Globalization raises the cost of labor to key factor in productivity, which reduces competition to a question of social dumping.

When there is closure of a workplace and the transfer of productive activity from a developed country to another developing economy and lower costs, this constitutes a typical process of relocation of companies. The emergency process massive multinational globalization, domestic firms that make their international strategic objective. Companies move from the simple export activity to the expansion of sales network in these new markets up to the introduction of factories in order to sell directly to the production and positioning themselves in these new markets by developing their own distribution networks.

Economic globalization has led to increased outsourcing

There are very different processes of dislocation, regional, national, even relocation processes sui generis where the company located in a low-wage workers to move their work to developed country wage under the country of origin, thus opening a whole range of legal problems and social (see policy Bolskestein). The exporter and expansionist distinctly many of the businesses in the economy of globalization means that the possibilities have multiplied exponentially location. Similarly, and with the same ease that are installed, companies come to closure and relocation of their workplaces, moving production to other markets to provide their factories more advantages especially regarding the relationship of productivity wages .


The wage cost as a main argument for off shoring

The issues involved in relocation decisions by companies of all kinds are usually related to changes in consumer habits, logistical problems that increase transport rates, exhaustion or price hikes in raw materials, strategies political, technological change, labor unrest or advantages in the host country environmental regulations. However, the primary reason that companies claim to justify the relocation of its production is basically the difference in wages between the two countries, who account for the relocation and receiving the new plant on its territory. Companies looking to get a skilled workforce with lower labor costs and will ensure competitive levels of productivity.

China and India are countries typically benefit from the relocation

Although outsourcing is a phenomenon that occurs throughout the economic map of globalization, there are economies whose characteristics are at the center of localization processes of industries established in developed countries. The industrial enterprises, especially the automotive and capital goods are the sectors worst affected by the relocation of businesses. Emerging countries with economies in labor-intensive and lower wages as China and India get a huge influx of investment from off shoring processes.

Regarding the situation in the EU, you can cite countries such as Hungary, Slovakia, Poland and Romania, which are attracting many factories and distribution centers from companies from other member countries of the European Union. These industry groups performed the dismantling and relocation of their factories for basically economic reasons, attracted by the differential between wages and productivity in these labor markets.

The relocation of labor cost differential is not the solution

According to experts, the medium and long term, the reduction of labor costs is not the solution to the problems of productivity and corporate positioning as an open global economy as the current is always possible the emergence of a producing country with lower wages and lower costs, starting a new process of relocation that will cause social unrest, unemployment and social dumping. Competitiveness by way of social dumping, seeking only implementation in economies with less protection of the rights of workers, low wages, extensive working hours, prohibition of trade union rights, or environmental regulations to enable smaller companies adjustment costs of production, are strategies that damage and stress the social fabric and pose a long term socio-economic decline.

The quality, excellence and innovation would slow the relocation of businesses

Wages are an important element of competitiveness of enterprises, no one doubts the necessary relationship between labor costs and productivity, but in the pursuit of excellence and differentiation of the final product which should be based economy globalization less precarious and short-term and more comprehensive structural solution-focused and stable. Competing on the path of innovation and research looking for high quality and differentiated products, prevent unfair competition posed by imitation and benefit based solely on low cost production as the only argument.