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ABSTRACT
I consider the effect of global supply chain production – in contrast to directly owned overseas production – for labour rights in low- and middle-income countries. I develop a set of hypotheses regarding the conditions under which supply chain workers are most likely to experience improvements in their working conditions and procedural rights. In doing so, I highlight the importance of host country governments in the protection of labour rights: while private governance efforts have intensified in recent years, their success is conditional on local political actors’ interests in the protection of workers’ rights. Put differently, appropriate protections for labour require that the incentives of participating firms (foreign or domestic) and host country governments align. I also suggest how future research might best explore these dynamics, by focusing its attention at the firm and supply chain (rather than at the country) level.
Disclosure statement
No potential conflict of interest was reported by the author.
Notes on contributor
Layna Mosley is Professor in the Department of Political Science at the University of North Carolina at Chapel Hill. Her research explores the effects of multinational production on worker rights, as well as the politics of sovereign borrowing.
Notes
1. In this piece, I use ‘global supply chains’, ‘global value chains’ and ‘global commodity chains’ interchangeably. For a discussion of contemporary global value chains, see Dallas (Citation2015) and Gereffi (Citation2014).
2. In estimating the reach of global supply chains, the ILO includes purchasing (of inputs), as well as subcontracting (‘outsourcing’) and foreign direct investment (‘offshoring’). Domestic firms that sell intermediate goods to subcontractors or lead firms are therefore considered part of global supply chain activity.
3. For a discussion of the various ways in which lead firms engage in sourcing, see Bartley and Child (Citation2014), Gereffi et al. (Citation2005), and Gereffi (Citation2014).
4. The ILO estimates that, in 1995, 16.4 per cent of workers were involved in global supply chains.
5. Many analyses focus on ‘core labour rights’, embodied in the ILO’s 1998 Declaration of Fundamental Principles and Rights at Work. These include the freedom of association and the right to bargain collectively; the elimination of all forms of compulsory and forced labour; the prohibition of discrimination based on race, gender, ethnicity or religion; and the elimination of (at least, ‘the worst forms of’) child labour. These rights are largely procedural, rather than substantive; process rights often are viewed as necessary (albeit not sufficient) for achieving outcomes such as appropriate wages, compensation for overtime, and worker health and safety (Kerrissey and Schurhke Citation2016). In this article, I refer generally to ‘worker rights’ or ‘labour rights’, assuming that collective and procedural rights often are correlated with the capacity to achieve improvements in individual conditions. That said, we sometimes observe improvements in individual conditions absent the presence of collective labour rights (e.g. China and Vietnam; also see Mosley Citation2011 on Costa Rica).
6. Similarly, Shepherd (Citation2013) reports that domestically owned firms engaged in assembly for global value chains do not pay higher wages than domestically oriented firms, a finding that contrasts with the ‘multinational wage premium’ for employees of foreign-owned subsidiaries.
7. The largest number of production stages exists in transportation equipment, textiles and garments, metals and electronics. See ILO (Citation2015), Figure 5.7.
8. Henisz (Citation2000) argues, for instance, that firms’ choice of entry mode depends on the political hazards they face in the host country. Where multinationals assets are more fixed and where they worry more about political risks related to creeping or full expropriation, we might expect them to choose subcontracting over direct ownership. Also, see Kerner and Lawrence (Citation2014).
9. One implication of this ‘California effect’ on labour rights is that trade with lower standards countries – China and India, for instance – could be associated with a deterioration in labour standards, as consumers in those markets are less worried about the conditions under which the products they buy are produced.
10. In an analysis of over 10,000 firms operating in post-Communist countries, Berliner and Prakash (Citation2014) find that foreign-owned, exporting, and MNC subsidiary firms are more likely to adopt ISO 9001 and ISO 14001. These effects are greater where the domestic regulatory environment is weaker. Berliner and Prakash also argue that, in countries with strong regulatory systems, firms may have an incentive to adopt international certification standards; there, however, adoption is assumed to result from concerns about state intervention or sanction and, as such, it should be unrelated to firms’ involvement in the global economy.
11. See, for instance, ‘Factory Audits and Safety Don’t Always Go Hand in Hand’, National Public Radio, 1 May 2013. http://www.npr.org/2013/05/01/180103898/foreign-factory-audits-profitable-but-flawed-business.
12. For an analysis of the economic benefits of global supply chain participation, see ILO (Citation2015), Chapter 5.
13. Payton and Woo (Citation2014) find that strict labour laws in developing nations tend to reduce foreign direct investments; over time, however, the presence of foreign direct investment serves to encourage better labour rights practices. Hence, we also would do well to consider firm–government relations in a dynamic sense.
14. In 2015, 56 per cent of union registration petitions were denied, compared with 19 per cent in 2013. http://prospect.org/article/bringing-labour-rights-back-bangladesh
15. http://www.thenation.com/article/207841/two-years-after-rana-plaza-are-bangladeshs-workers-still-risk. With regard to Bangladesh, it also is worth noting that the programme addresses a single industry in a single country; while firms sourcing in Bangladesh may invest in factory improvements, they also may instead decide to locate production elsewhere. This relocation would reduce employment opportunities in Bangladesh, and perhaps generate new dangers for workers in other garment-producing countries.
17. Note, however, that non-democratic regimes may use other instruments, such as bilateral investment treaties, to import the credibility that their domestic institutions lack (Arias et al. Citation2016).
18. This reflects, in part, the fact that certain firms are more vulnerable than others to activist campaigns, which often use non-compliance with codes of conduct as a centrepiece of their campaigns. In their analysis of the anti-sweatshop movement, for instance, Bartley and Child (Citation2014) find that large, branded firms with positive corporate reputations were significantly more likely to be targeted by activist campaigns.
19. http://manufacturingmap.nikeinc.com/ provides data on each Nike manufacturing facility. In terms of direct employment, Nike reports nearly 32,000 employees in the United States, as well as an additional 30,000 in other locations.
20. It is worth nothing, though, that broad supply chains do increase the extent to which lead firms can credibly threaten to move production away from a problematic supplier, so there also may be conditions under which breadth is associated with labour improvements.
21. For example, see http://www.dol.gov/ilab/reports/child-labour/list-of-goods/
22. Note that gains to skilled workers via global supply chains also could lead to greater inequality among workers in a given economy. Tewari (Citation2010) makes this argument about the Indian garment sector, for example.