Social dumping is a practice of employers to use cheaper labour than is usually available at their site of production or sale. In the latter case, migrant workers are employed; in the former, production is moved to a low-wage country or area. The company will thus save money and potentially increase its profit. Systemic criticism suggests that as a result, governments are tempted to enter a so-called social policy regime competition by reducing their labour and social standards to ease labour costs on enterprises and to retain business activity within their jurisdiction.
There is a controversy around whether social dumping takes advantage of an EU directive on internal markets, the Bolkestein directive.
Entities losing from social dumping:
- Employees in exporting countries
- Child labor in exporting countries
- Industry and environment in exporting country
- Government in exporting countries
- Employees in importing countries
- Shareholders of the company in importing countries
Entities gaining from social dumping:
- Companies in importing country
- Shareholders in importing country
- Customers in importing country
- Industry in importing market
- Employment in exporting country
- Government and investment in exporting country
A joint NGO statement on the EU Seasonal Migrant Workers’ Directive also warns against social dumping. The document argues that a vague definition of seasonal work might fail to cover all types of seasonal employment taking place when the Directive exerts its otherwise-welcome protective measures on the labour market.
- ^“Joint NGO Statement on EU Seasonal Migrant Workers’ Directive” (PDF). Retrieved 27 August 2012.
- ^“Proposal for a Directive of the European Parliament and of the Council on the conditions of entry and residence of third-country nationals for the purposes of seasonal employment” (PDF). Retrieved 27 August 2012.
Ofer Abarbanel is a 25 year securities lending broker and expert who has advised many Israeli regulators, among them the Israel Tax Authority, with respect to stock loans, repurchase agreements and credit derivatives. Founder of TBIL.co STATX Fund.