Category Archives: Globalization

Explaining the Unexplained: Residual Wage Inequality, Manufacturing Decline, and Low-Skilled Immigration

Source: Eric D. Gould, Centre for Economic Policy Research (CEPR), CEPR Discussion Paper No. DP10649, June 2015
(subscription required)

From the abstract:
This paper investigates whether the increasing ‘residual wage inequality’ trend is related to manufacturing decline and the influx of low-skilled immigrants. There is a vast literature arguing that technological change, international trade, and institutional factors have played a significant role in the inequality trend. However, most of the trend is unexplained by observable factors. This paper attempts to ‘explain’ the growth in the unexplained variance of wages by exploiting variation across locations (states or cities) in the United States in the local level of ‘residual inequality.’ The evidence shows that a shrinking manufacturing sector increases inequality. In addition, an influx of low-skilled immigrants increases inequality, but this effect is concentrated in areas with a steeper manufacturing decline. Similar results are found for two alternative measures linked to increasing inequality: the increasing return to education and the decline in the employment rate of non-college men. The overall evidence suggests that the manufacturing and immigration trends have hollowed-out the overall demand for middle-skilled workers in all sectors, while increasing the supply of workers in lower skilled jobs. Both phenomena are producing downward pressure on the relative wages of workers at the low end of the income distribution.

Walmart Web: How the World’s Biggest Corporation Secretly Uses Tax Havens to Dodge Taxes

Source: Frank Clemente, Marc Auerbach, Americans for Tax Fairness, June 2015

From the summary:
A groundbreaking report reveals that Walmart has built a vast, undisclosed network of 78 subsidiaries and branches in 15 overseas tax havens, which may be used to minimize foreign taxes where it has retail operations and to avoid U.S. tax on those foreign earnings. These secretive subsidiaries have never been subject to public scrutiny before. They have remained largely invisible, in part because Walmart fails to list them in its annual 10-K filings with the U.S. Securities and Exchange Commission (SEC). Walmart’s preferred tax haven is Luxembourg, dubbed a “magical fairyland” for corporations looking to shelter profits from taxation. The report, The Walmart Web: How the World’s Biggest Corporation Secretly Uses Tax Havens to Dodge Taxes, is the first-ever comprehensive documentation of the company’s use of tax havens. …
• Walmart has established a vast and relatively new web of subsidiaries in tax havens, while avoiding public disclosure of these subsidiaries. ….
• Luxembourg, dubbed a “magical fairyland” by one tax expert because of its ability to shelter profits from taxation, has become Walmart’s tax haven of choice. ….
• Walmart has made tax havens central to its growing International division, which accounts for about one-third of the company’s annual profits. ….
• There is evidence that Walmart uses its subsidiaries in tax havens to pursue well-known international tax-avoidance strategies: ….
• Walmart appears to be playing a long game – from tax deferral to profit windfall. ….
• U.S. and foreign authorities should investigate Walmart’s tax avoidance. ….

Walmart has 78 subsidiaries and branches and $76 billion in assets in 15 offshore tax havens, and zero stores.

chart of Walmart stores & subsidiaries

Key Findings
Press Release
Sharable Graphics

“Whoever Raises their Head Suffers the Most” – Workers’ Rights in Bangladesh’s Garment Factories

Source: Human Rights Watch, April 22, 2015

From the summary:
This 78-page report is based on interviews with more than 160 workers from 44 factories, most of them making garments for retail companies in North America, Europe, and Australia. Workers report violations including physical assault, verbal abuse – sometimes of a sexual nature – forced overtime, denial of paid maternity leave, and failure to pay wages and bonuses on time or in full. Despite recent labor law reforms, many workers who try to form unions to address such abuses face threats, intimidation, dismissal, and sometimes physical assault at the hands of factory management or hired third parties.
Press Release

Symposium Issue – Reimagining Labor Law

Source: UC Irvine Law Review, Volume 4: Issue No. 2, May 2014

Articles include:
Reimagining Collective Rights in the Workplace
Catherine L. Fisk
…. A group of eminent and rising scholars were invited to address fundamental questions: What are the alternatives to the Wagner Act model of majority unions, workplace collective bargaining, and the current regime of social welfare provision on which it depends? What institutional structures could be created to provide dignity, opportunity, and protection to work? Rather than focusing on the current regime, the authors were challenged to explore alternatives and not to take anything for granted, including the existing divisions between or structures of labor law and employment law.

The articles explore a variety of alternative legal and social regimes based in existing practice in the United States—including the hybrid union-community worker organizations like Our Walmart and Fast Food Forward, sector-based worker groups like the National Day Laborer Organizing Network, Occupy initiatives, workers’ centers, national progressive organizations like the National Employment Law Project, and community organizations like the Asian Pacific American Legal Center. Some are based on comparative studies, examining possibilities of creating in the United States institutional structures that show promise elsewhere in the world. Some generalize from careful studies of particular campaigns or organizations, with an eye toward scaling up successful efforts. Some examine different legal regimes—the First Amendment freedom of assembly clause, for example—and some examine different forms of representation and institutional structures, including worker centers. Some explore feasible legal strategies to address the marginalization of unauthorized migrant workers. Others propose legal reforms to invigorate private membership organizations that protect the interests of people at work, such as by reducing restrictions on the collection of voluntary political contributions through payroll deduction and liberating unions from some of the restrictions imposed by state right-to-work legislation. …

….The articles in this symposium collectively argue three important propositions. First, collective activism will be crucial to any revitalization of labor. Labor law reform should aspire to enable the organizing that is essential to effective collective activism. Each of the papers proposes a different way that law can either facilitate such organizing and activism or avoid thwarting it. Second, and related, institutional design matters a great deal to whether worker activism will occur and, if it does occur, whether it will be effective in improving working conditions. Third, legal rules should be crafted to facilitate collective worker action by making worker collectives sustainable and scalable institutions; by giving them crucial roles in existing legal regimes to empower worker voice in many important legal and political forums; by leveraging power at the local, state, and national level; and by thwarting efforts to use legal doctrines like preemption or legal bureaucracies like criminal justice to eviscerate organizing gains.

The third step of the argument is where the authors strike out on four different but intersecting paths. The paths are: (1) empowering collectives, especially at the local level; (2) creating mechanisms to enhance leverage through local, national, and international frameworks; (3) improving access to information to enhance worker power; and (4) strengthening the institutional power of unions by protecting the ability of unions and worker collectives to fund their operations. The first two of these offer macro perspectives on how law facilitates and thwarts worker activism. The third and fourth examine the ways that law creates (or destroys) the institutional frameworks that empower workers to act collectively in organizing, in negotiating and administering agreements over conditions of employment, and in political action. ….

Latin America’s “Third Left” Meets the U.S. Workplace: A Promising Direction for Worker Protection?
Chris Tilly & Marie Kennedy

Beyond Unions, Notwithstanding Labor Law

Marion Crain & Ken Matheny

Not Dead Yet: Preserving Labor Law Strengths While Exploring New Labor Law Strategies
Lance Compa

Riding the Wave: Uplifting Labor Organizations Through Immigration Reform
Jayesh M. Rathod

Policing Wage Theft in the Day Labor Market
Stephen Lee

Productive Unionism
Matthew Dimick

Organizing with International Framework Agreements: An Exploratory Study
César F. Rosado Marzán

Extending the Case for Workplace Transparency to Information About Pay
Cynthia Estlund

Automatic Elections
Michael M. Oswalt

Restoring Equity in Right-to-Work Law
Catherine L. Fisk & Benjamin I. Sachs

Paycheck Protection or Paycheck Deception? When Government “Subsidies” Silence Political Speech
Brian Olney

Labor in the Twenty-First Century: The Top 0.1% and the Disappearing Middle-Class

Source: William Lazonick, Institute for New Economic Thinking Working Paper Series No. 4, February 1, 2015

From the abstract:
The ongoing explosion of the incomes of the richest households and the erosion of middle-class employment opportunities for most of the rest have become integrally related in the now-normal operation of the U.S. economy. Since the beginning of the 1980s, employment relations in U.S. industrial corporations have undergone three major structural changes – summarized as “rationalization,” “marketization,” and “globalization” – that have permanently eliminated middle-class jobs in the United States. From the early 1980s, rationalization, characterized by plant closings, terminated the jobs of high-school educated blue-collar workers, most of them well-paid union members. From the early 1990s, marketization, characterized by the end of a career with one company as an employment norm, placed the job security of middle-aged white- collar workers, many of them college educated, in jeopardy. From the early 2000s, globalization, characterized by the movement of employment offshore to lower-wage nations, left all members of the U.S. labor force, whatever their educational credentials and work experience, vulnerable to displacement. Initially, these structural changes in employment could be justified as business responses to changes in technologies, markets, and competitors. Once U.S. corporations transformed their employment relations, however, they often pursued rationalization, marketization, and globalization to cut current costs rather than to reposition themselves to produce competitive products. Defining superior corporate performance as ever-higher quarterly earnings per share, companies turned to massive stock repurchases to “manage” their own corporations’ stock prices. Trillions of dollars that could have been spent on innovation and job creation in the U.S. economy over the past three decades have instead been used to buy back stock for the purpose of manipulating stock prices. Legitimizing this financialized mode of corporate resource allocation has been the ideology, itself a product of the 1980s and 1990s, that a business corporation should be run to “maximize shareholder value.” Through their stock options and stock awards, corporate executives who make these resource-allocation decisions are themselves prime beneficiaries of the focus on rising stock prices as the sole measure of corporate performance. While rationalization, marketization, and globalization undermined stable and remunerative employment structures, the “financialization” of the U.S. corporation entailed the distribution of corporate cash to shareholders through stock repurchases, often in addition to generous cash dividends, and, incentivizing these distributions, the stock-based remuneration of top corporate executives. In this essay, I review evidence on the fundamental structural changes related to rationalization, marketization, and globalization that, since the early 1980s, have eroded U.S. middle-class employment opportunities. Then, I analyze how, in many different ways and in many different industries, the financialized mode of corporate resource allocation has undermined the prosperity of the U.S. economy. I go on to show how justified by the ideology that companies should be run to “maximize shareholder value,” this financialized behavior boosts the remuneration of top corporate executives, providing a major explanation for the increasing concentration of income among the top 0.1% of U.S. households that is, through the very way it is achieved, based on the systematic destruction of middle-class employment opportunities available to members of the U.S. labor force.

Why are American Workers Getting Poorer? China, Trade and Offshoring

Source: Avraham Ebenstein, Ann E. Harrison, Margaret McMillan, National Bureau of Economic Research (NBER), NBER Working Paper No. w21027, March 2015
(subscription required)

From the abstract:
We suggest that the impact of globalization on wages has been missed because its effects must be captured by analyzing occupational exposure to globalization. In this paper, we extend our previous work to include recent years (2003-2008), a period of increasing import penetration, China’s entry into the WTO, and growing US multinational employment abroad. We find significant effects of globalization, with offshoring to low wage countries and imports both associated with wage declines for US workers. We present evidence that globalization has led to the reallocation of workers away from high wage manufacturing jobs into other sectors and other occupations, with large declines in wages among workers who switch, explaining the large differences between industry and occupational analyses. While other research has focused primarily on China’s trade, we find that offshoring to China has also contributed to wage declines among US workers. However, the role of trade is quantitatively much more important. We also explore the impact of trade and offshoring on labor force participation rates. While offshoring to China has a negative impact on US labor force participation, other factors such as increasing computer use and substitution of capital for labor are significantly more important determinants of US employment rates across occupations.

Globalization and Protest Expansion

Source: Kyle Dodson, Social Problems, Volume 62 Issue 1, First published online: 18 March 2015
(subscription required)

From the abstract:
Evidence of protest expansion both in the United States and abroad has stimulated theoretical discussion of a “movement society,” with some arguing that protest activities are becoming a standard feature of democratic politics. In advancing this claim, many have highlighted the role of domestic factors—for example, generational change or economic affluence—without fully accounting for the possibility that international dynamics may play an important role as well. The lack of work is surprising not only because the trend in protest is international in scope, but also because work in comparative sociology suggests globalization may make an important contribution. This study addresses the empirical gap by examining how political globalization (as measured by memberships in international organizations) and economic globalization (as measured by trade activity and foreign investment) influence trends in protest participation. Using data from World Values Surveys of 37,716 respondents in 17 advanced democracies merged with data on several national and international indicators, this study examines how the probability of participating in protest has changed over time as a result of these two forms of globalization. The results of multivariate, multilevel analysis combined with simulations indicate that trends in political globalization have expanded protest activity, while trends in economic globalization have limited that expansion. These results suggest that social movement scholarship should continue to examine the implications of globalization for protest behavior and other social movement dynamics.

Paying Taxes 2015

Source: PricewaterhouseCoopers (PwC), the World Bank and International, Finance Corporation, 2014

From the summary:
Globalisation, technological change, shifting demographic patterns and the persistent challenges that continue around climate change and the environment all have a significant impact on fiscal policy and the associated tax systems. Against this backdrop, this year the Organisation for Economic Co-operation and Development (OECD) has put forward proposals for changing the international tax rules to modernise them for today’s globalised business and to address concerns over base erosion and profit shifting (BEPS).

Alongside all of these circumstances however there are two simple, mutually supportive objectives for governments:
– ensure that there are sufficient public revenues for the future, to lay a foundation for sustained improvements in productivity;
– incentivise investment and economic growth.

Paying Taxes 2015 remains a unique study. It is the only piece of research which measures the ease of paying taxes across 189 economies by assessing the time required for a case study company to: prepare, file and pay its taxes, the number of taxes that it has to pay, the method of that payment and the total tax liability as a percentage of its commercial profits. The results illustrate both successful tax reforms and reform challenges as well as providing a platform for government and business to engage in constructive discussion around tax reform across a broader range of issues.

The objectives of the study are to:
– compare tax systems on a like-for-like basis;
– facilitate the benchmarking of tax systems within relevant economic and geographical groupings, which provides an opportunity to learn from peer group economies;
– analyse data and identify good tax practises and reforms;
– generate robust tax data on 189 economies around the world, including how they have changed, which can be used to inform tax policy decisions.

This year there have been some amendments to the methodology used to derive the Paying Taxes sub-indicators and ranking. These have come as a response to calls for the data to remain current, to take into account the potential for differences in the tax system across the larger economies in the study, and to more closely reflect the improvements that are made when implementing reform.