The ‘Creating and Capturing Value’ project seeks to understand how various actors in the global apparel industry – including brands and retailers, their shareholders, supplier firms, and factory workers – benefit from, or are burdened by, export-oriented apparel manufacturing in Ethiopia and Kenya. To guide our analysis of worker outcomes, we have developed a novel approach for explaining the evolution of labor regimes in labor-intensive segments in export industries in the global South. We call it the labor-led profit squeeze approach. Our arguments draw on ideas from global labor studies, structural development economics and GVC research. In this blog post, we introduce the conceptual framework – for an illustration of how it can be used in an empirical analysis, see this previous post.
Worker power and capitalist fixes
Inspired by Beverly Silver's book Forces of Labor, we argue that the evolution of labor regimes is driven by a dialectic between workers’ bargaining power and the “fixes” adopted by firms and states to resolve profitability problems, and reassert labor control, in the face of ensuing cost pressures. To understand how and why labor regimes change, therefore, we need to specify the conditions under which worker power increases – bolstering their struggle for better conditions – as well as the palette of counter-strategies available to capitalist firms and governments, through which production and labor regimes are restructured to restore profit margins (see Figure 1).
Figure 1: Conceptualizing change in labor regimes
Beverly Silver distinguished between workers’ associational power, arising from their collective organization, and structural power, rooted in their location in the economy and related potentials for disrupting capital accumulation. She further differentiated two sub-types of structural power: workplace bargaining power, resulting from workers’ position within workplaces and industries (and GVCs by extension), and marketplace bargaining power, rooted in supply-demand conditions in labor markets, skill requirements and access to alternative livelihoods. To these useful concepts, we add a power resource often overlooked in the literature: workers’ bargaining power vis-à-vis the state. Based on a strategic-relational approach to the state, we highlight the variable access, leverage and responsiveness that workers face in seeking concessions from the state, e.g. higher minimum wages or better social protections.
If workers mobilize their rising strength, rooted in any of these power sources, to extract material concessions from capital or the state, it can put profitability under strain, calling for effective counterstrategies to stave off profitability crises and reestablish control over workers. Firms (and governments) can pursue a range strategies: they can engage in a geographical restructuring of production (a spatial fix); shift to products with less intense competition (a product fix); or introduce labor-saving technologies (a technological fix). Whether manufacturers can accommodate rising labor costs through economic upgrading depends on many things, including trade and industrial policies, the nature of the product (e.g. capital-intensity, technological maturity, scale economies) and the position of firms in global supply chains. Where economic upgrading is inhibited, however, firms are more likely to turn to social downgrading – wage repression, work intensification, import of cheap migrant labor, union-busting etc. – to restore profitability.
Both ‘moments’ in this interplay – worker power and capitalist counter-strategies – are, we argue, shaped by the features of specific products and of typical producer countries in ways that allow us to specify more generalizable, but industry-specific, causal dynamics. To specify our general framework for export-oriented apparel assembly, we integrate insights from research on apparel supply chains and structural development economics.
Supplier squeeze and upgrading constraints in apparel assembly
The assembly stage of the apparel industry has always been characterized by low entry barriers, high price competition and contract manufacturing. But beginning in the 1980s, intensified competition and consolidation among retailers in the global North, combined with the proliferation of export-oriented development strategies in the global South, allowed brands and retailers to drive down sourcing costs by outsourcing production to countries with still lower wages. Leveraging their rising oligopsony power, brands and retailers pushed down prices paid to suppliers, while increasing flexibility demands and offloading functions and risks, resulting in a squeeze of suppliers’ profitability.
These features of apparel assembly, and of buyer-supplier relations in apparel supply chains, have important implications. First, the high spatial mobility of production undercuts workers’ workplace bargaining power, as supplier firms can relatively easily replace workers by relocating factories, and buyers can swiftly shift sourcing locations. Second, stagnant export prices make suppliers’ profitability highly sensitive to even modest cost inflation, whether due to wage increases or rising material costs. Third, the scope of economic upgrading is restricted, making it hard for supplier firms to absorb rising labor costs. Apparel assembly is characterized by insignificant economies of scale, low capital requirements and mature technologies, and few spillover effects – all of which reduces possibilities for economic upgrading. For this reason, we argue, apparel manufacturers and governments tend to respond to worker mobilization and upwards pressure on labor costs through the social downgrading strategies mentioned above.
Structural transformation and the shifting terrain of social struggle
The bargaining power of apparel workers, however, is also conditioned by the structural features of producer countries. When countries first integrate into the assembly stage of apparel supply chains, they often share a series of socio-economic characteristics, being agrarian economies with large subsistence sectors, small capitalist pockets, high unemployment and underemployment, few employment alternatives and high population growth. These conditions erode workers’ marketplace bargaining power and pose obstacles to successful worker mobilization. Given the lack of industrial development, moreover, the industrial working class tends to occupy a marginal position, with weak capacities to extract concessions from the state.
However, this may change if the country undergoes what development economists call structural transformation. With the expansion of industry, surplus labor may gradually be absorbed, leading to tightening labor markets and upwards pressure on wages; and this may be accelerated by a demographic transition that affects the size and composition of the workforce. Also, the rise of relatively more attractive livelihoods – whether due to declining real wages in export apparel, job-creation in services or industry, or improvements in agricultural incomes – can make it hard for apparel factories to recruit the workers they need. Together, these processes can create labor shortages in export apparel factories, thus enhancing workers’ marketplace bargaining power. At the same time, industrial expansion (including apparel) can facilitate the emergence of an industrial working class of sufficient size and strength to bargain concessions from the state. We acknowledge that structural transformation is hard to achieve, and that many countries in the global South face enormous challenges of surplus labor absorption; but insofar as it does occur, it can be a crucial source of worker power. Hence, the pace, scale, and depth of structural transformation is a central variable in our framework, as it shifts the terrain of struggle and empowers workers to challenge existing labor regimes.
Conclusion
In sum, our labour-led profit squeeze approach helps us explain the variable – but patterned – evolution of labor regimes in apparel export-producing countries. In the earlier phases of integration into global supply chains, apparel workers’ bargaining power is curbed by the high spatial mobility of apparel assembly, the existence of surplus labor and the lack of alternative livelihoods, as well as the political marginality of the nascent apparel working class. Processes of structural transformation, however, can significantly boost worker power and empower workers to challenge prevailing labor regimes. If this happens, however, rising labor costs tighten the profit squeeze on suppliers; but with the limited scope of economic upgrading in apparel assembly, this tends to provoke regressive responses from manufacturers and governments, who resort to work intensification and growing repression of organized labor to restore profitability. In this way, we argue that rising wages in apparel assembly, won through workers’ collective struggles, tend to be contradictory and fragile, as firms and governments take steps to realign labor regimes with the hyper-competitive reality of the industry.
While our application of the framework focuses on apparel assembly, we argue that it can be molded to other globalized industries such as electronics or automobiles, which, arguably, differ markedly with respect to worker power dynamics and capitalist “fixes”. We encourage future research to explore how variation in these conditions foster distinct patterns in the evolution of labor regimes in industries beyond apparel.
This blog post is based on an article by Kristoffer Marslev and Lindsay Whitfield recently published in Journal of Economic Geography. The article, which can be found here, presents our full conceptual argument and demonstrates it through a comparative analysis of the apparel industries in Madagascar, Cambodia and Vietnam.
Kristoffer Marslev is a Researcher at the Technical University of Denmark. His PhD examined the role of workers’ struggles in shaping the economic and social trajectories of apparel export industries in Southeast Asia, in the context of the power asymmetries and distributional dynamics of apparel GVCs.
Comments