Project 3:  Icelandic Freeze 

 

Instructions

Project 3: Icelandic Freeze

In the third assignment, you have the opportunity to gain an understanding of the ethical practices in a business related to wages.  You will research and identify the ethical issue presented in the case scenario, identify the ethical dilemma associated with the presented case scenario and assess the scenario in terms of ethical relativism and moral universalism.

Read the Case Scenario

Josh Garrett is Head of Packaging and Distribution at Biotech Health and Life Products (Biotech).  Josh is in charge of all of the branches the company has throughout the world.

Josh has been reviewing cost reports for the different branches.  He is concerned with some of the results.  His main concern is with the rising costs of unskilled labor at the Germany branch.  Many of the employees in the Packaging Department are classified as unskilled laborers making minimum wage.  Josh decided to research the matter further and found that the current US federal minimum wage is $7.25 per hour, which has not changed since 2009.  Interestingly, the German government recently raised its minimum hourly wage by 4% to 8.84 euros per hour ($9.79 – USD).  This information weighs heavily on Josh since another raise would be costly for the company.

Adding to the concern about the increase in unskilled labor costs is that distribution costs between Europe and North America have risen considerably.   The shipping crisis of 2016 has caused cargo costs to rise for all transatlantic routes and with the demise of the low-cost flight service of Air Berlin, cost in Germany have increased.

Josh is a great outdoorsman and loves Iceland.  It occurred to Josh that relocating the majority of the Packaging and Distribution Department from Germany to Iceland and setting up a distribution center would solve these problems because production and distribution costs would be lower in Iceland.  Iceland is the halfway point in the transatlantic route.  The new location would eliminate the need to ship long-distance hauls.  Josh also knows that Iceland is one of the poorest countries in Europe so if part of the business is moved to Iceland, he will receive the credit for job creation in the country.

Josh decided to research Iceland as a potential location.  His research showed:

  • All professions are exempt from minimum wage;
  • Salaries are determined by collective bargaining agreements with most professions paying 260,000 and 300,00 ISK or $2,600 – $3,000 a month; 
  • Salaries are higher due to contributions to universal health care coverage;
  • The cost of living is higher than many other European countries;
  •  The average wage in Iceland is approximately $3160 before taxes per month for a full-time worker; 
  • Income tax is 37.3 percent for most people.  However, income tax is higher for those workers who earn higher wages.

Josh had not expected the higher salary base but further research showed that Josh could improve the rate considerably by hiring young people between the ages of 15 and 18 who could work up to 40 hours a week since mandatory schooling ended at age 16.  Josh believed he could negotiate a much lower salary.

Iceland’s teenage unemployment is higher than the country’s overall unemployment.  Hourly costs are quite a bit higher than in the United States and slightly higher than in Germany.  However, Josh believes the change in logistics will cut distribution costs in the Canadian and Germany branches, and will more than make up for increase in labor cost.   

Josh also has a desire to help the young people of Iceland.  He believes he is being socially responsible in cultivating one of the poorest European countries and its low wage earners.

Josh decides to go ahead and move most of the German production and distribution business to Iceland as well as open a new distribution center.  In moving to Iceland, Josh decides to exclusively staff young workers and let the workers go before they reached the age of 19 prior to the time when the worker’s contract had to be renegotiated.

In Iceland, employees fall within one of two classification, young workers and adults.

A young worker is anyone under the age of 24.  An adult is a worker over 24.

Young workers include youth, children and adolescent workers.

  • Youth are those under 18 years of age.  
  • A child is an individual under the age of 15 and still in compulsory school.  
  • An adolescent is an individual under the age of 15 but not in compulsory school.

Young workers are subject to restrictions dependent upon the type of work, the work environment and times worked.

Youth unemployment tends to be extremely high.  Youth can only work part-time since a person must be 18 years of age to work full-time.

Josh’s plan came under dispute when two recent lay-offs brought his employment practice to the attention of the staff who believed that Josh’s employment practices were unethical.  The workers feel Josh is trying to use the system to avoid paying workers a fair wage and stopping workers from gaining full-time employment since after the age of 18, a worker’s contract must be renegotiated.

If the matter is not quickly settled, the workers will go to the Collective to ask for higher wages and request a guarantee of full-time employment when they reach the age of 19.

The workers have also questioned the company’s policy of paying different wages for the same job in different worldwide locations.

The company has always had a policy of ensuring fair wages dependent upon the country in which the company operates.  However, if workers go to the Collective, the company will have to pay more money than is reasonable for unskilled labor costs, and will compromise the move to Iceland.  Josh knows the higher labor cost will negatively affect the company financially.  Added to his concerns is that he knows that unskilled workers within Biotech make different wage amounts, especially in Germany, Mexico and the United States.  In these locations, wages are much lower.  Josh thought to himself, “is it fair that the workers in other countries are making so much less than the workers in Iceland?”

Instructions

Step 1:  Write the Introduction

Create the introductory paragraph.  The introductory paragraph is the first paragraph of the paper and tells a reader the main points covered in the paper.  To help you know how to write an introduction, view this website to learn how to write an introductory paragraph:  http://www.writing.ucsb.edu/faculty/donelan/intro.html

Step 2:  Answer the following

Assume Josh’s employment practices are unethical.

  • Explain the meaning of an ethical issue;
  • Identify and explain the ethical issue in the case scenario using the course material to support the reasoning and conclusions made;
  • Identify the one ethical issue in the case scenario that is irrelevant to the case scenario.  Explain why.
  • Identify and explain the ethical dilemma.  Use the course material to support the reasoning and conclusions made;
  • Define ethical relativism and moral universalism;
  • Does this case scenario illustrate ethical relativism or moral universalism? Explain why or why not.

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