Economics: Work conditions: Lego to cut Danish, US workforces - increase those in Mexico, East Europe - says Bloomberg
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I've had a thing for Lego. I like the main product of Lego building blocks for kids (mostly for kids, but can any adult resist constructing something if a box of Lego pieces is sitting at hand in some otherwise empty room?). And I like some of the work-relations policies that Lego practiced in its mainbase Danish factories. As a matter of fact, Lego was especially cited by the International Labour Organization (ILO - an independent UN agency) for the progressive and humanizing approach to workers in plants. But the company has hit hard times, even tho it sells its products in 130 countries around the world.
Now comes a report from the economics-news source Blomberg.com (click title link) on how Lego is meeting its financial problems by moving production to countries where wages for workers are much lower than they are at its facilities in both Denmark and the USA). The moved jobs will pay less to workers; but probably, relative to the new countries, the pay packets will be comparatively good compared to elsewhere in East Europe and Mexico). Further, in the new countries, Lego won't have a tradition of advanced work-relations to contend with, thus no raises in work-relations expenses there; rather quite the opposite (in the short term). Nor will the labour-union structure be as strong in East Europe and Mexico, nor will there be an advanced workers-culture of participation in discussions with their employers. It seems clear to me that in Denmark, Lego's work-relations policies were a relative expense, an expense that will no longer have to be paid out in East Europe. And probably there will be work-relations expenses saved in moving jobs from the US to Mexico. 
"The Organisation for Economic Cooperation and Development has 30 member countries. It was established in 1961. ...The OECD groups 30 member countries sharing a commitment to democratic government and the market economy. With active relationships with some 70 other countries, NGOs and civil society, it has a global reach. Best known for its publications and its statistics, its work covers economic and social issues from macroeconomics, to trade, education, development and science and innovation."
"OECD area unemployment has fallen since 1994 and those countries that embraced the recommendations of the Jobs Strategy have done particularly well. Nevertheless, so have those that have adopted Nordic-type approaches, such as Denmark’s much discussed “flexicurity” hybrid which combines relatively easy hire-fire with strong backup for, and obligations on, jobseekers. Austria and the Netherlands have adopted a similar approach. But countries that have not reformed enough, including France, Germany and Italy, as well as some central and east European countries, have performed least well. Their unemployment is high and employment rates relatively low, despite strong global growth (see OECD graph)."
Here's what Bloomberg says at the beginning of its report (Update 3 is the article-version I'm quoting), but I recommend you read the whole piece:
Globalization of the labour market will not only eliminate jobs in West Europe (the EU is built to effectuate this result in the short term, forcing greater industrial productivity and change); definitely this "shortterm" rigour will squeeze positive advanced work-relations policies in the advanced industrial countries. Many will disappear, as was in the case in the first great OPEC crisis in North America, never to have returned. The process is definitely necessary in Europe where Lego was a good positive model (and thus resultingly must have incurred some further non-wage expenses, as mentioned). But Lego was not typical of Western Europe's arrangements – France, for instance, is notorious for a severe overload of featherbedding, a country where able-bodied mentally-healthy employees at good salaries and wages, living a quite comfortable life-style, often actually worked relatively little in jobs secure for life. But in the longterm the French economy can't sustain this system of low productivity. That fact has led to the current difficulties in France, along with the fact that young immigrant workers willing to work for low wages can't find jobs to get individual toeholds in the workforce and build a succesful employment. The jobs low-skilled no-previous-experience young immigrants want are restricted to other sectors of the youth population – which thus don't have to compete with the young immigrants and don't need a good work record. Small businesses in particular, having to pay h+ wages to the non-immigrant workers benefitting from this veritable job-restriction, would be less able to create new jobs to take care of menial tasks and training for one-step-up responsiblities.Lego to Cut 1,200 Jobs in U.S., Denmark to Trim Costs June 20 (Bloomberg) -- Lego A/S, the maker of children's snap-together building blocks, plans to shut its U.S. factory and move 900 Danish jobs to Eastern Europe, paring its workforce by about 30 percent.
Production at the company's Enfield, Connecticut, plant will be moved to Flextronics International Ltd. facilities in Mexico, affecting as many as 300 employees, closely held Lego said in a statement on its Web site today. Work at the company's plant in Billund, Denmark, will be shifted to Flextronics' Eastern European facilities, Lego said.
Lego, Europe's biggest toymaker, is trying to recover from three years of losses since 2000 by consigning much of its production to overseas manufacturers. The company aims to lower manufacturing costs by 1 billion Danish kroner ($170 million) to counter a drop in industry sales as children shift their attention to electronics and outgrow toys at a younger age.
``They are reorganizing and streamlining to adapt to the marketplace today, which is very challenging and more fragmented,'' said Chris Byrne, contributing editor to Toy Wishes magazine. ``Lego is still a very strong brand.''
Lego, which reported a profit in 2005, has eliminated more than 5,000 jobs over three years.
The company said it was outsourcing production of standard Lego bricks because of their uniformity and large production volumes. More technically demanding items, such as Lego Technic and Bionicle, will still be produced by 300 employees in Billund, the company said.
``We are beginning to see the first outlines of a new business model,'' Chief Executive Officer Joergen Vig Knudstorp said in the statement. Lego is moving from ``a traditional integrated model towards a partnership model,'' he said.
The Lego dream is fading. The French nitemare doesn't go away. And jobs are moving.
- Owlb
Further Resources
Putting flexibility and security together - ILO on Lego Denmark ("security" here means guaranteeing a workers' job against unemployment)
Jobs Strategy: Policy choices that work
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