Come to low-wage Wales

Korean companies have found a grateful alternative to their own striking workers, says Tony Heath
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The Independent Online
The industrial tigers of the Pacific Rim are beginning to roar on the far distant shores of South Wales. For while workers in Korea take to the streets in protest at harsh new labour laws, the conglomerate Lucky Goldstar, one of the most voracious big cats, is setting up shop in Newport. There is a price - the somewhat unedifying spectacle of the British government handing out taxpayers' money like a drunken sailor on leave after weeks at sea.

The Korean giant prefers to be known simply as LG, perhaps because the full title suggests a manufacturer of fortune cookies. It got really lucky when last year William Hague, the Welsh Secretary, underpinned the pounds 1.7bn investment with a huge but undisclosed dollop of public money. When the project to manufacture all sorts of electronic wizardry gets going, it will employ 6,000 workers; insiders estimate that the cost to the taxpayer in government subsidies is around pounds 30,000 a job.

The deal was met with a stony silence on the streets of Seoul. No one likes to see their jobs being exported and the tens of thousands protesting in Korea have that at the back of their minds. The new labour laws in that country were pushed through in the early hours of Boxing Day when a sleepy Britain was reaching for the post-Christmas indigestion tablets. These rules make it easy for giants like LG to "downsize" - in Korea, that is. Why are Far Eastern jobs being exported to Wales? There is widespread belief that companies such as LG find a low-wage economy attractive. Just as cheap overseas labour propped up the British Empire, so low wages in places like Wales are a lure to canny Koreans, Taiwanese and Japanese.

No one took much notice of the question of wages until 12 months ago when Ronson moved cigarette lighter production from Korea to Wales in order to save nearly 20 per cent on the wages bill. Then only a couple of hundred jobs were involved, and it may take some time before the implications of the LG invasion sink in.

The Welsh Office has a secret weapon to blunt criticism - a briefing note on pay rates. Although it fails to mention figures, the document explains, somewhat plaintively, that inward investors "are attracted to the UK and Wales because of non-wage costs, for example, employers' social security costs, pension and health contributions. These costs are lower in the UK than elsewhere in Europe. For every pounds 100 in wages, employers pay an extra pounds 44 in non-wage costs in Italy, pounds 41 in France, pounds 34 in Spain, pounds 32 in Germany and pounds 18 in the United Kingdom.

The note also refers to higher levels of long-term illness that prevent people from working and the country's "greater proportion of retired people". It may be heresy to suggest that if more attention were paid to non-wage costs, illness would be reduced, absenteeism slashed and the working environment made more productive. And wouldn't it be a mark of John Major's country at ease with itself if tomorrow's pensioners could look forward to some improvement in the present levels of retirement pay?

As things stand - no Social Chapter, no minimum wage - that's just wishful thinking. The reality is stark. Wales stands 68th in the European Union's league table of regional prosperity, languishing behind regions in such countries as Italy and Finland. At pounds 10,358 the average annual Welsh income is almost pounds 2,000 below the European average of pounds 12,336.

Less than pounds 3 an hour is earned by 104,000 of a workforce that numbers a shade below one million. Meanwhile, job insecurity west of Offa's Dyke gnaws away at morale. Since the 1992 election, 239,600 employees in Wales have experienced two or more spells on the dole.

Given the pressures, it is not surprising that the "low pay is better than no pay" mantra is discreetly preached. The world of work has tilted sharply since 1985, when Welsh collieries alone employed 30,000 at wages unlikely to be matched by the "commercially confidential" rates inward investors hug close to their chests. Today just one deep mine, the worker- run Tower colliery near Aberdare, remains, paying high wages, making decent profits and able to give every one of the 250 miner-owners a pounds 500 new year bonus.

In their anxiety to pull in overseas investors, the brokers at the Welsh Office and the Welsh Development Agency scarcely stop to consider the factory hand's pay packet. Indeed there is a cavalier contempt for such concerns epitomised by Barry Hartop, the recently resigned chief executive of the agency, who declared unblushingly: "All this stuff about slave labour is just crap." A toughie with a touch of the Norman Tebbits, he declares that "at the end of the day there will always be losers".

Far away, the embattled Korean workers fear that more of their jobs could be exported. Back home a carrot dangled at the end of a long stick has muted the Welsh dragon's tongue. Lucky for some, unlucky for others? The real winners are international conglomerates stalking the world-wide labour market. With a little help from their new-found friends.