NEW POLITICAL ECONOMY, 2017
VOL. 22, NO. 2, 153–168
http://dx.doi.org/10.1080/13563467.2016.1273339
Workers’ rights in global value chains: possibilities for protection
and for peril
Layna Mosley
Department of Political Science, University of North Carolina at Chapel Hill, Chapel Hill, NC, USA
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.
ARTICLE HISTORY
Received 8 December 2016
Accepted 14 December 2016
KEYWORDS
Labor rights; multinational
production; supply chains
The nature of production and ownership is evolving, marked today by the importance of global
supply chain production. This change calls for a reassessment of the relationship between multinational production, on the one hand, and worker rights, on the other. In this article, I develop a set of
hypotheses regarding the conditions under which workers in global supply chains are most likely to
witness improvements in their procedural rights and working conditions. I suggest that such
improvements are conditional on the intersection of national governments’ incentives and developing country firms’ interest in rights protections. As such, this article highlights the continued importance – even as private governance efforts have intensified and sometimes succeeded – of political
institutions and political actors’ interests in the protection of labour rights. It also offers an agenda for
future empirical research, cast at the supply chain and firm, rather than at the country or industry
level.
1. Introduction: multinational production and labour rights
Scholars have long worried that the capacity of firms to locate production and sourcing overseas
increases the voice of capitalists at the expense of workers. Multinational firms offered tax revenues and employment creation to developing countries; their executives often were well connected politically to local elites and government officials. These firms typically choose from a
range of possible investment locations, increasing their power vis-à-vis local labour forces and
governments. Hence, the internationalisation of production brought with it a concern about
cross-national competition to attract capital, perhaps ending in a ‘race to the bottom’ in labour
(and other) standards.
CONTACT Layna Mosley
mosley@unc.edu
© 2016 Informa UK Limited, trading as Taylor & Francis Group
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The empirical record, however, suggested that a systematic link between foreign direct investment and government policy outcomes was limited. In the interplay among governments, multinational corporations and labour, multinational firms sometimes had positive, rather than a negative,
effects on workers’ rights. Some multinationals were interested in hiring at the top end of local
labour markets (Shepherd 2013); high standards allowed them to recruit and retain the most
skilled among local workers. Multinationals also could bring ‘best practices’ from their home
countries to their local hosts, and they might face pressure from shareholders and consumers –
given their visibility in their home locations – to act in ‘socially responsible’ ways. Indeed, past
research finds that, all else equal, the presence of foreign direct investment in developing countries
is associated with greater protection of collective labour rights (Mosley 2011). While workers in lowand middle-income countries often may work long hours in unsafe conditions, or experience the
denial of their rights to organise, bargain collectively and strike, directly owned multinational production may not be to blame.
The growth of supply chain production during the last two decades has created new challenges
for many of the world’s workers. Much of contemporary global production occurs not in facilitates
directly owned by hierarchically structured multinational corporations, but by firms of various sizes
and ownership structures participating in arm’s length transactional relationships with lead global
firms. Lead firms exercise varying degrees of control and influence over other participants in the
global supply chain (Gereffi and Mayer 2010).1 Lead firms often subcontract with a range of firms,
often in distant and diverse locations, for the production and purchase of inputs.2 Subcontracting
allows the diversification of production locations and reduces the risk related to any single subcontractor. Production processes may involve a series of subcontractor relationships, so that lead firms
have little idea of the ultimate sourcing.3 Subcontracting firms also have incentives to diversify;
many larger subcontractors produce for a range of lead companies. Branded products from different
multinationals may therefore be produced on different assembly lines in the same facility (e.g. Locke
2013).
While multinational corporations and their directly owned affiliates were estimated to employ 71
million individuals in 2014 – compared with 21 million in 1990 – a far greater number of individuals
are employed in firms (often domestically owned) that subcontract production for multinationals,
provide natural resource, agricultural and manufactured component inputs for multinationals, or
effect retail distribution and sales for multinationals (also see OECD et al. 2014). Still others work in
informal employment settings, but nonetheless produce inputs used in goods that ultimately are
traded internationally. The exact size of this global value chain-related employment is difficult to estimate (Shepherd 2013, Shepherd and Stone 2013), but a recent ILO (2015) analysis suggests that 20
per cent of the world’s workers labour in global supply chains.4 In developing and emerging economies, these supply chain-related workers are concentrated in manufacturing industries.
What does arm’s length production in global supply chains imply for the rights of workers?5
For market-based relationships between lead firms and subcontractors, or between domestic producers of inputs and their foreign-based customers, price competition can loom large. Winning and
keeping subcontracted production require the ability to produce a given quantity of an object, by a
given deadline, at a predetermined price. The demands of lead firms can change quickly over time,
especially for mass consumer products with short life cycles – apparel and electronics (see Locke et al.
2013), for instance.
As a result, cost and time pressures can generate violations of workers’ rights (i.e. Barrientos et al.
2011, Ruwanpura and Wrigley 2011), particularly for items whose production uses labour intensively.
Workers might be asked to work excessive overtime, perhaps without sufficient compensation; and
managers might worry that allowing workers the right to organise or strike will generate demands for
higher wages and create difficulties in meeting deadlines. Where employers can draw from a large
pool of surplus labour (Rudra 2002), they may have even less reason to protect the core rights of
their workforce. Hence, we might expect that subcontracted (compared with directly owned) production is associated with greater violations of labour rights (see Mosley 2011).6 Additionally,
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global supply chain workers – unlike their multinational employee counterparts – do not appear to
earn a wage premium. Domestically owned firms engaged in assembly for global value chains do not
earn significantly higher wages than workers in equivalent domestically focused firms; supply chain
participation appears to have no (positive or negative) systematic effect on wages (ILO 2015, Shepherd 2013). It therefore is not surprising that today’s activists, scholars and consumers can easily
identify myriad violations of fundamental labour rights. This partly owes to the increased technological capacity to share information from distant production locations. But this is not merely a case of
being better able to observe what was always there: the rise of supply chain, arm’s length production
appears to have brought with it significant intensification of threats to workers’ rights.
A second set of concerns about contemporary worker rights relates not to supply chains generally,
but to multinational corporations specifically. Multinationals continue to perform some production
in-house, and to directly employ workers in a range of locations. But, compared to foreign direct
investment of the 1990s or early 2000s, today’s multinational corporations are characterised by
greater diversity in their countries of origins, and in the political institutions and labour standards
in place in those countries (Pandya 2016). As direct investment from emerging market countries
(e.g. Brazil, China and India) has grown, so has the existence of lead firms – and large supplier
firms (Gereffi 2014) – based in developing countries. Some of these firms have acquired affiliates
in advanced economies (UNCTAD 2014, ILO 2015), potentially inverting the traditional model of
firms based in high-standards countries bringing their practices to their affiliates in weaker standards
jurisdictions. Additionally, some contemporary multinational firms operate less as hierarchical entities, with direct control and standardised practices emanating from corporate headquarters
(Johnson 2000), and more as parallel entities under a common financial ownership (e.g. Kristensen
and Zeitlin 2005). Furthermore, the market for internationally sourced products is shifting, with consumers in middle-income developing countries occupying a larger role. These consumers may have
less interest in ethical production and sourcing, again blunting a mechanism by which labour rights
were protected in the past. Each of these trends suggests that workers in developing countries face
growing challenges to achieving core rights and decent working conditions.
In this article, I point out that an essential, if sometimes overlooked, determinant of labourrelated outcomes in global supply chains is the national government. Specifically, we need to consider the extent to which key political actors have incentives to pass labour laws and regulations
which meet international standards, to devote resources towards monitoring and enforcing such
standards, and to cooperate with other governments to avoid ‘races to the bottom’. In Section 2,
I offer an overview of the pressures for governance generated by the rise of global supply
chains, and the resulting efforts towards private governance of labour-related issues. I note the
shortcomings in private governance-based approaches. Section 3 develops the argument that
(national as well as subnational) government actors are key players in determining labourrelated outcomes in a supply chain context. In Section 4, I present several hypotheses regarding
the conditions under which labour rights are most likely to be protected within global supply
chains. Section 5 concludes.
2. Workers, global supply chains and the private sector
The global value chains literature rightly draws our attention to the spread of production and consumption across multiple national political jurisdictions. In the last two decades, nearly all economic
sectors have experienced a growth in the number of production stages (ILO 2015).7 Fragmented production processes create a disconnect between the geography of public regulatory structures (typically, national, subnational and/or local) and the geography of production. The capacity of firms to
relocate (or threaten to relocate) their production or sourcing to other jurisdictions allows for regulatory arbitrage. If individual governments insist on implementing and enforcing higher standards
than their peers, then they may lose investment, jobs and orders to other jurisdictions. Hence, governments may find themselves very tempted to enter into ‘races to the bottom’.
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The change over time in the structure of production, which itself is partly endogenous to the
nature of political institutions,8 has created governance challenges. Intergovernmental institutions
often are unwilling or unable to address labour issues. The International Labour Office (ILO) acts to
set standards and norms through its conventions, and to provide some technical assistance to
national governments; but its material resources are quite limited, as is its means of directly enforcing
its rules (Mosley 2011). At the same time, the World Trade Organization has taken the view, since the
late 1990s, that it is a second-best organisation for the governance of labour-related issues. Such a
view allows the WTO to avoid conflict between developed and developing country members. And
while developed country governments had increasingly come to link labour and human rights
with market access via preferential trade agreements (e.g. Kim 2012), labour-related conditions in
trade agreements often are motivated more by the need to gain domestic support for agreements
than by a concern about workers abroad (Hafner-Burton 2009, Lechner 2016).
Beginning in the mid-1990s, a series of high-profile cases brought to light harsh working conditions and collective labour rights violations (most visibly, via the anti-sweatshop movement; see
Seidman 2007, Bartley and Child 2014), as well as concerns about environmental degradation and
the treatment of indigenous peoples, in a range of countries and industries. In response, many multinational firms made public commitments to corporate social responsibility, implementing their own
codes of conduct or subscribing to industry-wide standards. These commitments suggested that
many firms viewed ‘doing well’ and ‘doing good’ as compatible objectives, and that even if national
governments and intergovernmental organisations were unable to effect protection of workers’
rights, private actors might themselves be able to ensure core labour rights and appropriate
working conditions (Gereffi and Mayer 2010). At the same time, private sector modes of governance
were a means by which activists, NGOs, national governments and corporations could address some
of the negative consequences of economic globalisation, without significantly restricting its scope or
operation (Bartley 2007). Corporate social responsibility programmes, activists hoped, would facilitate
‘naming and shaming’ of visible firms that either did not participate in private governance initiatives
or that did not keep their commitments to such initiatives (Seidman 2007).
Hence, a ‘market for virtue’ emerged, in which industries, NGOs and intergovernmental organisations created corporate codes of conduct and social responsibility programmes (Bernhagen and
Mitchell 2010, Prakash and Griffin 2012, OECD et al. 2014), and in which firms issued regular
reports on their (and, often, their suppliers’ and subcontractors’) labour-related practices and outcomes (Vogel 2005, Bartley 2007, Seidman 2007). The rise of private sector regulation of labour
issues coincided with more general trend towards private governance (Mosley 2009, Buthe and
Mattli 2011).
Private governance of labour brought with it a range of concerns regarding effectiveness and
compliance. Some initiatives involve a commitment to general principles, but little in the way of
direct monitoring or enforcement (Locke et al. 2013). For example, the UN Global Compact, launched
in 2000, and over 8000 participating firms, depends mostly on self-reporting of environmental,
human rights and labour-related practices by participating firms. With such codes, firms’ commitments may be more symbolic than substantive (Lim and Tsutsui 2012). Additionally, the implementation of codes often involved the use of third-party auditors, who might have incentives not to reveal
problems to the firms which hire them, and whose visits typically are announced and occasional.
Auditors also may encounter local managers who keep a second (accurate) set of records or give
‘vacation’ days to keep vocal workers from sharing information with inspectors. Moreover, the diversity of codes of conduct and auditing protocols can allow firms to engage in ‘forum shopping’, and to
privilege some aspects of the codes (such as excessive working hours) at the expense of others (such
of freedom of association; see Anner 2012). Furthermore, the multiplicity of codes means that supplier factories, which often produce for multiple brands, may be asked to implement numerous
codes, may experience multiple audits each year and may come to suffer from ‘monitoring
fatigue’ and ‘compliance limbo’ (Locke et al. 2013).
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It is worth noting that corporate and industry codes of conduct are not the only mechanism by
which market- or private sector-based pressures could improve labour rights in global supply
chains. Behind the move towards corporate social responsibility is an assumption that consumers,
especially those in developed nations and especially those who purchase branded or luxury products,
are willing to pay more for ethically produced items (e.g. Hainmueller et al. 2015). We might therefore
expect that a trade-based diffusion of rights, in which developing countries that export to high-standards destinations will witness improvements (Greenhill et al. 2009).9 Furthermore, lead firms might
be compelled by other actors to meet certain standards. In the collegiate apparel sector, a small
portion of the overall US clothing market, colleges and universities have collectively insisted since
the late 1990s that firms producing their licensed apparel meet certain standards (Bartley and
Child 2014, Berliner et al. 2015a). Similarly, firms operating in weakly regulated domestic environments may have incentives to adopt international certification schemes, particularly as a means of
increasing their attractiveness as export and supply chain partners (Potoski and Prakash 2009, Berliner and Prakash 2014).10 And for publicly traded firms, pressure from large shareholders (e.g. the California Public Employees’ Retirement System, CALPERS) could provide additional incentives to attend
to workers’ rights (Torres et al. 2012).
More broadly, private governance has been insufficient to effect significant improvements in
labour conditions in many developing countries (e.g. Appelbaum and Lichtenstein 2016). Consumers
and shareholders are often less attentive to labour issues than activists might hope (Hainmueller and
Hiscox 2015). While some lead firms may have a genuine desire to improve conditions throughout
their supply chains, this desire often conflicts with the competitive pressures of the contemporary
global economy. Moreover, while lead firms may be effective at monitoring policies and outcomes
within their directly owned facilities, they are less able to do so when they subcontract all or part
of their activities to other firms, many of which in turn engage in subcontracting of their own.
For instance, in Bangladesh and Pakistan, factories that were the sites of fires and collapses in 2012
and 2013 had been inspected and deemed to meet lead firms’ standards. While the audits identified
problems, the inspections did not result in factory closures, in the removal of lead firms’ business from
these locations, or in the necessary safety improvements.11 Similarly, Locke et al.’s (2013) analysis of
electronics firm Hewlett-Packard and its suppliers in the Czech Republic and Mexico concludes that,
‘freedom of association in the electronics industry remains a persistent challenge, and for this issue,
there is no substitute for effective government enforcement of national labour laws’ (544). More
broadly, Locke’s (2013) analysis, based on rich firm-, supplier- and industry-level data, suggests
much caution regarding private governance of labour standards and working conditions. While
improvements can occur absent public regulatory pressure, as they did for temporary workers in
Mexico, such improvements likely require not only pressure from the lead firm, but also activity by
a local NGO as well as national laws on the books (Locke et al. 2013). In other instances, it is the existence of competent and impartial bureaucracies that is central to generating compliance with domestic labour laws (Piore and Schrank 2008). Ultimately, the most successful private governance
schemes may be those that interact, and are consistent, with the incentives of government actors
and agencies (Amengual and Chirot 2016), a theme I return to in Section 3. In sum, while the functional logic calling for private sector governance certainly is reasonable, it gives insufficient attention
to the continued importance of state actors in providing workers with the capacity to organise and
bargain, and in ensuring that working conditions meet minimal standards.
3. The continued relevance of government actors
National governments continue to play a key role in affecting the condition of workers in global value
chains, and in determining the extent to which workers share in the gains from multinational production.12 Governments decide not only whether to pass labour laws and regulations, but also
whether to devote resources towards monitoring and enforcing such standards, and whether to
allow or repress civil society actors and labour rights activists. They may face incentives, given
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their relationships with local elites, to fail to uphold basic protections for workers and to limit civil and
political rights. In other cases, however, these same governments may choose to actively intervene to
improve working conditions, and they may facilitate the growth and development of labour movements and civil society groups. They may do so as part of an attempt to serve the interests of workingclass voters, or they may do so in response to external pressures, such as those contained in trade and
investment agreements or communicated by human rights activists. As scholars interested in labour
rights in a world of global supply chains, we should seek to identify the conditions under which
national governments are most – and least – likely to offer protection to workers in global value
chains.
Given the central role of governments, it is important to treat them as strategic actors, rather than
as passive recipients of the pressures generated by the rise of multinational production and global
supply chains. Governments make broad choices about how to engage with global capital and
trade markets – for instance, in which sectors to allow foreign ownership versus in which sectors
to require joint ventures with local firms; or whether to impose performance requirements on
firms operating in export processing zones. Governments also make specific choices about the investment incentives to offer to particular foreign firms, and about how and to what extent to regulate
labour and working conditions. For example, in Payton and Woo’s (2014) formal model, national governments set a level of labour rights protection; in doing so, they consider both the costs of enforcing
labour regulations and the benefits of attracting foreign investment.13
National governments often are interested in competing to attract international investment and
production, not least because such activities can generate jobs, improve balance of payment positions and generate higher rates of economic growth. Government actors’ interest in such economic
outcomes stems from their desire to remain in political office. This desire, in conjunction with a country’s political institutions, leads political actors to serve the interest of some groups at the expense of
others. For instance, when governments rely on support from local capitalists, they may fail to provide
or enforce basic protections for workers; alliances among host country governments, local elites and
foreign capital – and excluding local labour – are not new (e.g. Evans 1979). In other instances, governments actively intervene in order to improve working conditions. They may do so as part of an
attempt to serve the interests of working-class voters, or in response to external pressures.
At the level of workers and developing country labour unions, it is tempting to treat them as
passive recipients of the effects of multinational production (also see Barrientos et al. 2011). Given
that they are largely immobile – they have little capacity to exit their national, or perhaps even
their local, labour market – it is easy to ignore their potential agency in responding to a global
supply chain world. Certainly, where labour markets are slack, informal sectors are large, and governments limit the right of individuals to freely seek employment, workers have a limited capacity to
effect their own protection. Yet, many private regulatory initiatives assume that workers have the
legal right to organise, in that they rely on informed and organised workers to file complaints (e.g.
ITUC 2011) or to provide accurate assessments to auditors and inspectors. It is worthwhile, then,
to consider whether and under what conditions workers have agency (see Mosley and Singer 2015).
In reality, independent labour unions do not exist in many production locations, and workers who
attempt to create or join unions are dismissed from employment. Governments may provide the legal
right to organise, but fail to enforce this right in practice (Mosley 2011). Without empowered workers,
even the most ambitious private regulatory programmes may fall short: in Bangladesh, for instance,
the centrality of the readymade garment sector to the country’s economy and the tight connection
between political elites and factory owners have resulted in a political system which greatly limits the
legal protections and the practical voice of workers. While union members have the right, under the
Accord on Building and Fire Safety, to participate directly in the inspection process, not all factories
have union representation. Recent pressure from the EU and the US has contributed to a greater
union presence in Bangladesh, but many union locals have been denied the right to register,14
and union members continue to report dismissals, intimidation and physical harm.
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Despite recent changes to Bangladesh’s labour code, it remains to be seen whether these will generate substantive improvements in practice (also see Berliner et al. 2015a), especially in light of government officials’ and employers’ hostility towards trade unions.15 Consistent with such concerns,
in June 2015, the country’s finance minister stated, in a meeting with garment exporters, that inspections under the auspices of the Accord and the Alliance were an attempt to retard progress in that
sector. He went on to describe the private sector efforts as ‘a noose around the neck’ of Bangladesh’s
development.16
To take another example, the International Finance Corporation (IFC) now includes a set of performance standards in all of its loan contracts; borrowers that violate these standards put their financing at risk, and one of these standards includes freedom of association. But, particularly in industries
and countries without independent union movements, workers often are unaware of the performance standard mechanism; the standard is meant to facilitate labour unions but, absent unions,
workers are unlikely to learn about the standard (Graz et al. 2015). We ought therefore to ask
about the conditions under which national governments are most – and least – likely to offer de
facto as well as de jure protection to workers in global value chains, as these protections allow
workers to benefit from private sector and private–public governance efforts (also see Amengual
and Chirot 2016).
4. Possibilities for protection and peril: hypotheses
The preceding sections highlight some of the challenges associated with labour rights protections
and improvements in the context of global supply chains. In this section, I offer four causal hypotheses regarding the conditions under which worker rights are most likely to be protected. These
hypotheses offer an agenda for future empirical work, ideally cast at the firm and supply chain
(rather than country- or industry-) level of analysis.
First, where supply chain participants are located in democratically governed political regimes,
attention to labour-related issues is more likely. When we consider the influence of governments
on labour rights outcomes, we must be attentive to both government capacity (are they able to
protect workers? Do they have the resources to identify and address violations of labour rights?)
and government willingness to act (does the government choose, given its own interests, to
protect the rights of labour, sometimes at the expense of employers?). Many private sector- and intergovernmental organisation-based efforts have targeted government capacity (e.g. Locke 2013), but
capacity matters only where a will to protect rights also exists.
Political will – governments’ inclination and incentives to protect workers (or some subsets of
workers – may affect both the passage of de jure protections for workers and their de facto enforcement. Compared to their authoritarian or hybrid-regime counterparts, democratic regimes are more
likely to protect the rights of individuals across the economic spectrum, rather than the interest of
only elites. While many democratic regimes are interested in reaping the tax, employment and economic growth benefits associated with openness to international trade and investment, they also will
be more inclined to ensure that the gains from openness accrue not only to local factory owners or to
foreign entities, but also to local workers. By contrast, long-term improvements in labour conditions
in China are difficult to imagine given the central government’s unwillingness to allow the formation
of independent unions. As long as the government prioritises revenue generation and local economic
development, workers’ rights improvements will be difficult to effect (Berliner et al. 2015b).
Existing studies of the determinants of labour rights at the national level – which, admittedly,
masks significant variation across industries and regions – find that countries that are more democratic display, all else equal, higher levels of respect for workers’ collective rights (Mosley 2011). Similarly, Berliner et al. (2015b)’s cross-sectional time series analysis suggests that the effect of state
capacity on respect for workers’ rights is conditional on political will. State capacity has a positive
and significant effect on labour rights when governments are more democratic, and when leftleaning governments (see below) are in office, but not otherwise. Hence, capacity matters only
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when coupled with political will. The causal connection among democracy, labour rights and supply
chain production also is likely somewhat endogenous: foreign firms may be more inclined to locate
their activities in democracies, where they are concerned with the rule of law and the protection of
property rights (Pandya 2016).17
Second, among democracies, those with strong labour movements, with left-leaning governments, and with a history of left governments, are more likely to protect the rights of globally
engaged workers. Typically, left-leaning political parties draw support from working-class voters, as
well as from labour unions. While left parties in the developing world have witnessed their fortunes
rise and fall during the last decade, they remain important actors in many countries. Moreover,
countries with a legacy of left party governance – even if left parties do not currently occupy the
executive branch or hold a majority in the legislator – typically have labour laws that are more protective and that have facilitated the existence and operation of labour unions. Such countries should
be more inclined to insist on the protection of core labour standards (e.g. Murillo and Schrank 2005)
and to facilitate labour’s capturing of the gains from industrial upgrading (Barrientos et al. 2011, Shepherd 2013). For example, workers in the garment sector in Sri Lanka were better protected in the
2000s – albeit less so during the global economic downturn of 2008–2009 – than many of their
counterparts, because the country had a well-developed trade union movement and a long tradition
of effective government regulation of labour (Ruwanpura and Wrigley (2011). On the other hand,
where labour unions exist but operate more as legacies of elite power, protest and strikes will
occur as elite-driven phenomena, which do not serve to benefit rank and file workers (e.g. Robertson
2007).
While contemporary left-leaning governments may welcome the arrival of foreign direct investment, especially when it creates well-paying jobs (Pinto 2013), they will nonetheless pay greater
attention – compared to their centrist and rightist counterparts – to workers’ rights and conditions.
Earlier institutional choices also condition the behaviour of governments vis-à-vis workers. Rudra
(2007) distinguishes between productive and protective welfare state regimes in developing
countries. The former is characterised by a focus on the efficiency of local firms, which often includes
labour market deregulation and fewer protections for workers. The latter, by contrast, feature
attempts to decommodify labour and to privilege the interests of workers – especially those in the
formal sector – over those of domestic and foreign capital. Existing welfare state structures are
often quite path-dependent, even in the face of external pressures (Huber and Stephens 2001). Therefore, we might expect states with protective public sectors to be more likely, all else equal, to guard
the rights of workers within global production chains. We also might anticipate that, where union
density and union centralisation are greater, governments will be more likely to distribute the
gains from economic growth throughout society, rather than to a narrow set of economic elites
(Huber et al. 2016).
Again, existing research finds a link between left governments and collective labour rights in the
context of directly owned multinational production (Mosley 2011). And, in their analysis of IMF loan
programmes, Caraway et al. (2012) find that democratic countries with stronger domestic labour
movements are more concerned about labour’s opposition to IMF conditionality requirements,
and are therefore more likely to receive loan programmes with less intrusive labour-related conditions. It is possible, however, that a split exists between workers in the formal sector (typically
those represented by labour unions) and those in the informal sector. When informal sector
workers are participants in global supply chains, they may benefit less from the presence of leftleaning governments and strong labour movements. Rather, the informal sector may serve as a
‘safety valve’, allowing economic opportunities where formal employment opportunities are somewhat limited; providing a supply of low-cost and unregulated labour for the lower rungs of supply
chains; and preventing greater labour market competition in the formal sector (Milner and Rudra
2015).
Third, when lead firms and consumer markets represent high value-added markets with rightsaware consumers and shareholders, the protection of supply chain workers’ rights is more likely.
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This expectation returns us to the role of private sector actors in labour-related outcomes. In some
instances, private actors may have incentives to address labour-related issues, especially when
they face pressures from transnational rights advocates, activist shareholders or consumers.
Here, spatial nature of supply chain relationships makes a difference. Lead firms that are located in
high-standard destinations are likely to create incentives for their supply chain partners to product
worker rights. This expectation is consistent with the finding that, all else equal, developing countries
that trade with high-standards destinations are more likely to experience improvements in their collective labour rights (Greenhill et al. 2009). Several mechanisms underlie this relationship. Developed
nations often make preferential or unilateral Generalized System of Preferences market access conditional on the protection of worker rights; if such conditionality is sincere, it also will contribute to
this effect. More important, shareholders and consumers in developed markets, perhaps especially in
Europe (in contrast to the US), are attentive to the conditions under which goods are produced. As a
result, lead firms have material incentives to guard against reputational risk – that is, to avoid the
negative spotlight that comes from the identification of labour right violations in their supply
chain partners. While such mechanisms operate imperfectly, we can expect that a ‘California
effect’ as well as ‘China effect’ operate: developing country firms that want to win and keep business
of branded, higher valued-added lead firms will have incentives to protect labour rights. Firms, on the
other hand, that are involved in low-margin, volume-based production will not. Along these lines,
Malesky and Mosley (2016) report that Vietnamese firms are more willing to invest in improvements
to their labour practices when their potential supply chain partners are located in Europe, rather than
India. Such an effect appears more pronounced for firms in textiles and apparel, rather than in plastics
and rubber, which suggests that this effect may be driven in part by the ability of lead firms and consumers to observe labour conditions in supplier factories, as well as by the potential for higher markups in higher income consumer markets (also see below).
These expectations also mirror the conditions under which the corporate social responsibility
movement has found its greatest success – among lead firms which produce branded, higher end
products (also see Gereffi et al. 2005, Gereffi and Mayer 2010);18 among foreign-owned (versus
domestically owned) supplier firms and among suppliers which have longer term relationships –
and therefore, greater incentives to invest in meeting a given lead firm’s standards – with lead
firms (Barrientos and Smith 2007, Locke et al. 2009, Locke 2013).
Fourth, and related, when supply chains are narrower and shallower, it is easier for lead firms to
hold supply chain partners accountable. Many supply chains are multi-level, reflecting efforts to
locate each stage of the production process in its most efficient location. Some supply chains also
include a variety of contractors at each level, reflecting firms’ desire to diversify their subcontractors
and, therefore, to minimise the potential for disruption to their production. To take perhaps the most
visible example, Nike Inc. reports that its apparel, equipment and footwear products are produced in
666 factories worldwide; these facilities are located in 44 countries, and they employ just over one
million workers in total.19 Factories that subcontract for Nike typically produce for other global
brands as well. The facilities vary in size; footwear factories typically are larger (and more capital intensive) than apparel contractors. For instance, Nike lists 170 contractor facilities in China, employing an
average of 1245 workers; 33 facilities in Thailand (average employment: 1105 workers) and 42 facilities in Indonesia (with an average of 4729 workers per factory). In Vietnam, second only to China in
the number of contractor factories, Nike works with 81 facilities, employing an average of 4817
workers, and ranging in labour force size from 68 to 23,888.
Some of these contracting firms are themselves large and multinational in ownership and production. The largest Nike contractor in Vietnam, Vietnam Chingluh Shoes Company, is a subsidiary
of the Taiwan-based Chingluh Group, which operates 14 manufacturing facilities in China, Indonesia
and Vietnam, contracting production for several global brands, including Adidas, Nike, Reebok and
Mizuno. Similarly, Hansae Vietnam, the largest Nike contract apparel facility in Vietnam, is based in
South Korea. In Vietnam, its largest overseas operation, it employs over 20,000 workers in several
facilities. Hansae sources fabric via its Shanghai office; employs assembly workers in Indonesia,
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Burma, Guatemala and Nicaragua, as well; and, since 2008, operates a design facility in New York.
Meanwhile, Freetrend Vietnam Industries, another large Nike contract manufacturer (with approximately 20,000 workers in Vietnam), was founded in Vietnam in 1996. It began contracting with
various global brands, including Nike, in 2004; Freetrend has since expanded its operations to
include several locations in Vietnam, as well as factories in China and Indonesia.
If we assume that lead firms sometimes do want to engage in monitoring labour conditions in
their supply chains, doing so is easier when supply chains are shorter, as well as when they are narrower. Shorter supply chains reduce the number of principal–agent (lead firm to subcontractor; subcontractor to sub-subcontractor) relationships at play, thereby limiting the potential for slippage
between the desired standards and those on the ground. Moreover, narrower supply chains not
only reduce the number of facilities to which lead firms must pay attention, but also increase the
incentive for lead firms to gather information about each supplier – a narrower base makes reallocating production in the wake of labour issues more difficult to achieve. At the same time, from the point
of view of supplier firms, a broad supply chain implies more intense competition, and a greater risk of
losing its contracts. Workers who demand greater protection or benefits may find that their firms
simply lose business to other firms. Much apparel production has this quality, even though the
garment sector offers job opportunities to many women, migrants and less skilled workers (ILO
2015).20
If, on the other hand, a supply chain relies on a narrow set of suppliers at one or more stages, then
workers in these supplier firms can use the lead firm’s vulnerability to the interruption of the flow of
inputs to insist on the protection of labour rights. Along these lines, workers in the electronics sector
have had more success at capturing some of the gains from global supply chain participation (ILO
2015), not only because the sector is more knowledge-intensive (creating an incentive to retain
skilled workers) but also because narrower supply chains increase the bargaining leverage of supplier
firms. Similarly, where lead firms are few and large, while supplier firms are small, lead firms can more
easily insist on certain labour-related standards (if they so desire). This situation characterises global
supermarket chains, for instance (Gereffi and Mayer 2010). Therefore, as above, we might expect that
some of the variation in supply chain breadth and depth reflects industry-specific factors, as well as
firms’ assessments of political and economic risk.
Note that a narrow supply chain in no way guarantees better treatment for workers, especially at
early stages of supply chains, which frequently involve informal work arrangements. An extreme
example is the extraction of coltan, tungsten and tin; a limited set of locations supply the bulk of
global supply of these materials. The mining stage often is controlled by militant groups and
results in the exploitation of workers, exposure to hazardous conditions and the use of child
labour.21 Such instances notwithstanding, however, narrower supply chains offer a greater probability that, if government actors are sympathetic to the protection of labour, workers will achieve
better treatment.
Supply chain dynamics also may depend on the commodity that is produced or used: if, for
instance, there are few sources of an important natural resource, its suppliers will have more leverage
vis-à-vis lead firms. Other vulnerabilities result from technology, transportation and coordination
costs. When such costs rise – for instance, with global oil prices – lead firms may reduce the size
of their supply chains (also see ILO 2015). Gereffi (2014) notes that, during the last decade, multinational firms have consolidated and concentrated their supply chains (also see Gereffi and Mayer
2010). The rationalisation of supply chains could make it easier for lead firms to pressure supplier
firms to improve standards. But, depending on the industry, supply chain contraction also could
transfer influence from lead to supplier firms, in that lead firms may become reliant on inputs
from a single supplier. At a more general level, then, variation in supply chain structures should
create variation in the capacity to protect workers, all else equal.
These four hypotheses offer an agenda for research into the consequences of global supply chain
for workers’ rights and working conditions. Each causal claim identifies independent variables which
should help to explain variation in labour-related outcomes. Given the causal complexity of labour
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163
rights, it is likely that the effects of such variables often are conditional – for instance, that the impact
of left-leaning political parties is greater for supply chains that produce goods for high-standards,
high value-added destinations. Testing these hypotheses empirically requires that we consider
new empirical approaches; within political science, it implies moving away from cross-sectional
time series analyses cast at the country (or industry) level to firm-level studies, or to analyses
which consider multiple levels (firm, sector and country, for instance) of independent variables. Moreover, testing these expectations also suggests that, in some cases, the unit of analysis should be the
supply chain itself, which occupies a number of political jurisdictions and, perhaps, multiple economic sectors. Drawing comparisons across supply chains, as well as across countries, will allow for
a better assessment of the interaction of firm-, industry- and government-level forces.
It also is worth noting that other factors also may affect outcomes for workers in global supply
chains. To take one example, developed democracies sometimes attempt to link trade with
human and labour rights (Hafner-Burton 2009, Lechner 2016), including labour-related conditions
in unilateral preference schemes and reciprocal preferential trade agreements. Rights-based conditionality is not necessarily effective, in that it relies on ex post enforcement by partner governments.
Governments are not necessarily willing to rescind trade benefits, especially when PTA partners are
strategically important, or when powerful domestic firms stand to lose from the suspension of trade
and investment ties (e.g. Spilker and Böhmelt 2013). Aware of the enforcement problem, rights advocates have increasingly demanded, and sometimes achieved, greater ex ante attention to labour conditions, so that the negotiation stage can create additional pressures on developing country
governments (Kim 2012, Schrank 2013). Other forms of conditionality – for instance, linking
labour-related outcomes to access to project financing from theIFC or to investment guarantees
from the Overseas Private Investment Corporation also could help to tilt governments’ incentives
more in the direction of protecting workers’ rights.
Another possibility for improving conditions comes with the recent growth of Global Framework
Agreements (GFAs), concluded between the management of a multinational corporation and one or
more global union federations. GFAs apply throughout the multinational firm’s directly owned affiliates and subsidiaries; most GFAs also apply beyond the firm’s boundaries, to subcontractors and
perhaps to suppliers. The use of GFAs expanded dramatically in the 2000s, with over 100 agreements
signed by the end of 2013 (Sydow et al. 2014; also see Evans 2014). Like other forms of private sectorbased governance, however, the utility of GFAs remains to be seen: the vast majority of GFA activity is
based in Europe. Sydow et al. (2014) report that only 17 of the GFAs they catalogue involve non-European multinational corporations. And where framework agreements are in place, their effectiveness is
thus far mixed: the labour conditions contained in the agreements are more likely to be applied when
unions mobilise pressure against the firm (Sydow et al. 2014).
Finally, various multistakeholder initiatives now seek to bring together workers and labour unions
in producer countries; lead firms and retailers in consumer countries; and suppliers and subcontractor
factories in production locations. These initiatives typically also involve national governments and
intergovernmental organisations. The Better Work programme, a collaborative effort focused on
garment sector production and spearheaded by the ILO and the IFC, is one such effort. Now
active in eight countries, the programme emerged from efforts in the early 2000s to link working conditions in apparel factories in Cambodia to access to the US market. For participating countries and
garment manufacturers, Better Work offers improved export access; for workers, it seeks to improve
conditions at work. While it is difficult thus far to evaluate the impact of Better Work – neither
countries nor factories are randomly assigned to participate in the programme – it is worth noting
that the programme assumes the cooperation of national governments, as well as the existence of
domestic labour laws which protect core labour rights. For instance, in 2012, following exploratory
work with Bangladesh, the ILO and World Bank concluded that they would not launch a Better
Work programme there until the country’s labour laws were overhauled (Bolle 2014; also see Amengual and Chirot 2016).
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5. Conclusion
In sum, the protection of workers’ rights in global supply chains is difficult to effect, and it also presents challenges for causal and empirical analysis. Appropriate protections for labour require that the
incentives of participating firms (foreign or domestic) and host country governments align. This alignment is more likely in industries, activities and time periods in which the demand for workers – or for
workers with particular skills – exceeds the available supply of workers, rendering workers more able
to insist upon sharing some of the gains from participation in global supply chains (Shepherd 2013).22
Indeed, as shortages of skilled as well as unskilled labour emerged in coastal China in the early 2010s,
these workers became better able to effect improvements in their wages and working conditions. The
willingness of employers and governments to protect workers’ rights also will be greater where
foreign governments, intergovernmental organisations, shareholders and consumers are attentive
to labour rights and working conditions. It is under such conditions that we are most likely to
observe effective government regulation and enforcement, which is ‘probably the most important
and sustainable mechanism for improved labour standards’ (Lake et al. 2015: 3).
In some cases, by contrast, governments are part of the problem, given the incentives they have to
serve the interests of investors and factory owners at the expense of local labour. But, if we want to
understand the conditions under which workers are better or worse protected in these supply chains,
governments’ incentives and interests must remain a key part of the causal explanation. Where both
the will and the ability to protect workers exist, or can be created, governments are much more likely
to complement the many current efforts to regulate supply chains via private sector governance.
Changing governments’ incentives is by no means straightforward, but developed country governments, labour rights activists and labour unions may be able to do by drawing on the (sincere)
use of labour-related provisions in global trade agreements; by more effectively harnessing consumer
and shareholder pressure in home jurisdictions to supplement such provisions; and by encouraging
the expanded use of GFAs, which limit the ability of firms to engage in regulatory arbitrage across
their supply chains.
At the same time, a focus on national governments as part of the solution to labour rights in global
supply chains should not ignore the fact that countries vary in the structure of their labour markets, in
their comparative advantages and in their industry profiles (OECD et al. 2014). The most effective
mechanisms for improving labour rights in global supply chains may vary across industries (Barrientos et al. 2011) and among firms in the same industry (Dallas 2015), as well as across countries and
over time. Hence, scholars of worker rights and global supply chains must work to find the best
means of disentangling the complicated causal processes that lead to better, or worse, outcomes
for supply chain workers.
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 (2015) and Gereffi (2014).
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 (2014), Gereffi
et al. (2005), and Gereffi (2014).
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
2016). 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
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6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
165
sometimes observe improvements in individual conditions absent the presence of collective labour rights (e.g.
China and Vietnam; also see Mosley 2011 on Costa Rica).
Similarly, Shepherd (2013) 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.
The largest number of production stages exists in transportation equipment, textiles and garments, metals and
electronics. See ILO (2015), Figure 5.7.
Henisz (2000) 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 (2014).
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.
In an analysis of over 10,000 firms operating in post-Communist countries, Berliner and Prakash (2014) 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.
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.
For an analysis of the economic benefits of global supply chain participation, see ILO (2015), Chapter 5.
Payton and Woo (2014) 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.
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
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.
http://www.thedailystar.net/business/alliance-shocked-muhiths-comments-100441.
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. 2016).
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 (2014) find that large, branded firms with positive corporate reputations were significantly more likely to be targeted by activist campaigns.
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.
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.
For example, see http://www.dol.gov/ilab/reports/child-labour/list-of-goods/
Note that gains to skilled workers via global supply chains also could lead to greater inequality among workers in
a given economy. Tewari (2010) makes this argument about the Indian garment sector, for example.
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.
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L. MOSLEY
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