Legal opinion: Two-tier system for migrant staff may stem offshoring trend in manufacturing

With staff from Europe’s newest members in the east heading west for work, while manufacturing continues to offshore work to the east, is it time to consider a formal two-tier system for migrant workers in Europe?

In the UK specifically, unions (and in many cases local management) in the manufacturing industries have failed to stem the gradual flow of jobs eastwards and protect the manufacturing base, with the number of staff employed in UK manufacturing having more than halved from about nine million in 1970 to four million today.

Losing game

Even where UK companies improve productivity by introducing efficiencies through greater mechanisation or by increasing working hours – allowed as a result of the 48-hour working week opt-out – manufacturing in the UK seems to be fighting a losing battle.

Newer, low-cost plants in Eastern Europe with closer access to significant growth markets, such as those in Russia, the Baltic states, Asia and the Indian subcontinent, are making it increasingly difficult to compete. And the seemingly ever-present threat of strikes or other industrial action continue to drive manufacturing business overseas rather than keep it on UK shores.

Alongside this trend, there has been an increase in reports of trafficking and a re-emergence of bonded labour – the BBC’s recent investigation in this area being just one example. Maintaining the current system will continue to push manufacturing production offshore, potentially driving down wages and the economic wellbeing across the whole of the European Union (EU), and creating an underclass of workers in the UK who will be open to abuse and deception.

But this is not just an issue for the UK.

A current battle taking place on the high seas brings the issue facing UK manufacturers to the European Court of Justice. The case, International¬†Transport Workers’ Federation v Viking Line ABP and another, concerns the Viking Line passenger and cargo ferry operating between Finland and Estonia.

The ferry sails under a Finnish flag with a predominantly Finnish crew. Viking wants to sail under an Estonian flag, enabling it to operate the same route with a predominantly Estonian crew employed on terms and conditions more favourable to Viking. Viking claims this will make it more competitive on the busy Helsinki-Talinn route, and that it should be protected by the EU Treaty’s commitment to the free movement of goods, persons, services and capital.

The unions want to safeguard the higher-paid Finnish jobs. They cite something also enshrined in EU law – the unions’ right to take industrial action to protect jobs, and the EU’s commitment to “a high level of social protection”, “raising the standard of living”, and to “economic and social cohesion”.

So what’s the answer?

Striking a balance

There are obvious and inherent dangers in a ‘two-tier’ workforce. However, for businesses such as Viking with staff in a number of EU countries, the option of transferring a controlled number of lower paid workers from one state to work alongside the higher paid workers could be appealing.

Such a scheme could only operate for a relatively short period, while wage rates were gradually equalised over, say, a one- or two-year period. During this time, alternative work could be sought for higher paid staff, or a social plan could be implemented to allow them to be re-trained.

Such a scheme may well be unpopular with employers, but it might strike the balance between the two sides in Viking. It could also help reduce the arguments for a wholesale relocation of industry simply to benefit from employing workers on more favourable terms and conditions.

At Viking, most, if not all, of the Finnish jobs could be lost if the business moves. This would undoubtedly be accompanied by widespread industrial action, not only by the unions involved, but also by sympathetic trade unions in other European countries.

While it is important to recognise that any new rules would have to involve a high level of safeguards for migrant staff, I believe this is a question that must be addressed if we are to maintain a UK manufacturing base. At the very least, a debate on this issue is long overdue.

By Julian Hemming, head of international employment law, Osborne Clarke


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