ABSTRACT

Wage dumping and precarious work within automotive value chains Outsourcing can be motivated by considerations linked to product quality, management capacities and human resource management (Flecker et al., 2007), but most often it is used by employers as a cost-cutting instrument in the face of intensifying competitive pressures. The evidence from the InCAValC project largely confirms the cost-cutting motivation behind outsourcing practices. In all six regions examined in the project, there is a systematic disparity between the

OEMs and their supply and subcontracting companies in terms of the extent of employee rights and the standard of employment conditions. A progressive deterioration of wages and working conditions may be observed along the subcontracting chain, as well as a proliferation of discriminatory practices related to gender, age and nationality. The delegation of certain tasks to external companies has often entailed the displacement of unionized workers on open-ended contracts by low-paid and unorganized labour. Atypical employment contracts and precarious work are being used increasingly by supplier companies, and the share of atypical jobs in these companies is markedly higher than in ‘core’ companies.1 In supplier firms, about 30 per cent of the total workforce may be considered precarious, whereas the share of such workers at ‘core’ company locations is nearly three times lower. Wage dumping is a common practice under these conditions. In Italy, for example, automotive suppliers using temporary workers hired them from specialized cooperatives whose workers performed exactly the same task as the supplier’s own employees on open-ended contracts, except that their wages were on average 25 to 30 per cent lower. Automotive suppliers belong not only to the metalworking industry but also to other sectors such as rubber, plastic and logistics. The share of precarious employment varies across these different sectors and is particularly high in manufacturing (27.6%), administration (20%) and warehouse activities (18%). In addition, there is a significant proportion of migrants (42%) and women (23.56%) among the atypical workers. The latter figure suggests that the increase in precarious employment in the automotive industry has an important gender dimension. The share of female workforce is particularly high in supplier companies, where the bulk of low-paid, insecure jobs are concentrated. This finding is symptomatic for structural problems related to the status of women in the labour market, in particular the close link between gender and job insecurity also observed in many other manufacturing sectors and services. The proliferation of precarious working conditions in supplier companies is encouraged by the procurement mechanism used by the OEMs to select their business partners. It is based on the lowest-bid award system, which forces the suppliers to adopt cost-reduction strategies that negatively affect the working conditions and wages of their employees. By shifting social costs and business risks on to supply companies, major automotive groups contribute to the spread of social dumping practices at the subcontractor level. Wage dumping used by service cooperatives in Italy, the proliferation of mini-jobs in Germany and the increasing reliance upon temporary agency workers in Poland may all be viewed as a consequence of OEMs’ approach to selecting their suppliers. The carmakers’ practice in this regard is similar to that of large French building firms described by Kahmann (Chapter 3, this volume), which outsource many construction tasks at price levels that cannot be met without violations of pay and employment regulations at lower levels of the supply chain.