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17 September, 2001The ICT companies in the so-called new economy have presented themselves as job creators, but this reputation belongs to the past. The trade unions have to make considerable efforts to strengthen their bases in companies of the ICT sector.
BY ROBERT STEIERT
The past few years have been marked by a rapid reorganisation of our economy and society. New products, an ever-increasing penetration of all areas of life by electronic devices and the creation of information and communications networks on a global scale have had a growing impact on more and more sections of our economy and society. For years, the sector of information and communications technologies has experienced growth rates which exceeded those of the other industries to a considerable extent. The question is: Will this development continue like that? What kind of changes are still to be expected? How will unions and their activities be affected by this development?
WHAT IS COVERED BY ICT?
It is difficult to come up with an exact definition of this sector. ICT is no ordinary industry, at least it is not included as such in the official statistics. It is rather a sector of industry which is actually composed of several industries. Moreover, this sector does not only comprise sales, service and office activities, i.e. office staff, but also the production of goods.
According to a rather conservative definition, the ICT sector including production, marketing, sales and maintenance covers the following:
- office equipment,
- brown goods (radio, TV, picture tubes and the necessary electronic components), - telephones including accessories,
- devices for TV and radio transmissions,
- telephone networks (fixed and mobile telecommunications networks) including call centres,
- computers and the necessary hardware (peripheral devices, main boards, processors, memory chips etc.) as well as the development and distribution of computer software,
- computer networks.
A more comprehensive definition of ICT might also include any product which is mainly based on electronics, such as control and measuring equipment for cars, airplanes, etc.
Thus, ICT does not only cover the provision of services, as is often mistakenly assumed. ICT also comprises the "branch of production" where devices are being manufactured without which ICT services such as telephony or computer software would not be possible at all.
"HARDWARE PRODUCTION"
The proportion of such "hardware production" varies considerably from country to country. According to estimates, it accounts for 30%-40 % of this sector's national product on average. While this proportion is below 30% in the United States, it is considerably higher in countries like Taiwan, Malaysia, etc. An overview of the individual countries reveals a strong or weak presence in the individual segments of the ICT sector as well (see table 1). There is a similar difference regarding the proportion in the ICT sector's workforce compared to the total workforce of a country. While this proportion still reaches some 5% in EU countries (with Ireland accounting for 9.3%, for example), the percentage is much lower in Japan at 4.3% and in the USA at 3.7 (see table 2). To give an idea of the contribution of this sector to the gross domestic product (GDP) of the different countries is rather difficult as the statistics are not updated and seem to partly use a different definition for the sector. A table (see table 3)of the OECD states for 1996 that the ICT's value added to the GDP of the USA is 4.4%. This seems to have changed. Newer sources estimate a percentage of between 8%-10% for the U.S. and also higher figures for the other countries listed. But updated official statistics have not been available.
The production of ICT goods is concentrated in the industrial countries as well. With 29% and 25% respectively of this sector's products, the USA and Japan alone manufacture more than 50%. Another 27% is manufactured in other OECD countries, mainly in EU countries. A group of Asian newly industrialised countries, comprising Taiwan, Singapore, Hong Kong, Malaysia and Thailand, account for another 14%. The remaining 5% is distributed over a multitude of non-OECD countries.
A JOB CREATOR?
A lot of hope has been pinned on ICT companies. While the companies of the so-called "Old Economy" of the industrial countries have continuously reduced their workforce due to productivity gains, new production techniques and also to a relocation of production, the companies of the "New Economy" have presented themselves as job creators. These created jobs were considered more "creative", less strenuous in terms of physical exhaustion and better paid than in the "Old Economy". While the companies of the "Old Economy" were regarded as the dinosaurs of the industrial age, those of the "New Economy" were hailed as the "driving force" of a new age.
This did not only have an effect on the image of these companies but also on the way they were dealt with at the stock exchanges of the industrial countries. Investments in shares of "Old Economy" companies were considered to be outdated. Huge amounts of capital went into the companies of the "New Economy" and an incredible boom and run on the shares of these companies started. Almost each "start-up", i.e. each newly established company in this sector, went public as fast as possible and was rewarded with soaring share prices.
Even companies such as Amazon.com, which has not made profits for several years, reported share prices and thus a capitalisation which partly exceeded the capitalisation of large transnational companies of the "Old Economy" to a considerable extent, although their business activities were secured by production plants, premises, know-how etc. Between 1998 and 2000, some US$177 billion was invested in 1,155 start-ups listed on the Nasdaq, the U.S. stock exchange for companies of the New Economy.
A DRAMATIC CHANGE
Meanwhile, however, the situation has changed dramatically. A number of companies of the "Old Economy" have managed to gain a foothold in this sector by successfully diversifying and restructuring their business activities (see table 4), and these "old" TNCs have become an important player in this sector by developing initiatives of their own and acquiring other companies, whereas many so-called start-ups did not manage to live up to the market's expectations.
Since the stock exchange prices of listed companies in particular started to show a downward trend last year, share prices of a multitude of formerly praised and actively traded start-ups have collapsed. Price losses of more than 50% have been the rule, not the exception. Partly, these losses are so dramatic that stock exchanges in the USA and Germany set up rules to suspend companies whose share prices fell to under US$1 or €1 (euro) from trading. Even well-known companies such as Yahoo, Ebay, Amazon, AOL and others had to accept heavy stock price losses.
After having exceeded the limit of an incredible 5,000 points in March 2000, the U.S. technology stock exchange started to tumble. In March 2001, a remaining 1,929 points were registered, which is a minus of 62%. Prices of stock exchanges in other countries, such as the German Nemax and Dax, or the U.S. Dow Jones experienced a similar development.
In the one year during which the Nasdaq continued to drop sharply, US$3.5 trillion in securities vanished into thin air. 322 U.S. Internet firms (dot.coms) have disappeared, half of them this year alone.
A JOB KILLER
Meanwhile, the downturn on the stock market has had an impact on employment figures as well. Between January and March 2001, the Silicon Valley companies in the USA alone laid off at least 6,000 people. Following the slowdown in the U.S. and European economy, so-called profit warnings have been issued more and more often since May/June. With these warnings, the companies aim at "cautiously preparing" their shareholders for the fact that they will probably not come up to the expectations raised with ambitious business plans and forecasts from analysts. Instead, an increasing number of companies is announcing job cuts.
If only the companies which announce employment cuts of at least 1,000 (see table 5) were listed, these cuts would already amount to more than 300,000. When taking into account all the companies which plan to reduce their workforce by less than 1,000, the number of jobs which will be axed in the ICT sector might total 400,000 to 500,000.
This will not only destroy the reputation of these firms as being a generator of assets and wealth via the stock exchange, but their reputation of being a "job creator" will also belong to the past.
ICT AND THE UNIONS
Generally, it can be said that in most countries union membership in the ICT sector will probably be below the average of other industries.
On closer examination, however, this statement has to be reviewed. Depending on the proportion of employees as well as regional criteria, the situation might vary considerably.
In many countries with an average or above-average rate of union membership (i.e. more than 30%--35%), the average union membership in the section of hardware production, i.e. sections mainly comprising shopfloor workers, might at least equal the average union membership in the metalworking industry, with the exception of countries whose union membership is below average anyway (e.g. USA with a union membership of just about 10% in the private industry). Membership might be lower in the service sector, software development and in many start-ups where most or even all employees are probably office workers. This has a negative effect on union membership in this sector in general, where the majority of employees usually are office workers. At Siemens, for example, office staff accounts for 65% and shopfloor workers for merely 35% of the whole workforce.
In countries where the metalworking industry records a union membership below average, the new production facilities of the New Economy, which are often built on greenfield sites, might partly have an even lower membership. The USA will probably again be a typical example in this respect. None of the production sites of the well-known big players of the sector, such as IBM, Intel, Compaq, etc., is unionised, while the European subsidiaries of these TNCs have a union representation which is also accepted as a partner in collective bargaining negotiations.
These statements are of course only valid for countries without legal restrictions on unionisation. In free trade or export processing zones (EPZs), where unionisation is forbidden, or in countries, such as Malaysia, where the law provides for the workforce of the electronics industry only to be organised in company unions, not, however, in trade unions operating at national level, union membership usually tends towards zero.
In a survey among its affiliates, the IMF is currently trying to support these observations with facts and studies from the individual countries.
ACTIVITIES OF THE IMF
A number of affiliates of the International Metalworkers' Federation (IMF) have already members in the ICT sector, in particular in the section of hardware production. Some affiliates also have members among the office staff of ICT companies. Other unions, which have only office workers as members, are associated with another so-called international trade secretariat at global level, the Union Network International (UNI).
Taking into account the importance the ICT sector has in some countries and will have in the future, even though at lower growth rates than in the past, a number of IMF affiliates have already started initiatives to increase union membership and have drawn up programmes aimed at the needs of the workforce in the ICT sector.
The IMF has taken up these initiatives and developed approaches to promote and coordinate activities at international level. For this purpose, a task force has been set up and assigned the task of coming up with concrete proposals for projects on a global scale. The issue of union membership will definitely play a decisive role. Another important aspect will be the cooperation within TNCs, the development of a position on the industrial policy to adopt for the sector and the preparation and implementation of common standards regarding wage policy, working conditions, safety at work, etc. The task force is expected to present its first proposals by the end of 2001.
THE GOLD RUSH IS OVER
In the next few years, the information and communications technologies will remain well on course for further growth but will probably experience a lower growth rate than in the past. Some sections have seen a saturation of the market. The slowdown of the economy in many countries will cause investments to be shelved. This has already been announced by a number of companies which are planning to set up UMTS networks. Private consumption is facing a similar situation. The private consumer will probably not buy a new mobile phone, a new computer or other ICT products every year only because the companies have just launched a new model, a new processor, etc. on the market.
The workforce of this industrial sector is currently realising that ICT is no longer an industry that offers secure jobs. The announced job cuts of numerous companies speak for themselves. Furthermore, the "gold rush" at the stock exchanges of the new market will, for the time being, probably belong to the past. Investors will probably act with more caution and less euphoria. Many private investors might withdraw from this market for some time, not least because they have to consolidate their losses from the slump in share prices. There will definitely be new start-ups in the future as well. But they can no longer expect their share prices to rocket. This means that the amount of capital raised by means of going public will decrease, and thus funds available for investments.
Rationalisation and productivity gains in the hardware section will result in products being manufactured with a smaller workforce. It will take some time to compensate for the job losses in the software and service sector.
A BOOMERANG
The sudden collapse of many start-ups as well as the high share price losses of many companies of the New Economy have made the remuneration system of many companies obsolete. Payment with stock options, which was common practice in many companies, turned out to be a boomerang for many workers when share prices started plummeting. Therefore, many would meanwhile prefer a fixed wage resp. salary system where profit-sharing and stock options should be a supplement at most. This wish of having a collectively agreed salary structure is opening up a sphere of activity for the unions. Working hour schemes, safety at work and above all the issue of further training and qualification will be additional fields for union activities.
In the years to come, the unions will have to make considerable efforts to strengthen their bases in companies of the ICT sector. This will require a multitude of activities, from campaigns aimed at unionising workers in the companies to international initiatives in order to reduce the number of cases where government regulations limit the workers' right to unionise or deprive the workers of this right at all. Apart from initiatives with regard to the UN, ILO, WTO and the World Bank, this will certainly require projects promoting the adoption of a social clause in international trade agreements. The negotiation of a global code of conduct with transnational companies will be another field of international union activities.
A SOCIAL COMPONET IS NEEDED
It will be increasingly important for unions to intensify their cooperation at international level and to formulate and implement joint positions and policies. This will be the only way to reduce the number of cases where workers are played off against each other and where companies try, together with compliant governments, to adjust social conditions downwards. But this also means that the unions' fragmentation in this sector at international level has to be overcome and that the international trade secretariats (ITSs) have to develop closer ties with affiliates in this sector.
Globalisation -- even in the ICT sector -- may have positive effects on the world economy. This, however, requires a social component which has so far often been ignored. It is only now that politicians and industry start realising that globalisation without "social responsibility" may have the opposite effect and cause resistance in the populations of the various countries. That is why it is also the task of the unions to draw people's attention to this correlation so that the number of those who are prepared to take on social responsibility will be growing.
The past few years have been marked by a rapid reorganisation of our economy and society. New products, an ever-increasing penetration of all areas of life by electronic devices and the creation of information and communications networks on a global scale have had a growing impact on more and more sections of our economy and society. For years, the sector of information and communications technologies has experienced growth rates which exceeded those of the other industries to a considerable extent. The question is: Will this development continue like that? What kind of changes are still to be expected? How will unions and their activities be affected by this development?
WHAT IS COVERED BY ICT?
It is difficult to come up with an exact definition of this sector. ICT is no ordinary industry, at least it is not included as such in the official statistics. It is rather a sector of industry which is actually composed of several industries. Moreover, this sector does not only comprise sales, service and office activities, i.e. office staff, but also the production of goods.
According to a rather conservative definition, the ICT sector including production, marketing, sales and maintenance covers the following:
- office equipment,
- brown goods (radio, TV, picture tubes and the necessary electronic components), - telephones including accessories,
- devices for TV and radio transmissions,
- telephone networks (fixed and mobile telecommunications networks) including call centres,
- computers and the necessary hardware (peripheral devices, main boards, processors, memory chips etc.) as well as the development and distribution of computer software,
- computer networks.
A more comprehensive definition of ICT might also include any product which is mainly based on electronics, such as control and measuring equipment for cars, airplanes, etc.
Thus, ICT does not only cover the provision of services, as is often mistakenly assumed. ICT also comprises the "branch of production" where devices are being manufactured without which ICT services such as telephony or computer software would not be possible at all.
"HARDWARE PRODUCTION"
The proportion of such "hardware production" varies considerably from country to country. According to estimates, it accounts for 30%-40 % of this sector's national product on average. While this proportion is below 30% in the United States, it is considerably higher in countries like Taiwan, Malaysia, etc. An overview of the individual countries reveals a strong or weak presence in the individual segments of the ICT sector as well (see table 1). There is a similar difference regarding the proportion in the ICT sector's workforce compared to the total workforce of a country. While this proportion still reaches some 5% in EU countries (with Ireland accounting for 9.3%, for example), the percentage is much lower in Japan at 4.3% and in the USA at 3.7 (see table 2). To give an idea of the contribution of this sector to the gross domestic product (GDP) of the different countries is rather difficult as the statistics are not updated and seem to partly use a different definition for the sector. A table (see table 3)of the OECD states for 1996 that the ICT's value added to the GDP of the USA is 4.4%. This seems to have changed. Newer sources estimate a percentage of between 8%-10% for the U.S. and also higher figures for the other countries listed. But updated official statistics have not been available.
The production of ICT goods is concentrated in the industrial countries as well. With 29% and 25% respectively of this sector's products, the USA and Japan alone manufacture more than 50%. Another 27% is manufactured in other OECD countries, mainly in EU countries. A group of Asian newly industrialised countries, comprising Taiwan, Singapore, Hong Kong, Malaysia and Thailand, account for another 14%. The remaining 5% is distributed over a multitude of non-OECD countries.
A JOB CREATOR?
A lot of hope has been pinned on ICT companies. While the companies of the so-called "Old Economy" of the industrial countries have continuously reduced their workforce due to productivity gains, new production techniques and also to a relocation of production, the companies of the "New Economy" have presented themselves as job creators. These created jobs were considered more "creative", less strenuous in terms of physical exhaustion and better paid than in the "Old Economy". While the companies of the "Old Economy" were regarded as the dinosaurs of the industrial age, those of the "New Economy" were hailed as the "driving force" of a new age.
This did not only have an effect on the image of these companies but also on the way they were dealt with at the stock exchanges of the industrial countries. Investments in shares of "Old Economy" companies were considered to be outdated. Huge amounts of capital went into the companies of the "New Economy" and an incredible boom and run on the shares of these companies started. Almost each "start-up", i.e. each newly established company in this sector, went public as fast as possible and was rewarded with soaring share prices.
Even companies such as Amazon.com, which has not made profits for several years, reported share prices and thus a capitalisation which partly exceeded the capitalisation of large transnational companies of the "Old Economy" to a considerable extent, although their business activities were secured by production plants, premises, know-how etc. Between 1998 and 2000, some US$177 billion was invested in 1,155 start-ups listed on the Nasdaq, the U.S. stock exchange for companies of the New Economy.
A DRAMATIC CHANGE
Meanwhile, however, the situation has changed dramatically. A number of companies of the "Old Economy" have managed to gain a foothold in this sector by successfully diversifying and restructuring their business activities (see table 4), and these "old" TNCs have become an important player in this sector by developing initiatives of their own and acquiring other companies, whereas many so-called start-ups did not manage to live up to the market's expectations.
Since the stock exchange prices of listed companies in particular started to show a downward trend last year, share prices of a multitude of formerly praised and actively traded start-ups have collapsed. Price losses of more than 50% have been the rule, not the exception. Partly, these losses are so dramatic that stock exchanges in the USA and Germany set up rules to suspend companies whose share prices fell to under US$1 or €1 (euro) from trading. Even well-known companies such as Yahoo, Ebay, Amazon, AOL and others had to accept heavy stock price losses.
After having exceeded the limit of an incredible 5,000 points in March 2000, the U.S. technology stock exchange started to tumble. In March 2001, a remaining 1,929 points were registered, which is a minus of 62%. Prices of stock exchanges in other countries, such as the German Nemax and Dax, or the U.S. Dow Jones experienced a similar development.
In the one year during which the Nasdaq continued to drop sharply, US$3.5 trillion in securities vanished into thin air. 322 U.S. Internet firms (dot.coms) have disappeared, half of them this year alone.
A JOB KILLER
Meanwhile, the downturn on the stock market has had an impact on employment figures as well. Between January and March 2001, the Silicon Valley companies in the USA alone laid off at least 6,000 people. Following the slowdown in the U.S. and European economy, so-called profit warnings have been issued more and more often since May/June. With these warnings, the companies aim at "cautiously preparing" their shareholders for the fact that they will probably not come up to the expectations raised with ambitious business plans and forecasts from analysts. Instead, an increasing number of companies is announcing job cuts.
If only the companies which announce employment cuts of at least 1,000 (see table 5) were listed, these cuts would already amount to more than 300,000. When taking into account all the companies which plan to reduce their workforce by less than 1,000, the number of jobs which will be axed in the ICT sector might total 400,000 to 500,000.
This will not only destroy the reputation of these firms as being a generator of assets and wealth via the stock exchange, but their reputation of being a "job creator" will also belong to the past.
ICT AND THE UNIONS
Generally, it can be said that in most countries union membership in the ICT sector will probably be below the average of other industries.
On closer examination, however, this statement has to be reviewed. Depending on the proportion of employees as well as regional criteria, the situation might vary considerably.
In many countries with an average or above-average rate of union membership (i.e. more than 30%--35%), the average union membership in the section of hardware production, i.e. sections mainly comprising shopfloor workers, might at least equal the average union membership in the metalworking industry, with the exception of countries whose union membership is below average anyway (e.g. USA with a union membership of just about 10% in the private industry). Membership might be lower in the service sector, software development and in many start-ups where most or even all employees are probably office workers. This has a negative effect on union membership in this sector in general, where the majority of employees usually are office workers. At Siemens, for example, office staff accounts for 65% and shopfloor workers for merely 35% of the whole workforce.
In countries where the metalworking industry records a union membership below average, the new production facilities of the New Economy, which are often built on greenfield sites, might partly have an even lower membership. The USA will probably again be a typical example in this respect. None of the production sites of the well-known big players of the sector, such as IBM, Intel, Compaq, etc., is unionised, while the European subsidiaries of these TNCs have a union representation which is also accepted as a partner in collective bargaining negotiations.
These statements are of course only valid for countries without legal restrictions on unionisation. In free trade or export processing zones (EPZs), where unionisation is forbidden, or in countries, such as Malaysia, where the law provides for the workforce of the electronics industry only to be organised in company unions, not, however, in trade unions operating at national level, union membership usually tends towards zero.
In a survey among its affiliates, the IMF is currently trying to support these observations with facts and studies from the individual countries.
ACTIVITIES OF THE IMF
A number of affiliates of the International Metalworkers' Federation (IMF) have already members in the ICT sector, in particular in the section of hardware production. Some affiliates also have members among the office staff of ICT companies. Other unions, which have only office workers as members, are associated with another so-called international trade secretariat at global level, the Union Network International (UNI).
Taking into account the importance the ICT sector has in some countries and will have in the future, even though at lower growth rates than in the past, a number of IMF affiliates have already started initiatives to increase union membership and have drawn up programmes aimed at the needs of the workforce in the ICT sector.
The IMF has taken up these initiatives and developed approaches to promote and coordinate activities at international level. For this purpose, a task force has been set up and assigned the task of coming up with concrete proposals for projects on a global scale. The issue of union membership will definitely play a decisive role. Another important aspect will be the cooperation within TNCs, the development of a position on the industrial policy to adopt for the sector and the preparation and implementation of common standards regarding wage policy, working conditions, safety at work, etc. The task force is expected to present its first proposals by the end of 2001.
THE GOLD RUSH IS OVER
In the next few years, the information and communications technologies will remain well on course for further growth but will probably experience a lower growth rate than in the past. Some sections have seen a saturation of the market. The slowdown of the economy in many countries will cause investments to be shelved. This has already been announced by a number of companies which are planning to set up UMTS networks. Private consumption is facing a similar situation. The private consumer will probably not buy a new mobile phone, a new computer or other ICT products every year only because the companies have just launched a new model, a new processor, etc. on the market.
The workforce of this industrial sector is currently realising that ICT is no longer an industry that offers secure jobs. The announced job cuts of numerous companies speak for themselves. Furthermore, the "gold rush" at the stock exchanges of the new market will, for the time being, probably belong to the past. Investors will probably act with more caution and less euphoria. Many private investors might withdraw from this market for some time, not least because they have to consolidate their losses from the slump in share prices. There will definitely be new start-ups in the future as well. But they can no longer expect their share prices to rocket. This means that the amount of capital raised by means of going public will decrease, and thus funds available for investments.
Rationalisation and productivity gains in the hardware section will result in products being manufactured with a smaller workforce. It will take some time to compensate for the job losses in the software and service sector.
A BOOMERANG
The sudden collapse of many start-ups as well as the high share price losses of many companies of the New Economy have made the remuneration system of many companies obsolete. Payment with stock options, which was common practice in many companies, turned out to be a boomerang for many workers when share prices started plummeting. Therefore, many would meanwhile prefer a fixed wage resp. salary system where profit-sharing and stock options should be a supplement at most. This wish of having a collectively agreed salary structure is opening up a sphere of activity for the unions. Working hour schemes, safety at work and above all the issue of further training and qualification will be additional fields for union activities.
In the years to come, the unions will have to make considerable efforts to strengthen their bases in companies of the ICT sector. This will require a multitude of activities, from campaigns aimed at unionising workers in the companies to international initiatives in order to reduce the number of cases where government regulations limit the workers' right to unionise or deprive the workers of this right at all. Apart from initiatives with regard to the UN, ILO, WTO and the World Bank, this will certainly require projects promoting the adoption of a social clause in international trade agreements. The negotiation of a global code of conduct with transnational companies will be another field of international union activities.
A SOCIAL COMPONET IS NEEDED
It will be increasingly important for unions to intensify their cooperation at international level and to formulate and implement joint positions and policies. This will be the only way to reduce the number of cases where workers are played off against each other and where companies try, together with compliant governments, to adjust social conditions downwards. But this also means that the unions' fragmentation in this sector at international level has to be overcome and that the international trade secretariats (ITSs) have to develop closer ties with affiliates in this sector.
Globalisation -- even in the ICT sector -- may have positive effects on the world economy. This, however, requires a social component which has so far often been ignored. It is only now that politicians and industry start realising that globalisation without "social responsibility" may have the opposite effect and cause resistance in the populations of the various countries. That is why it is also the task of the unions to draw people's attention to this correlation so that the number of those who are prepared to take on social responsibility will be growing.