An important aspect of economic globalisation is the globalisation of the process of production. With the gradual dismantling of trade barriers, and capital flows becoming easier, globalisation of the process of production has also become easier. It is no longer necessary to produce goods in one location. Even though a product may bear the mark of being produced in a particular country, its components may have been produced in different locations. This is particularly the case with high-tech products for which R&D (research and development) is usually carried out in developed countries, components are made in other countries, and the final assembly may be done in yet another country. This approach is also used in producing labour-intensive goods like garments, shoes, etc. - with designs provided by developed countries, components produced by some countries and the final production undertaken in some others.
Thus, globalisation of production involves splitting of the global value chain into different components and their handling in an integrated manner irrespective of where they are produced. Its success depends critically on several conditions including the technical capacity of the producers of components and of firms to assemble them, the availability of workers with necessary skills, and the ability of managers to ensure delivery according to strict time schedule (the so-called "just-in-time delivery"). In some cases, e.g., for basic consumer goods like garments and shoes, the skills required are rather basic while in the case of others like electronics and their components, parts of capital goods, etc., higher-level skills are required. But what is regarded as key is the flexibility with which labour can be employed and their low cost. Of course, the arrangement has its positive as well as negative aspects.
Globalisation of the process of production has influenced the world of work in ways that have not been witnessed before. While some of the impact has been positive from the point of view of workers, others have given rise to serious concerns. In fact, the process of globalisation of production has led to serious pressure on the working class preventing real wages from rising and compelling them to work in adverse conditions and under unfavourable terms. The term "race to the bottom" has come into circulation in the context of such negative impact of globalisation. But this does not have to be the only consequence, especially since there are useful positive aspects from which the workers could benefit alongside the rest of the global community. The purpose of the present article is to explore possible pathways to such outcomes.
The first part of the article provides a very brief overview of changes in the world of work emanating from the process of globalisation of production. The second part points out that "race to the bottom" does not have to be the only consequence and that work can be organised along a high road of development, thereby upholding human rights and promoting human development.
GLOBALISATION OF PRODUCTION HAS POSITIVE ASPECTS
* The major positive aspect is the location of labour-intensive (usually export-oriented) manufactures in labour-abundant countries and the creation of an avenue for the absorption of surplus labour in sectors where wages and incomes may be higher than in the traditional sectors. That facilitates the transformation of the structure of employment towards sectors where productivity and incomes are higher than in traditional sectors.
* A related aspect is the creation of avenues for employment of women that were not hitherto available. While the early experience of export-oriented industrialisation creating jobs in industries like electronics and garments (e.g., in countries of East and South East Asia) requiring so-called "nimble fingers" illustrates this aspect, the more recent examples of increase in women's employment are provided by countries like Bangladesh and Cambodia.
* Developments related to women's employment in export-oriented industries include increase in women's participation in the labour force (e.g., in Bangladesh), higher growth of women's employment compared to men, and a rise in the share of women in paid employment.
* Location of modern manufacturing of the kind mentioned above, by generating demand for skills of different types, creates one of the basic pre-conditions for skill development in developing countries.
* Although R&D and activities relating to design and planning are normally carried out in developed countries and there may not be much scope for transfer of technology through such process of locating parts of production activity, a process of "learning by doing" may be engendered, thus creating grounds for entrepreneurship development. In the garment industry of Bangladesh, for example, a class of "managers" (if not real entrepreneurs) has emerged who are able to organise the process of production to meet the requirements of the global value chain.
* Opportunities for participating in the global value chain leads to investment, both by domestic and foreign investors, and thus creates the possibility of moving to a higher growth path - as has happened in Bangladesh.
NEGATIVE CONSEQUENCES: The process of participating in the global value chain and the resulting growth of economies have not been an unmixed blessing, especially if one considers the costs incurred in terms of the negative effects on the world of work.
* One feature that distinguishes industries emerging out of the process of globalisation of production is their direct link with work orders from buyers and hence the uncertainty in the size of operation that a producer needs to maintain. The risk that arises out of such uncertainty is usually borne by the workers of the industry in terms of the flexible nature of arrangements through which they are hired. Flexibility may be manifested in terms of the temporary nature of the contract (if a formal contract is given to workers), the compulsory nature of overtime work when required (often without appropriate compensation), possibility of termination without notice and often without severance benefits, and so on. In fact, the workforce in such industries does not resemble the industrial labour force that one is familiar with. Very few workers are hired on a regular/permanent basis.
* During the early phase of the development of the ready-made garment industry of Bangladesh, employment of workers without written contracts was almost universal. Even today, the practice of providing written contracts is far from universal, although issuance of appointment letters is one of the conditions mentioned in a memorandum of understanding (MoU) agreed upon in 2006. BGMEA (Bangladesh Garment Manufacturers and Exporters Association) claims the rate of compliance (on appointment letters) among their members to be 80-90 per cent. But other studies report much lower rates. In major industrial centres of India, unskilled production workers in the ready-made garment industry are usually engaged without formal contract which is given only to managerial and administrative officials. In ASEAN (Association of Southeast Asian Nations) countries (except in Singapore), the incidence of "non-standard employment" has increased during the 2000s; and that has happened even when economic growth was high.
* Even in formal enterprises, workers are often engaged without normal benefits and allowances, e.g., those that protect against illness, old age, unemployment, etc. Thus the boundary between formal and informal employment often gets blurred and informal employment does not remain confined to the informal sector alone.
* While increase in women's employment has been a positive impact of the globalisation of production, this has not been an unmixed blessing, and has been associated with a host of issues including discrimination in terms of wages and other terms of employment, higher incidence of women in informal and casual employment, and the imperative to combine household and reproductive responsibilities with income-earning activity.
* Competitiveness is a key word in the environment in which production is globalised, and the term is usually interpreted in the narrow and static sense of cost per unit of the item being produced. As costs of material inputs are often beyond the control of producers in developing countries, the onus of maintaining competitiveness in terms of cost usually falls on labour, and wage repression is a commonly used mechanism for achieving this goal. This is amply demonstrated by the decline in the share of wages in value added (or national income) that has been experienced by many countries - developed as well as developing.
* The frequency with which accidents occur in export-oriented industries shows that it is not only in terms of wages and other terms of employment that producers try to cut costs, poor work environment and unsafe workplaces also characterise the global value chains.
* In situations where workers often don't have even formal contracts, it is a far cry to think of their right to voice grievances and demands. Very small proportions of workers enjoy fundamental rights like freedom of association and of collective bargaining. Not only is the degree of unionisation very low, formation and joining of unions is actively discouraged in many developing countries. In addition to problems posed by the unfriendly (and often hostile) environment faced by workers and trade unions in such countries, an additional challenge is the fractious nature of unions and their image problem in pursuing the real goal of workers' interests. [The concluding part of the article will appear on April 16]
The author, an economist, is former Special Adviser, Employment Sector, International Labour Office, Geneva. rizwanul.islam49@gmail.com
Changes in the world of work
Rizwanul Islam | Published: April 14, 2015 00:00:00 | Updated: April 15, 2015 14:20:05
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