International operations of companies and impact on workers

Two interrelated studies, commissioned by the Austrian Chamber of Labour, analysed the impact of internationalisation and whether employees benefit from it, as well as the effects of the economic crisis on Austria’s top 300 companies. The first study found that a majority of companies stabilised or boosted employment due to internationalisation, but employees benefited little from the profits. The second study showed that 50% of the companies are feeling the full blow of the economic crisis.

The international operations of Austrian enterprises, especially in central and eastern European countries, are usually seen as evidence of the fact that Austria is among the beneficiaries of globalisation – a development many people can benefit from. It should be considered, however, whether a company’s foreign business ventures actually create advantages or disadvantages for its Austrian employees.

About the surveys among works councils

By means of qualitative and quantitative analysis, the Working Life Research Centre (Forschungs- und Beratungsstelle Arbeitswelt, FORBA) carried out two interrelated studies, commissioned by the Austrian Chamber of Labour (Arbeiterkammer, AK), among the works councils of major Austrian companies. The first study published in 2008 investigated the impact of internationalisation, with the aim of assessing if and the extent to which international corporate success is passed on to a company’s employees in Austria (Eichmann and Flecker, 2008). A follow-up to this study was launched a year later to explore the employment effects of the economic crisis (Eichmann and Bauernfeind, 2009). The second study focused on the following issues: the extent to which companies are affected by the ongoing financial and economic crisis, (employment-relevant) crisis management measures, employees particularly affected (such as core workers and temporary agency workers) and expected future developments (of employment). The combination of these two studies offers interesting insights into recent developments in Austria.

Survey methodology and sample

The two studies are based on the same methodological approach. Focusing on the top 300 companies in Austria, both studies used online survey questionnaires sent to the companies’ works councils. Both surveys had similar response rates, with 111 works councils (37%) taking part in the first study and 109 (36%) respondents in the second survey. The studies refer to developments within the companies between 2000 and 2008.

About two thirds of the participating companies operate in the manufacturing sector and one third in the services sector. Overall, 80% of the companies have been active in international markets, with only a minority of 20% restricted to the Austrian market. In terms of company type, 36% of the companies surveyed are independent enterprises, 22% are subsidiaries of multinational corporations with headquarters in Austria, 17% are subsidiaries of multinationals without a headquarter function and 25% are subsidiaries of multinationals with a headquarter function in the country.

Internationalisation leads to employment growth

One of the surprising results of the first study carried out from July 2007 to February 2008 is that the majority of the companies showed a growth or at least stable development in employment at their Austrian sites between 2000 and 2007. Only about a third (35%) of the companies cut employment levels during the same period. Companies with international activities (80%) were asked directly about the employment effects of internationalisation: in 43% of the companies, the works councils reported employment growth, in 23% they reported a decline in employment and in 34% they reported no change in employment levels. The authors of the study thus conclude that a majority of companies were able to stabilise or even boost employment levels in Austria because of their internationalisation activities. Therefore, internationalisation in many companies seems to have resulted in a general expansion of the business rather than just a relocation of employment to other countries.

Figure 1: Internationalisation activities and development of employment levels, 2000–2008 (%)

Internationalisation activities and development of employment levels, 2000–2008 (%)

Source: Eichmann, H. and Flecker, J., 2008

Internationalisation activities and development of employment levels, 2000–2008 (%)

Moreover, companies that are not involved in relevant internationalisation activities since 2000 (20% of the sample) showed below-average employment trends and the future outlook of the participating works councils were much more pessimistic with regard to employment levels: 55% expected a decline in employment within the next five years whereas only 25% did so in actively internationalised companies.

Impact of internationalisation on employment and working conditions

While the employment effects of internationalisation activities in Austria were predominantly regarded as positive, works councils were much more ambivalent in their assessments of the effects on working and employment conditions. To evaluate the impact of internationalisation on working and employment conditions, the study focused closely on the 80% of companies active in the international field since 2000.

These companies and their employees certainly benefited from internationalisation activities: for instance, in 60% of the cases, employment levels in Austria were at least kept stable, and in 47% employment even increased. However, employees were only able to participate in the profit growth to a very modest extent. Although a majority of 71% of the companies produced healthy earnings growth, this resulted in above-average wage increases for employees in only 13% of companies. One of the most frequent effects cited by the interviewed works council representatives was that internationalisation processes open up new international career prospects for employees – this was reported in 62% of the companies. As the growing mobility demands accompanying this development often cannot be met by employees with, for example, childcare obligations (reported in 65% of companies), this is frequently regarded as a rather ambivalent benefit from an employee perspective.

Clear negative effects were reported in terms of increasing competition and work pressure brought about by internationalisation. This was the case in 57% of the companies. Other negative effects included staff cuts as a direct consequence of internationalisation activities, reported by 26% of participating works councils, followed by ‘concessions regarding working time regulations’ (30%) and ‘concessions regarding wages’ (20%).

Figure 2: Impact of internationalisation activities on employment and working conditions at Austrian sites (%)

Impact of internationalisation activities on employment and working conditions at Austrian sites (%)

Source: Eichmann, H. and Flecker, J., 2008

Impact of internationalisation activities on employment and working conditions at Austrian sites (%)

The study also tried to correlate the effects of internationalisation on working conditions with the motivations behind a company’s internationalisation strategy as well as with different company types. The analysis shows that expansive internationalisation strategies driven by the need to access new markets, capacity problems in Austria or the necessity to follow large clients correlate positively with employment growth at Austrian sites and above-average wage rises. By contrast, in companies where cost-cutting measures and/or relocation dominated the reasons behind internationalisation activities, rising competition, mounting work pressure, concessions with regard to working time regulations and wages, and even staff cuts are widespread effects.

Effects of economic crisis

The follow-up study carried out from December 2008 to May 2009 shows the impact of the recent economic crisis on Austria’s top 300 companies. As the crisis has had a huge international impact, Austria’s most internationalised companies have been particularly affected. In fact, 50% of the interviewed works council representatives believe that their companies are feeling the full blow of the international financial and economic crisis. Moreover, 52% of them were expecting severe cost-cutting measures with negative consequences for the employees and 27% suspected that business units in Austria might be forced to close down. The outlook of the works councils is rather pessimistic: only 10% of them expect an improvement within 2009, 52% do not expect any improvement before 2010 and 38% expect it sometime after 2010.

The employment and personnel-relevant management strategies reported by the works councils included the following: cutbacks of overtime hours (61%), a reduction of temporary agency workers (52%), the dismissal of core workers (24%), non-replacement of retired employees (24%), temporary closures (extended holiday shutdowns) (17%) and the implementation of ‘short-time work’ (16%).

It is not surprising that the most vulnerable groups of employees with respect to their employment conditions are the most affected sections of the workforce. According to the interviewed works council representatives, the most affected group in terms of layoffs has been temporary agency workers (reported in 76% of the companies), followed by unskilled and semi-skilled workers (66%), workers on fixed-term employment contracts (61%) and ‘quasi freelance’ workers (57%).

The follow-up study also observed a shift in the importance of working conditions issues as perceived by the works councils compared with the first study carried out a year previously. Due to the economic crisis, the following problems gained importance: restrictions in staff recruitment (84% compared with 43% the year before), problems with protection against dismissals (47% compared with 29%) and job cuts (42% compared with 29%). These findings can be seen as a clear effect of the economic crisis. At the same time, rising competitive pressure and work-related stress remain the most pressing problems in terms of working conditions, as stated by 93% of the interviewed works council representatives.

Commentary

The first study shows that expansive internationalisation does not necessarily lead to decreasing employment levels at Austrian sites but can even have positive employment effects. Relocation and job losses are neither the only nor the most important impact of the internationalisation activities of companies in Austria. Apart from positive employment effects, however, international corporate success is generally not passed on to a company’s Austrian employees, for example in the form of higher wages, while the effects on working and employment conditions can be assessed as ambivalent. The economic crisis has strongly affected internationalised, export-oriented companies and does have an impact on employment, especially on employees on atypical employment contracts. This clearly demonstrates that atypical forms of employment, which have been on the increase in Austria in recent years (AT0904019I), actually do serve as an employment buffer used by companies to flexibly adapt employment levels to market fluctuations in the short term. While it is not surprising that these groups of workers are the first to lose their jobs during an economic crisis, this further underlines the precarious and vulnerable employment status of these workers.

References

Eichmann, H. and Flecker, J., Was haben die ArbeitnehmerInnen davon? Auswirkungen der Internationalisierung auf Beschäftigungsbedingungen bei Top-300-Unternehmen in Österreich [How do the workers benefit? Impact of internationalisation activities on employment conditions in top 300 companies in Austria], Working Life Research Centre (FORBA), Vienna, 2008.

Eichmann, H. and Bauernfeind, A., Auswirkungen der Wirtschaftskrise auf Beschäftigte in Top-300-Unternehmen in Österreich [Impact of the economic crisis on employees in top 300 companies in Austria], FORBA, Vienna, 2009.

Manfred Krenn, Working Life Research Centre (FORBA)

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