The effect on international competitiveness of differing labour standards in the steel industry of the NIS and the EU

Abstract

The project which generated this paper arose from continuing concern in the European Union about the persistence of high unemployment and the likely effects of economic reforms in the New Independent States. The study brought together researchers from four countries: Finland and the United Kingdom in the EU and Belarus and Russia in the NIS. The purpose was to examine the impact that differing labour standards in the two NIS countries and the two EU countries have and are likely to have on the ability of companies in each country to compete internationally. The core research activity comprised a small number of in-depth case studies of firms in the steel sector, enabling comparisons to be made between the industries in each of the four countries. The lack of structure to labour markets in the NIS and their comparatively low labour costs posed a potential threat to the competitive position of the EU and this study set out to understand the relevant issues more fully from a number of different perspectives. These included comparing labour costs and productivity, social costs such as health and safety, pensions and other benefits and exploring the impact of investment on productivity. Ultimately the study focused on how a levelling up of labour standards in the NIS would impact on the EU Member States. This paper sets out the findings of the case studies within the steel industries of the respective countries. These specific findings are presented within the context of a comparison of general labour market conditions. The steel sector is an important job and wealth creator in all four countries, accounting for a substantial proportion of manufacturing employment. The contrast between the EU producers and their Belarusan and Russian counterparts is quite marked. In terms both of health and safety standards and environmental standards, the EU firms incurred costs significantly in excess of those incurred by their NIS counterparts, but this was counteracted by much higher productivity and concentration on quality products.