Labour capacity in global subcontracting chains: Evidence from a construction MNC

In an increasingly globalised economy, the construction industry is distinctive in many ways. Whilst labour, materials and services are relatively mobile, the site of production is, by definition, fixed. With this constraint, global competitiveness has been particularly reliant on subcontracting, with resultant pressures on employment conditions and on trade union organising. At the same time, there are also includes cases where International Framework Agreements (IFAs) have been negotiated explicitly to address these problems. These IFAs (particularly in the domain of the Building and Wood Workers’ International, BWI) often contain very strong provisions with regard to compliance with core labour standards and, specifically commit construction multinationals to enforcing compliance in the subcontracting chain. However, in the context of ever-changing configurations of subcontractors, the test of these agreements must be their success in promoting a sustainable local organisation that outlasts individual projects. This paper uses an international comparison of practices in Hochtief, a German MNC, in order to evaluate the use and effectiveness of framework agreements at the national and local level. The case studies are based on an analysis of the IFAs and CSR policies, interviews with management and global union officers in charge of the implementation/coordination of monitoring, as well as interviews with trade union officers in construction unions in Brazil, Canada, Malaysia and Ukraine. It is these latter interviews that provide first valuable insights into the use and impact of IFAs in MNCs’ subsidiaries and subcontractors in host countries. The paper is organised as follows. A first section introduces the particular challenges for the social regulation in the industry (complex subcontracting networks and the use of informal labour). Then we outline the structure and operations of Hochtief and the place of the IFA within this. The following section provides a synthetic discussion of the national and local case studies. Here, particular emphasis is given a) to implementation and monitoring procedures, b) how grievances are resolved (whether they are resolved with reference to the IFA) and c) to what extent the IFA has opened up a space for trade union organising. The key concern is with the way trade unions in subcontracting chains are drawn into the remit of the lead MNC’s industrial relations. A concluding section will discuss the findings of the case studies from an analytic point under the above headings. The construction industry has not escaped the pressures of globalisation (e.g. ILO 2001a; EMCC 2005; Ofori 2003), however, it can be argued that the local and project-based character of construction - as opposed to the relative mobility of labour, materials and services – structured the impact of global markets in different ways than those observed in other industries. While similarities might be found in other service industries, the construction industry has globalised in a particularly selective way. Multinational enterprises (MNEs) have built on technological strengths in large-scale, high-end building and increasingly focussed on competitive advantages in project management and financing. While all projects are obviously subject to locally specific regulations and involve numerous companies in tiered subcontracting chains, particularly in the lower-ed of the value chain, another aspect that has globalised in a significant way is labour. Over the last three to four decades the construction industry has become a major employer of migrant labour, overwhelmingly in informal employment. At various points in the 1990s, informal employment in construction in countries such as Brazil, India, Malaysia was put between 75-95 percent (Wells 2008; ILO 2001a). Equally, within the European Union the practice of subcontracting to companies based in countries with lower wages and weaker labour regulations who then ‘post’ their workers to sites across the continent (e.g. Lillie and Greer 2007), has led to significant labour migration in the sector as well as pressure on existing social and labour standards. Against the background of the internationalisation of the market for construction materials and services, a number of MNEs have become a terrain for union efforts to establish transnational coordination networks, organise workers in those MNEs’ subsidiaries and subcontractors, and establish social standards that address key problems within the sector. In this vein of strategies the Building and Wood Workers’ International (BWI) has reached a number of International Framework Agreements (IFAs) with MNEs in the construction sector, focussing on the core labour standards embodied in the ILO’s 1998 Declaration of Fundamental Rights at Work as well as a range of industry-specific Conventions. These agreements often contain very strong provisions with regard to compliance with core labour standards and specifically commit construction multinationals to enforcing compliance in the subcontracting chain. In this respect, IFAs in the construction industry, particularly in the context of highly fragmented inter-firm and employment contracts, constitute a good example to discuss global and national union strategies to organise and protect fundamental social and labour rights. The global restructuring of the sector and its labour markets is intricately based on the changing national and global political economies which have been analysed, amongst others, in the literatures on societal effects, business systems (Whitely), varieties of capitalism (Hall and Soskice) or under the system, society and dominance effects (Smith). There has been less discussion, however, on the implications of these developments on labour’s capacities and strategies to defend labour rights across company and national boundaries (Anner et al 2006…). For example, in the context of ever-changing configurations of subcontractors, of varying national regulatory frameworks of the employment relationship and trade union governance, as well as major differences in local labour regimes (Castree et al), important questions are raised as to how social standards can be implemented and protected along value chains. Going beyond the question of securing labour rights in subcontracting chains, a second crucial issue arises with regard to the sustainability of any advances made The project-based nature of construction in particular carries the threat that work in the areas of core labour standards, trade union organising, or corporate social responsibility takes on a Sisyphus-type character once the contract is finished and the parties involved move on. This set of questions concerns both the strategies and capabilities of trade unions and enterprises, at the global as well as local levels, in the formal as well as informal economy.