Outsourcing and Cheap Labour: HowSari Power Exposed the Economic Myth of New Labour; ANALYSIS

The Mail on Sunday (London, England), August 14, 2005 | Go to article overview

Outsourcing and Cheap Labour: HowSari Power Exposed the Economic Myth of New Labour; ANALYSIS


Byline: DAN ATKINSON

AS CHAOS engulfed Heathrow airport last week following the Gate Gourmet dispute, there was a remarkable parallel with a landmark industrial action nearly 30 years ago. In August-1976, a bitter strike also involving a largely Asian female workforce took place at Grunwick, a film processor in Dollis Hill, North-West London.

But if the violent picket-line clashes that followed at Grunwick were emblematic of Old Labour's industrial difficulties, the Gate Gourmet dispute symbolises the stresses and contradictions of New Labour's 'economic miracle'.

In particular, it throws a spotlight on the widening cracks in two key pillars of the Government's economic policy - business 'outsourcing' by household-name companies of vital aspects of their operations, and an increasing reliance on immigrant labour.

Indeed, both are intimately linked, because the promise of outsourcing is that certain operations can be performed more cheaply by another firm. After all, there would be little point in Gate Gourmet supplying meals to British Airways at the same cost as BA itself managed before 1997, the year it contracted out the business.

BA wants a lower catering bill, and Gate Gourmet has to deliver this lower bill while also making a profit.

With wage costs accounting for the largest chunk of business overheads, the obvious way to protect profits is to find a less expensive workforce.

Fortunately (or not, depending on your point of view) just such a workforce has become available in recent times, arriving from overseas.

Earlier this year, Mervyn King, Governor of the Bank of England, went so far as to praise migrant workers for their role in holding down wage inflation at a time of low unemployment. Between May 2004 and March this year, said Mr King, 120,000 new workers had arrived from Eastern Europe.

He added: 'Without this influx to fill the skills gaps in a tight labour market, it is likely earnings would have risen at a faster rate, putting upward pressure on the costs of employers and, ultimately, inflation.'

Critics are less enthusiastic than the Governor, pointing out that migrant workers themselves consume goods and services, thus creating further skills gaps, that presumably need to be filled by more migrant workers . . . and so on.

However, in the short term, few doubt that large-scale immigration has played a big part in holding down pay demands.

One notable feature of the Heathrow dispute is that nobody seemed to find it odd that BA should be dependent for its catering on an outside operator whose somewhat eccentric approach to industrial relations has brought the 'world's favourite airline' to its knees.

But then, BA is far from being alone among brand-name organisations to have hived off to outside companies functions once thought inseparable from the organisation itself.

While consumer product manufacturers direct enquiries and complaints to anonymous call centres, mighty accounting firms hand out specialist work to small practices run by ex-partners. While there has been much anxiety about the thousands of jobs 'offshored' to India and other destinations, the phenomenon of domestic outsourcing dwarfs the movement of work to developing countries.

The grandest names are doing it, too. National Savings & Investments - formerly the Post Office Savings Bank - hived off 4,000 staff to Siemens Business Services. Gas meters these days are read by employees of firms such as AccuRead.

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Outsourcing and Cheap Labour: HowSari Power Exposed the Economic Myth of New Labour; ANALYSIS
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