integrated into
groups. Collectivist societies with a low individualism score will have a high
level of employment security and commitment to staff.
Masculinity/Femininity (M/F). Masculine societies are assertive and
competitive, with high levels of organisational conflict.
Uncertainty avoidance (UA). The degree to which people feel comfortable in
ambiguous situations. Low uncertainty avoidance is reflected in informal,
unstructured organisations.
Long term orientation (LTO). In organisations this will be reflected in shortterm profit maximisation, versus long-term growth.
The following table summarises those of Hofstede’s findings which are relevant
to Jaguar-Land Rover:
Country
PD
IDV
M/F
UA
LTO
United Kingdom
Japan
Germany
United States
India
Low
Medium
Low
Low
High
High
Low
Medium
High
Medium
Medium
High
Medium
Medium
Medium
Low
High
Medium
Low
Low
Low
High
Low
Low
Medium
Source: Hofstede G, 2009 www.geert-hofstede.com/hofstede (accessed 14
October 2009).
To some extent, the above table is reflected in attitudes to quality at Jaguar-Land
Rover. Under British management, quality was a low priority – most of the time
the group was struggling for survival. Honda brought in a high priority for quality,
with the emphasis placed on the ‘soft’ aspects – total quality management,
kaizen (continuous improvement), quality circles, just in time - and a realisation
that the pay-off from quality would be long-term. BMW was also concerned with
quality, with a shorter-term orientation and a more top-down approach, while
Ford concentrated on ‘hard’ aspects of quality, such as Six Sigma. It is yet to be
seen what Tata’s approach will be, but evidence on Tata’s management style
suggests a high commitment to quality (see Section ??).
It is important to bear in mind that Hofstede’s approach has been heavily
criticised. One key criticism is that his basic research is very old, carried out
between 1967 and 1973, and originally based solely on (mainly male) employees
of IBM.
What other criticisms can you make of Hofstede’s approach, (a) in general and
(b) in relation to Jaguar-Land Rover? (You will find Marchington and Wilkinson,
Human Resource Management at Work, 4th ed, pages 29–31 useful.)
Feedback
Marchington and Wilkinson point out a number of flaws in Hofstede’s approach:

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Many of the national samples in his research were very small – only 37 in
Pakistan, for example.
The research ignores differences within countries – between New York or
San Francisco on the one hand, and the deep south of the US on the other,
or between England and Scotland.
The averages can hide much greater variation within countries, and so
individuals vary much more within countries than between countries. It is
theoretically possible that a country might contain two extreme but opposed
cultures, but an average would cancel out these differences and produce a
middle of the road result which is not representative. Research cited by
Marchington and Wilkinson suggests that Hofstede’s results only explain
between 2–4 per cent of the variance between countries.
In practice national cultures can evolve - they are not frozen in time. Monocultural Britain in the 1950s was not the same country as multi-cultural Britain
in the 2000s.
The research ignores the impact of corporate culture. A strong organisation
can easily have its own culture which is very different from the predominant
national culture. IBM itself is well known for having a strong corporate culture,
which permeates its activities throughout the world. (see also Chiang 2005)
Chiang F, (2005), A critical examination of Hofstede’s thesis and its
application to international reward management, International Journal of
Human Resource Management, vol. 16 issue 9.
Turning to the corporate level, there are some contradictions in the data. Ford,
for example, comes from a national culture (the US) which stresses shorttermism, but Ford is well known for taking a long-term view (which helps to
explain why it came through the 2008–9 recession relatively unscathed, while its
US rivals General Motors and Chrysler both went into liquidation.
Another example is Honda (and Japanese companies in general). They stress
the individual role in maintaining high levels of quality, but Hofstede’s Japanese
cultural model suggests that they should be low on individualism.
Seminar Activity Polish plumbers
On 1 May 2004, ten new members joined the EU. Eight of these, known as the
A8, came from Central and Eastern Europe, the biggest of these being Poland,
with a population of about 38.5 million. The UK already had a significant Polish
minority, the descendants of the Free Poles who had fought on the Allied side in
the war, and who had decided not to go back to a Communist Poland. In the
2001, census, there were nearly 61,000 people who had been born in Poland,
with a third of these living in London (BBC nd). With their descendants, they
made up a population of Polish ancestry of about a quarter of a million.
Under the EU rules on free movement, people from the A8 countries had the
right to come to other EU countries, but this did not necessarily extend to the
right to work. As part of the accession arrangements, the 15 ‘old’ EU countries
had the right to impose restrictions on work for A8 citizens for up to seven years.
Only Sweden allowed A8 citizens an unrestricted right to work. The UK and
Ireland granted them right to work, but no right to unemployment benefit until
they had worked continuously for a year.
It was forecast at the time of accession that 13,000 A8 workers a year would
come to the UK. However, this has proven to be a gross under-estimate. Denis
MacShane, who was Europe minister at the time, claimed that the original figure
was based on all 15 old EU members opening their doors to A8 workers.
(MacShane 2006).
Although it is clear that many more A8 workers, particularly Poles, are working in
the UK than originally thought, nobody really knows how many. As Poles and
other A8 citizens can enter the EU without visa, there is no way to telling how
many of those who enter the country intend to work, and how many are just
passing through. The Office for National Statistics carries out random interviews
on arrivals to the UK and on this basis estimates that 56,000 Poles entered the
UK to work in 2005. However, the Department of Work and Pensions says that
170,000 Poles applied for National Insurance numbers in 2005 (Doward and
McKenna 2007).
The other main source of information on numbers is the Worker Registration
Scheme (WRS), under which A8 workers are encouraged to register. This is not
compulsory, is not required for the self-employed, and costs £75. There is also
no requirement to deregister if a worker leaves the UK. In May 2005, the BBC
reported that 176,000 had registered by March 2005. Of these 82 per cent were
aged between 18 and 34, 96 per cent were working full time and a third may
have been working illegally in the UK before accession and merely regularising
their position. Poland was the biggest provider, with 56 per cent of the total,
followed by Lithuania with 15 per cent, and Slovakia with 11 per cent. (BBC
2005). This is not surprising, as Poland had by far the biggest population of the
A8 countries, it had 20 per cent unemployment, wages one-sixth of those in the
UK, and a well-educated population, many of whom spoke English.
By January 2007, 579,000 had registered under the WRS, of whom 63 per cent
were from Poland. The anti-immigration pressure group claimed that this was an
under-estimate, and that the true figure was nearer 600,000, although they
admitted that many of these will have left the country (Migration Watch 2007).
By December 2007 the number registered had increased to 750,000. (House of
Lords 2008).
Some figures are also available from the Polish end of the migration. In 2004,
the year of accession, there were fewer movements of Poles out of the country
than in 2003 (27.2 million compared with 38.6 million) (Iglicka 2005). However,
there is no way of telling how many of these were going out of Poland to work,
or, perhaps, on day trips to Germany or the Czech Republic. What may be
significant, however, is that the number of those leaving by air increased by 37
per cent in 2004 to 1.89 million. Official emigration in 2004 was also lower than in
2003, and only 543 Poles officially emigrated to the UK, compared with 12,646 to
Germany.
Rumours and urban myths abound of the number of Poles in the UK. There are
said to be 10,000 in Slough, 15,000 in Boston, Lincolnshire, 3,000 in Crewe
(Doward and McKenna 2007). According to some stories, every other plumber in
the UK is now Polish, although according to WRS figures there are only about
100 Polish plumbers registered. Remember, though, that the self-employed do
not have to register.
Remember also that despite the myths, most Polish and other A8 immigrants are
not plumbers. Among the A8 immigrants, 24 per cent work in distribution, hotels
and restaurants, 21 per cent in manufacturing, 14 per cent in construction, and a
significant but unstated proportion in agriculture and food processing (House of
Lords 2008, 18).
The plain truth is nobody really has any idea how many Poles are working in
Britain. It is thought that most Polish and other A8 workers come to the UK with
every intention of going back to Poland, and, unlike other immigrant groups,
going back is very easy and cheap – as cheap as £10 on a Ryanair flight. When
questioned by the Joseph Rowntree Foundation immediately after accession,
only six percent said they intended to stay in the UK permanently. A year later,
this had risen to 29 per cent. (Spencer et al 2007). In September 2007, 62 per
cent of those arriving in the previous 12 months said they intended to stay for
less than one year (House of Lords 16), although the experience of other
immigrant groups suggests that more will stay than initially expected to. The best
estimate is probably that at any one time, there are about 200,000–250,000
Polish workers in the UK at any one time, which approximately doubles the figure
of Polish descent in 2001. We will not have any really accurate figures until the
2011 census.
Questions
1. What do you think is the likely economic and social impact of the influx of
Polish and other A8 workers into the UK?
2. How can trade unions respond to the issues raised by the influx of Polish
workers?
Feedback
2. John Philpott and Gerwyn Davies of the CIPD estimated the impact of
eastern European immigration on the UK in 2006 (Philpott and Davies 2006).
Their analysis was generally favourable. They quoted the Home Office –
‘contributing to the success of the economy while making very few demands
on out welfare state or public services’, and the CBI, ‘Immigration has been a
success story - benefiting the economy, businesses and the people who have
come.’
The Poles are nearly all young, nearly all single, and nearly all in work. They
thus pay taxes and National Insurance, but make few demands on the
welfare services. They don’t have children, so there are no education costs,
they are healthy, so low NHS costs, and they are way off pension age. They
also fill skills shortages in the UK, particularly in agriculture, construction and
the hospitality industry. Because they are mostly paid at or near minimum
wage, this has held the UK inflation rate down. As a result, interest rates are
estimated to have been 0.5 per cent lower and output 0.2 per cent higher
than otherwise would have been the case. However, Migration Watch points
out that the net benefit per head of the population is very small – on one
estimate 4p per person per week (Migration Watch 2007), and recent
research carried out for the House of Lords also suggests that the benefit has
been small. The NIESR estimated that the impact on GDP per head is
negative in the short term (up to four years), but slightly positive in the long
tun (up by 0.3 per cent by 2015). A8 immigration has also lowered the wage
rates for those in the lowest paid jobs. (House of Lords, 26-27)
Unlike previous waves of immigration, the Poles have not predominantly gone
to London, West Yorkshire and the West Midlands. Only 21 per cent are in
London, and 40 per cent in the rural counties of Lincolnshire, Norfolk, Kent
and Sussex, with significant concentrations in Southampton, northern
Scotland and west Wales. The TUC has pointed out that they run the risk of
exploitation by rural gang-masters, and that they should be encouraged to
join unions for their own protection (Philpott and Davies 2006).
A8 migrants generally are highly regarded by employers. They are rated as
more productive than non-migrants by 43 per cent of employers (only 4 per
cent think they are worse). Figures for reliability are 38 and 6, for absence 37
and 6, and for quality of work 25 and 1. These figures suggest that A8
migrants are underpaid for the work they do, supported by the fact that
almost 80 per cent of A8 migrants earn between £4.50 and £5.99 an hour
(Philpott 2007).
Towns with high concentrations of A8 workers are complaining about
pressure on local facilities, particularly housing, and this undoubtedly true.
Housing pressure will increase rents and house prices. However, the
pressure may not be as great as it seems at first sight. The biggest
employers of A8 workers are agriculture and hospitality, both of which are
likely to provide live-in accommodation. As they are single, the A8 workers
are also likely to multiply occupy houses.
MacShane points out that we must also put the immigration in perspective.
A8 migrants make up less than half a percent of the UK workforce. There are
many more British emigrants in the EU – 750,000 in Spain, 500,000 in France
– and there are complaints in these countries about the Brits pushing up
house prices and clogging up the healthcare system (MacShane 2006).
2. A number of initiatives have been taken by trade unions to respond to the
needs of Polish workers in the UK:
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Amicus is providing advice for Polish workers in Bradford, covering housing
as well as employment issues.
The Vulnerable Workers Project, run by the TUC and funded by the
Department for Business and Enterprise, is providing free training on
employment rights for Polish workers in London, after finding that over a
quarter had problems with getting paid properly.
Under an agreement between the GMB and the Polish union Solidarnosc
(Solidarity), Polish workers will be told of their UK employment rights before
they leave Poland, and will be encouraged to join the GMB.
Two full-time GMB Organisers in the East Midlands who are themselves
migrant workers recruit and organise migrant labour in agriculture and food
processing.
The GMB and Unison hosted three Polish bands at the Glastonbury Festival
in both 2007 and 2008.