Union Bargaining Power, Labour Standards and Foreign Direct Investment

This paper presents a cross-country empirical investigation of the impact of Foreign Direct Investment (FDI) on manufacturing wages. Our results indicate that FDI-Flows have a negative impact on overall wages in the manufacturing sector and this impact is stronger for female wages. We argue that one possible explanation for such an impact may be a decrease in the bargaining power of labor due to new labor market arrangements in a global economy where capital is free to move across countries in search of more favorable conditions. This decline in labor power also tends to have a greater impact on the more vulnerable workers female workers whose bargainingpositions have been traditionally lower than male workers.

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The role of labour unrest and skilled labour on outward foreign direct investment in Taiwan, Republic of China, ROC

The Economic and Labour Relations Review ◽

10.1177/10353046211066932 ◽

2021 ◽

pp. 103530462110669

Author(s):

Yu Cheng Lai ◽

Santanu Sarkar

Keyword(s):

Foreign Direct Investment ◽

Direct Investment ◽

Industrial Relations ◽

Series Data ◽

Outward Foreign Direct Investment ◽

Skilled Workers ◽

Estimation Model ◽

Labour Costs ◽

Labour Standards

This paper builds an estimation model to test whether improved labour standards necessarily lead firms to send work offshore to countries with lower wages and fewer employment protections; or improved labour standards influence the labour market, where with time, firms attract more skilled workers, which help deter outward foreign direct investment (FDI). When more firms comply with improved labour standards, the industrial relations climate also improves as non-compliance usually causes labour unrest. Using a model built on pooled cross-sectional time-series data from 2008–17, we studied the role of changes in labour unrest and the percentage of skilled workers in the labour force in predicting outward FDI in Taiwan. Per our estimation model, we found the percentage of skilled workers steadily increased as Taiwan maintained improved labour standards. The increase in skilled workers also increased labour costs making it challenging for firms to stay onshore. However, skilled workers helped firms improve productivity, which justified increased labour costs. As a result, firms in Taiwan that complied with labour standards found it less challenging to pay higher wages and stayed onshore. JEL Code: J28, J38, F66

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