Workers influence production through skills and collective action, while firms and states shape their opportunities and bargaining position.
Labour affects location through wages, skills, productivity, reliability and availability. Productivity is output per worker or hour. A higher wage can be offset by greater productivity, lower error rates or specialised expertise. Different functions therefore seek different labour characteristics.
Workers may organise through labour unions. Collective bargaining brings workers together to negotiate pay, hours or conditions. Industrial action and public campaigns can raise costs for firms or press governments to change policy. Influence is stronger when workers are difficult to replace, well organised and legally able to bargain.
States shape labour through education, migration rules, minimum standards, social protection and rules governing organisation and bargaining. These can strengthen workers' capabilities and protection, or restrict their options. Enforcement and access to complaints matter as much as written rights.
TNC decisions also shape labour. New investment can create jobs and training, while automation, relocation or pressure on supplier prices can reduce employment or intensify work. A lead firm's deadline can affect workers employed by a separate supplier. Labour, states and firms therefore influence one another, with unequal power and changing alternatives.
Step by step
Compare total labour cost
Relate wages to productivity, quality and the skills a function requires.
Explain collective influence
Show how bargaining or action can change firm or state decisions.
Trace the response
Assess how regulation, automation or relocation changes workers' opportunities.
Worked example: Wages versus output
In an invented comparison, a worker costs $100 a day and produces 50 acceptable units in A, while a worker costs $150 and produces 100 in B. Labour cost per acceptable unit is $2 in A and $1.50 in B. Other costs and working conditions still matter, but B's higher wage is not automatically a disadvantage.
Watch out for this
The lowest wage always gives the lowest production cost.
Compare output, quality, skills and other costs. Wage per worker and cost per acceptable unit are different measures.
Check your understanding
A supplier union wins safer hours after collective bargaining. Which mechanism is shown?
- Workers have no influence because the buyer is a TNC.
- Workers acting together can influence employment conditions, within their bargaining context.
- The state and lead firm can no longer affect those workers.