Tag Archives: labour rights

Работнички права

Regular assembly: Labour rights in a neoliberal and post-socialist Macedonia

Along with the explicit, even if only declarative, commitment to transition to a democratic society, all governments since the independence have been unconditional promoters of market economy and neoliberalism. This, inter alia, significantly redefined labour rights. Between the socialist legacy, the poorly implemented privatisations, the labour unions’ partisanship, the neoliberal legal reforms, and the populist rhetoric, the Macedonian worker has been put in a specifically precarious position. It is for this reason that this assembly brings four analyses of the state of labour rights in the Republic of Macedonia:

 

photo: Radio Free Europe

Is crisis our new order?

Part of the virtual assembly “Labour rights in a neoliberal and post-socialist Macedonia” Author: Aleksandar Dimitrovski

Neoliberalism arrived in Macedonia as the answer to the debt crisis that shattered the Yugoslav economy in the eighties. Roughly, its ideal aim is the liberation of individual entrepreneurial potentials by mediating all forms of human relations through the market where the only function of the state is to create and maintain the institutional framework that safeguards the system (e.g. courts, police, stable currency). The economic stagflation of Yugoslavia was interpreted precisely as a consequence of the absence of such a framework: backed by the state, the system of social ownership and self-management gave workers too many “rights” and too much power to increase wages beyond their market value, thus reducing the overall efficiency of the economy.  The ensuing shift to “privatization, marketization and democratization” was meant to secure, in Jeffrey Sachs’ words, a “recovery of human freedom and a democratically based rise in living standards.”

In reality, this turned out to be a smokescreen for an all out assault on labour. After ten years of reform, the number of employees in industry dropped from 470,000 in 1990 to 221,000 in 2000. Unemployment in 1999 stood at a whopping 47 percent. Workers lost not only their jobs and legal rights but their social status. In the new order, the former “vanguard” of the socialist economy suddenly became a social burden.

The question that imposes itself is how could this have been made possible in a context where people were finally living in a democracy where they could supposedly decide their own fates? David Harvey says that for a shift of such magnitude to take place in (relatively) democratic conditions it must be preceded by the prior construction of consent among the population. Neoliberalism must be infiltrated (for example through the media, the educational system and political propaganda) as a new kind of common sense way in which we experience the world.

Yet what is immediately apparent is that in spite of over two decades of neoliberal remedies to the ills of socialism the basic premise of the neoliberal idea has never been a matter of consensus in Macedonia outside the narrow circles of governing elites. If there is any consensus among workеrs it is that the economy is there to serve the needs of the people rather than the other way around. Exploitation and inequality are everyday topics to the extent that wealth accumulation is itself seen as a reflexion of moral decrepitude and the state is called upon to offer protection from markets rather than for markets.

How then, in the face of such popular refusal to accept the basic tenets of the neoliberal creed, does the system reproduce itself? Not through the manufacturing of consensus, but through the continuous production of disorder, crisis and insecurity that disable collective action. Factory workers are constantly bombarded with daily reminders about the fragility of their industry, the difficulty of securing regular orders, or the threat of capital flights to competing labour markets; the possibility to employ workers on temporary three-month contracts for up to five years increases their vulnerability; consumer credits cement people’s dependency on a regular income; well meaning union activists fear that union interference might cause more harm to individual workers than score benefits etc.

When the roads to collective action are blockaded workers are gradually co-opted into pursuing individual strategies for improving their position (e.g. getting “connections” or migration). The cumulative effects of such practices foster a culture of individualism, self interest, mistrust and the destruction of the horizontal bonds of mutual support that are the basis of any form of collective action.

In short, the question of “workers’ rights” is not purely legal but pervades all social spheres and involves the peripheral position of Macedonian workers in the global division of labour. It is a context wherein all alternatives appear impossible and political creativity is buried. But perhaps we can revive it if we start from the realization that the crisis is not a transitional phase that we can patiently outwait. The crisis is not an epiphenomenon but a set of coercive mechanisms that maintain the system. In other words, we’ve already walked our neoliberal road and it has led most of us to the periphery of cheap labour. From here on there lies only more of the same. We can either change direction, or seize the power to make roads.

Hard work, low wages and post-socialist nostalgia: A view of the Macedonian garment industry

Part of the virtual assembly “Labour rights in a neoliberal and post-socialist Macedonia” Author: Chiara Bonfiglioli

Textile production was an important industrial sector in socialist Yugoslavia, reaching up to 12% of total manufacturing in the 1970s. Textile factories spread from bigger cities to smaller towns since the early 1950s, and they employed thousands of workers, women for the majority. The break-up of Yugoslavia, the collapse of the Yugoslav and Soviet markets in the 1990s and global competition from Asian countries in the early 2000s have been major challenges for the South Eastern European garment industry. While the number of employees in textile greatly dropped in Croatia, Slovenia and Bosnia-Herzegovina (now employing around 20.000 workers each), Serbia and Macedonia managed to maintain some of their garment production. The garment industry employs around 30.000 workers in Serbia and around 40.000 in Macedonia.

In Macedonia, in particular, private companies acquired some of the assets of state-managed factories, and continued to produce for export, through the system named Outward Processing Trade (OPT), or, as it is commonly known in the region, lohn. This system existed in Yugoslavia during the 1970s and 1980s, but it became much more widespread in the last two decades in post-Yugoslav states, since local firms ceased to create their own collections and became increasingly dependent on external orders. Today Western fashion brands are delocalizing the most labor-intensive phases of production to countries where labor costs are lower, as in the case of Macedonia. The materials are sent to Macedonia, cut and sewn into garments by local workers, and shipped back to the clients in Western Europe. Western clients can benefit from the local highly experienced work force, from low prices, and from the geographical closeness of the country, which means that clothes can be ordered and obtained very quickly, according to the changing needs of Western fashion. As advertised by the official website Invest in Macedonia, one of the competitive advantages of the local textile industry is “high flexibility and readiness to adapt to the demands of foreign markets.”

What this means, however, is that workers are pressured by local factory owners to work very hard and at a very fast pace to meet the demands of Western clients. In order for local firms to keep up with the competition from the rest of Eastern Europe and Asia, moreover, production costs must be kept very low. This results in many Macedonian workers being paid around 150 -200 euros for working days of 12 hours, depending on their position and qualification. Different organizations such as the Clean Clothes Campaign and the Fair Wear Foundation have reported violations of workers’ rights in Macedonian textile factories. These reports have underlined that workers receive “poverty wages” that are 19% of a living wage, so that many of them have to simultaneously engage in subsistence agriculture. Overtime work is common, with Saturdays as “normal” working days. Many factories also lack health and safety regulations. Precarious contracts are widespread and trade union participation is extremely low, around 9%.  In many places, such as Štip, garment work is one of the few available options, especially for women. Workers have a limited bargaining power in a country where the unemployment rate has been over 30% for the last twenty years.

If we compare textile workers’ status during socialist times with their present condition, it becomes clear that workers have lost many labor rights and that their purchasing power has dropped. Workers have also lost a number of social services that were guaranteed by their factory for free or at subsidized prices, such as healthcare services, a canteen, the possibility to take credits from the factory’s common fund, childcare facilities and summer resorts. Post-socialist nostalgia, therefore, is widespread in the garment industry. Remembering a different, more secure past, when they had had a better social status, is another way for workers to cope with the hard work and low wages of the present.

Labour rights from the point of view of a fetishist

Part of the virtual assembly “Labour rights in a neoliberal and post-socialist Macedonia” Author: Branimir Jovanovic

For a minute, I’ll pretend to be a narrow-minded macroeconomist, who cares only for GDP. A GDP fetishist, as Joseph Stiglitz would put it. Why should I care for labour rights then?

Labour rights affect the bargaining process between employees and employers. Lower rights raise the bargaining power of the employers. This means that bigger share of the new income will end up in their hands. How will this affect GDP afterwards depends on the multiplier effect, which itself depends on the marginal propensity to spend, i.e. on the share of the new income that is spent. If marginal propensity to spend is higher, so will be GDP growth. Economists usually think that the propensity to spend decreases as income grows (simply put, there are fewer things to spend the money on). Employers usually have higher income than workers. Therefore, lower labour rights may hamper GDP growth, because they make more money end up in the hands of the employers (capital owners), who tend to spend less and save more.

This refers to the short run only. There may be other, longer-term effects, too. For instance, through income inequality. Since lower labour rights redistribute income from workers to capital owners, and since the latter tend to be richer, lower labour rights increase income inequality. Higher inequality is believed to reduce growth in the medium to long run.

What does the Macedonian evidence say about this? Since 2005, there is a downward trend in labour rights in Macedonia. According to the Economic Freedom of the World report, the labour market regulation index in Macedonia rose from 5.9 in 2005 (same as Austria) to 7.6 in 2012 (same as Singapore). This is a significant worsening in the regulation, i.e. labour rights. In accord with the redistribution argument, during this period there is a notable increase in the income of the rich and only minor increase in the income of the others – real income of the top 1% income earners rose nearly threefold between 2005 and 2010, while income of the remaining 99% increased only 11%. In accordance with the argument about the low marginal propensity to spend of the rich, this period is marked with increased savings, but also with an increase in the “passive money”, i.e. money which end up in central bank bills instead of in credits. The stock of central bank bills in 2005 was around 3% of GDP (9 billion denars), while in 2012 it reached 6% of GDP (26 billion denars). Income inequality rose during this period, too – the top 1% income share was around 5% in 2005, to reach 12% in 2010. Finally, all these developments are associated with a slowdown in the GDP growth – real GDP per capita grew by 4.4% per annum during 2003-2007 (when the labour regulations index was 6.1 on average) and only 1.7% per annum during 2008-2013 (when the labour regulations index was 7.8 on average). Findings remain unchanged even when growth is observed in relation to the world GDP, or 2009 is excluded (because of the crisis), or 2007 is included in the second sub-period. Needless to say, these are just stylised facts, based on simple correlations, but in my opinion, they are indicative enough.

But, if I leave the role of a GDP fetishist and return to my true self, the answer to the above question would be much simpler – labour rights are important because they prevent serfdom.

 

* The views expressed here are those of the author and do not have to represent the views of the institutions with which he is affiliated.

Neoliberalism: A rat race to the bottom

Part of the virtual assembly “Labour rights in a neoliberal and post-socialist Macedonia” Author: Goran Lazarevski

One of the chief aims of the neoliberal-inspired transition to a free market economy was the deregulation of the labour market. In order to achieve this ideal a large number of labour rights and protections, formerly granted under socialism, were stripped away, unions were suppressed, minimum wage laws repealed (for an in-depth analysis of this process, see the excellent study by Lenka, “Devaluation of labour”). Decades later, the results are disenfranchised workers, laid-off workers and workers earning subsistence wages. Even the ideologues of this transition agree that large costs in human suffering were sustained, but they claim these were necessary in order to achieve competitiveness with the rest of the world. What this competitiveness means in practice is actually a rat race to the bottom, where the countries of the world compete among themselves which one would offer more precarious labour conditions and lower wages in order to attract foreign investors to build manufacturing plants. Thus, our government’s commitment to attracting FDI is an ideological commitment to participate in this race to the bottom, which is why we see the emergence of so called “free economic zones” – areas with taxes plummeting to 0% and wages also glued to the bottom.

The neoliberal globalisation project, however, had a self-defeating flaw in its very design, and that is the problem of generating aggregate demand that Keynes predicted long ago. If the developing world’s vast population is forced to slave away in factories for extremely low wages, then who will buy all those fancy products that these factories are supposed to produce? The answer was, of course, the Western (primarily US) consumer, so this consumer was encouraged to spend money (s)he did not have in order to keep the global economy going. These free-flowing “easy” money in turn helped produce the housing bubble which eventually collapsed and thus we are in the mess where we are today.

Unless sufficient internal demand is generated in major markets in the developing world, global imbalances, instability and economic stagnation are but guaranteed to persist in the future. But for this to happen, it is crucial for all countries to give up the rat race, i.e. strengthen their unions and introduce generous minimum wage laws that will guarantee their workers decent wages and thus purchasing power to sustain that domestic demand. The EU is in a unique position to pursue this agenda due to the ability to enact legislation to coordinate such pro-labour policies among all its member-states, reducing the credibility of the threat by investors to flee a market with stronger labour protection. So far the EU has been successful at this strategy to a certain degree, hence no surprise that standards of living in Europe are on par with those in the US.

It should be the economic imperative of all European countries to get under this labour rights umbrella and protect their workers from exploitation from multinationals, and thereby generate domestic demand and spur economic activity. But first we need their leaders to forget about their ideological commitment to the neoliberal mantra: “low taxes, low wages, and attract FDI”, and we need them to start focusing on developing the productive and purchasing potentials of their own economies.

In the particular case of Macedonia, these recommendations need to be tempered somewhat due to the country’s extremely high unemployment rate. In this sense, a flexible labour market is crucial for incentivising employment, however the central point remains – eliminating the minimum wage and weakening the labour unions has not brought the country any closer to prosperity. On the contrary, poverty and inequality have soared since its independence like never before in history. That is why the minimum wage raise expected to take place in 2014-2016 is most welcome and further steps in this direction should be encouraged. Additionally, strong and independent from political interference labour unions are a necessary partner in an economically prosperous society, and not a drag to the economy as they are usually viewed by our ruling elites.