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The ‘Hidden Workforce’ Making Profits for Multinationals

Sharan Burrow, general secretary of the International Trade Union Confederation (ITUC) speaks during a panel session on the first day of the 42nd annual meeting of the World Economic Forum, WEF, in Davos, Switzerland, file photo.

A recent report from the International Trade Union Confederation reveals that 50 of the world’s largest companies depend on a “hidden workforce” to provide 94 percent of the labor from which they profit.

[Editors Note: A recent report from the International Trade Union Confederation reveals that 50 of the world’s largest companies depend on a “hidden workforce” to provide 94 percent of the labor from which they profit. With only a tiny minority of workers employed directly by these multinationals—including McDonalds, Nestle and Samsung—the majority of people in their supply chains do not benefit from their profits. ITUC General Secretary Sharan Burrows spoke to VOA Khmer's Ten Soksreinith about the report, and discussed how weak regulatory systems allow companies to exploit workers, especially in developing countries like Cambodia.]

Can you help us to understand what you mean by a “hidden workforce”?

The global supply chain is now the dominant model of global trade. Sixty percent of production is caught up in supply chains, and it’s 80 percent if you include financial flows. But workers in those supply chain, more often than not, are living on poverty wages, they have insecure work and, indeed, often unsafe work. You’ve seen of course highlighted cases like Bangladesh, but they are everywhere.

So we took a look inside 50 of the largest companies in the world. We found that the supply chains provide a shocking story of invisibility. Employers at the multinational level, the big CEOs of those companies, only directly employ 6 percent of the workforce on which they depend. So the 94 percent of the workforce which contribute to their profits are invisible to them. They are a hidden workforce. The model of production is based on exploitation.

How do these big companies utilize this huge workforce?

The multinational enterprises contract out their work, particularly in Asia, but also in Africa and Latin America. That contractor might contract out again, and you can have six, eight [or] 10 tiers of contractors. So there is no transparency.

Under the U.N. Guiding Principles on Business and Human Rights, there is a recent requirement on companies to do due diligence, to understand the nature of the supply chain. The G7, the biggest countries in the world, last year actually gave an indication that they acknowledged that the model of supply chain is often exploitative, and that there must be stronger rules to clean up supply chains. The G20 acknowledged that supply chains are an issue, in terms of sustainability, and that includes human and labor rights. It’s now time that those CEOs acknowledge that they wouldn’t want their sons and daughters working in those conditions. Therefore, they have to take responsibility for ensuring that other people’s sons and daughters are not exploited in this way.

Is there anything illegal about having a supply chain set up like this?

They just simply contract out and the contractors contract out, and it’s a long chain. Nobody takes responsibility for the workforce. Often the legislation in those countries is very, very weak. It’s often anti-worker. It does not provide freedom of association or a right to collective bargaining arrangement, or even a minimum living wage, a minimum wage on which you can live with dignity.

When there are no safe, secure regulatory environments that provide for fundamental rights, then companies aren’t absolved from their responsibilities. But in fact, they have been hiding behind the fact that they only employ a small part of workforce on which they depend. This has to change.

What is the system of regulation for today’s global supply chains? How effective is it?

The system of regulation is very weak. The labor laws in Cambodia are weak. The labor laws in Bangladesh are weak. The labor laws in Indonesia, or indeed in the Philippines, are weak. Workers do not have adequate protection. Whether it’s the right to freedom of association, to have a collective voice, to join the union, whether it’s a minimum wage on which they can live with dignity—governments aren’t providing strong minimum wage mechanism. When it comes to collective bargaining, or indeed a safety committee where workers are represented with the capacity to prosecute breaches of rights or safety, the rule of law, based on very weak legislation, is also absent.

Governments certainly hold a responsibility. They are all members of the International Labor Organization, which sets the fundamental rights standards. That’s a tripartite body with business, workers and government that’s part of the U.N. system. That is the international rule of law. Governments don’t respect that. They don’t legislate for those protections often because they’re cowed by the demand of big businesses who want cheap labor. That’s the basis on which these companies are making profit.

Then, of course, you have the companies themselves. And again, under the U.N. system, there’s a set of U.N. principles on business and human rights that indicate that governments are responsible. But the companies can absolve their responsibilities where the rule of law by government is weak. But they have responsibility for due diligence and to remedy. Both are responsible. People can’t walk away from responsibility—if you are the CEO of a company or if you are a head or minister of a government. But it’s the people that are exploited, and they are being exploited by their own governments in many cases, who turn a blind eye, and directly by employers from the big multinationals, who simply take no responsibility, demand the cheapest price possible, irrespective of the human cost or impact.

What would be a practical system of regulation in countries with corrupt local governments to ensure human rights and labor rights? Are there international laws that can be applied to these companies?

Indeed. When we’ve got a situation where in Germany or Belgium or Australia, or the U.S.—pick a country—you can actually use the rule of law to hold companies to account for fundamental rights or safety standard. Then we ask the question: Why can’t you hold that same company to account for each abuse of workers’ rights in Cambodia?

In the U.S., they have the principles called Joint and Several Liability that doesn’t exist in most governments’ laws. But if the governments where multinationals are headquartered were to legislate to mandate due diligence, then we could prosecute companies across borders. That’s one of our ambitions. It’s time that companies were held to account. You’ve seen the exploitative stories about companies are not paying tax in the countries where they earn it. Governments with the G20 are trying to change that. We want governments to work with us to change the model of supply chains.

There are governments concerned about this—Germany, Netherlands, Belgium, France, a range of governments—but we haven’t got them yet to the point where the rule of law makes it possible for employers to be held to account for workers in countries where they make profits from.

Indeed, in Cambodia, when these companies can’t pay $178 a month as a minimum living wage, then that’s exploitation. When the Cambodian government does not think that they have the responsibility to stand up to the company and make sure that their workers have a minimum living wage, that’s just an abrogation of democratic responsibility.

We have to clean this up. We want to see the wages base at $178 in Cambodia, $250 in Jakarta, where there is another minimum wage struggle going on, $320 in the Philippines. I could give you the entire wage rates, they are very modest. If we have a floor of wages, then you can take that level of competition out of global trade, and then companies could genuinely compete on quality, on design, on efficiency. That’s not happening. The only competition base at the moment is low wages, poverty wages, and that’s simply exploitation.