Key Concepts
• Arbitrage – Buying a commodity in a local
market where it is cheap, then selling it in a neighboring
market where price is higher. p. 57
• Wage Arbitrage – Where production and
jobs move from a high wage labor market to another
where the labor is much cheaper. p.57
• Unions – A group of workers united for the same
goal. p.58
Wage Arbitrage
Graduate Engineers – India vs. U.S. p. 64
• India’s Engineers < $10,000/year
• U.S.’s Engineers = $60,000 - $80,000/year
Steel Industry – Brazil vs. U.S. p. 75
• Brazil – 5.8 hrs/ton (1/10 wage rate of the U.S.)
• U.S. – 3.4 hrs/ton (10 times the wage rate of Brazil)
Wage Arbitrage
Clothing Industry – Bangladesh vs. U.S. p.75
• Bangledesh – 25 min./shirt x $0.25/hr. = 2.4 shirts/hr
• U.S. – 14min./shirt x $7.53/hr. = 4.3 shirts/hr.
Production Workers – Germany vs. Japan p. 66
• Germany – Paid $25.56/hr (after cutbacks accepted)
• Japan – Paid $19.20/hr. (still sending jobs overseas)
Advantage/Disadvantage
Of Wage Arbitrage
• Advantage:
Reduction of labor costs p.59
- “… the opportunity to capture savings at
home and abroad by taking advantage of
the gross surpluses of human labor that
exist around the world.”
• Disadvantage:
“Social dumping”
p.59
- The exiting of companies from their home
countries to other countries.
Wage Arbitrage Effects
on Unions
Manufacturing Workers – East vs. West
Germany p. 61
• Helmut Kohl – “Gleiche Arbeit, gleicher Lohn”
- Same work, same pay. (E. Germans make about
$6.70 < W. Germans)
Electrical Workers – Malaysia vs.
China/Vietnam p.64
• Malaysia – government prohibits unions to prevent
corporations from moving to lower
wage
countries like China and Vietnam
Unions
Purpose
- Limit the supply of workers
Issue
-Unions have been decimated by the mobility of
capital
IMF
-International Metalworkers Federation
-Federation of more than 90 metalworkers unions
Union Issues
Engineering and Electrical union- Timex
-Accusation on Timex for dumping 343
employees at their plant in Scotland
Metalworkers- Shipbuilders
-Major shipbuilding countries losing market
share to wage arbitration
Union Issues
Machinist Union-Aerospace Industry
-U.S. aerospace industry to cooperate with Airbus
Swiss engineering unions-Asea Brown Boveri
-ABB plans to lay off 1,000 workers to invest $1
billion in Asia
IG Metall- Eastern Germany
-3.4 million member union begged for support to
East and West Germany
Union Issues
Hungary- Auto Industry
-Complain that U.S. and European
companies are trying to turn Hungary into
union-free zone
Electronics – Malaysia
-Possible establishment of unions in
Malaysia’s electronics industry
Summary
• Basic outline of chapter 4 given
• The definition and concept of Arbitrage was
introduced. Examples from Greider’s text was
given for illustration purposes.
• The Union and the effects that Arbitrage has on
it.
Notes
1.
2.
3.
4.
5.
6.
7.
8.
9.
Financial Times
The Wall Street Journal
Office of Technology Assessment, U.S. Congress
The Trap (La Piège)
The Oxford University Press
The American Prospect
U.S. Labor Department
World Bank
Der Spiegel