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Fact and fiction: wage levels and the (re)location of production

Fact and fiction: wage levels and the (re)location of production Argues that the influence of developments in production technology and process innovation on the selection of the location of production has markedly increased and, as a consequence of this, the role of wage levels has diminished, in spite of the fact that many of the top managers of European enterprises stubbornly continue to maintain that the opposite is true. On the one hand challenges the statement that wage levels in The Netherlands are too high compared with other European countries and on the other hand (and more important) argues that the role of wage levels has diminished in the discussion of how to increase European employment. To illustrate the shift in industrial strategy, the actual (re)location behaviour of a large Dutch electronics concern, namely Philips Electronics, can be given. By examining this corporation′s behaviour side‐by‐side with the developments in production technology, demonstrates that, while wage costs played a significant role in determining the location policy in large‐scale enterprises in the 1960s and 1970s, the importance of this factor since the 1980s has diminished. Casts a different light on the constantly reiterated admonitions by European managers (and economists) that high wage levels in Europe will lead to the emigration of enterprises to low‐wage countries with disastrous consequences for the European levels of (un)employment. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png International Journal of Social Economics Emerald Publishing

Fact and fiction: wage levels and the (re)location of production

International Journal of Social Economics , Volume 22 (5): 12 – May 1, 1995

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Publisher
Emerald Publishing
Copyright
Copyright © 1995 MCB UP Ltd. All rights reserved.
ISSN
0306-8293
DOI
10.1108/03068299510087903
Publisher site
See Article on Publisher Site

Abstract

Argues that the influence of developments in production technology and process innovation on the selection of the location of production has markedly increased and, as a consequence of this, the role of wage levels has diminished, in spite of the fact that many of the top managers of European enterprises stubbornly continue to maintain that the opposite is true. On the one hand challenges the statement that wage levels in The Netherlands are too high compared with other European countries and on the other hand (and more important) argues that the role of wage levels has diminished in the discussion of how to increase European employment. To illustrate the shift in industrial strategy, the actual (re)location behaviour of a large Dutch electronics concern, namely Philips Electronics, can be given. By examining this corporation′s behaviour side‐by‐side with the developments in production technology, demonstrates that, while wage costs played a significant role in determining the location policy in large‐scale enterprises in the 1960s and 1970s, the importance of this factor since the 1980s has diminished. Casts a different light on the constantly reiterated admonitions by European managers (and economists) that high wage levels in Europe will lead to the emigration of enterprises to low‐wage countries with disastrous consequences for the European levels of (un)employment.

Journal

International Journal of Social EconomicsEmerald Publishing

Published: May 1, 1995

Keywords: Low pay; Production; The Netherlands; Pay

References

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