Catering for Globalization

The firing of 670 workers employed by Gate Gourmet at London's Heathrow Airport has intensified an already heated labor environment. The company is owned by a US investment firm, and union officials hold "mean-spirited capitalists" responsible. According to this Guardian commentary, however, the company's decision was primarily a response to current economic realities. Gate Gourmet is under pressure from above – a major airline client – to keep down costs, and unfortunately for the workers, the burden rolls down the supply chain. European integration has increased the stress: In a larger labor pool, workers from outside Britain may be willing work for lower wages. Indeed, this issue is larger than an isolated dispute at Heathrow; Salil Trapathi writes, "It is about the way the world is." – YaleGlobal

Catering for Globalization

Defending workers in the current dispute at Heathrow is all but futile in the face of international business and employment trends
Salil Tripathi
Wednesday, August 24, 2005

If you ask the managers at Gate Gourmet, they will blame the firm's plight on an inflexible workforce unwilling to change.

The Transport and General Workers Union (T&G), which represents the workers, says the fault lies with an unsympathetic and devious management bringing "US-style union bashing" tactics which have no place in Britain.

The 670 workers recently sacked by Gate Gourmet were given just three minutes' notice and were informed of the management's decision over a megaphone, the union says.

The company, formerly part of BA, is now owned by a US investment company.

The dispute has significantly heightened the sense of insecurity among workers who, on salaries of between £12,000-£16,000, are relatively poorly-paid for London. They fear that Gate Gourmet wants to bring hundreds of workers, possibly from Poland, willing to work on more flexible contracts at lower wages.

Union officials and some commentators see a grand design behind all this - mean-spirited capitalists reducing wage costs and so fattening up profit margins by bringing in foreigners who will work for less.

Whether events at Gate Gourmet are part of such as movement or not, profits are far from the company's mind. In this case, survival is the issue.

Think of a small factory in Indonesia making trainers for a large sports goods company. The only hope the factory has of remaining in business is to ensure its customer does not take its business elsewhere. The sports goods company realizes this, and so keeps squeezing its supplier to drive prices down.

Gate Gourmet is in a similar situation. It is being squeezed by a major client who can shop around for new suppliers. Some industry analysts are already recommending airlines farm out their contracts among several suppliers and make them compete with one another, ostensibly to improve quality and performance.

Why has cost reduction become such an issue? Competition is one reason, and the other is the consumer. As long as travellers want £19 tickets to Paris and £49 packages to Ibiza and budget airlines are willing to oblige, larger carriers like BA will squeeze their suppliers.

Those suppliers, in turn, will have few options other than to seek greater flexibility from their workforce. That means employing workers on flexible contracts and only during peak season to reduce overheads during quiet times.

By law, any new workers cannot be paid less than the national minimum wage new workers cannot be paid wages below the legal minimum, but they will still find it harder to command wages at certain levels in certain sectors, because labor supply has increased due to European integration.

Actions of companies such as Gate Gourmet take advantage of that increase to suppress wage increases, which hardly seems fair for the community of workers at Heathrow, where whole families work for airlines or their suppliers, sometimes over generations.

This takes us to the heart of the globalization debate. The first lesson of globalization was that workers in the industrialized world would have to be more flexible, and accept that someone somewhere else may be prepared to do the same job for less money.

Yale economist Robert Shiller says any job that does not need immediate proximity or close contact can be shipped abroad. It applies to car engineers at Rover, copy editors at Reuters, financial analysts in the City and workers at Europe's remaining clothing factories. Unless workers abroad get access to such jobs, how would their countries' economies prosper?

Jobs such as those at Gate Gourmet seemed immune from that trend. Planes have to be fuelled, serviced and supplied at Heathrow. But with European integration, the rules have changed and "they" have become part of "us". Someone else can move to your country and do the same job on different terms, which may include a lower wage. That may not necessarily be below minimum wage, although it is not unheard of in unregulated sectors.

Maintaining a particular way of life, even if not luxurious by British standards, will be a challenge for Gate Gourmet's current workers because even at a lower wage, a job with the company is an attractive proposition for someone from eastern Europe.

Poles may have a sense of déjà vu. As Robert Winder points out in Bloody Foreigners, his history of immigration in Britain, Polish pilots shot down one out of seven of all German planes destroyed in the Battle of Britain. When the war ended, though, there were mutterings about when they would go home.

Churchill said he would never forget the debt Britain owed to Polish troops and offered them British citizenship. Of the 160,000 Poles eligible, three-quarters accepted the offer. But then, as Winder reminds us:

"Those traditional opponents of migrant workers - the unions - were among the first to make their voices heard over all this. The government was hoping to send 2,000 Poles into the coalmines each week. In response, the National Union of Mineworkers banned all Poles from its pits, even though there was an estimated labor shortage of 100,000 men in the industry."

T&G, to its great credit, has said none of this. It has sought justice for the sacked workers and has alleged practices by Gate Gourmet, which, if true, are deeply troubling.

But this goes beyond the present catering dispute at Heathrow. It is about the way the world is.

Salil Tripathi is a London-based writer who specializes in Asian and international economic affairs.

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