Giving workers employment rights increases productivity and profitability

By Boni Sones, University of Cambridge

Image by Stuart Miles. FreeDigitalPhotos.net

We live in a globalised world and buy products produced by workers’ from all over the World. Increasingly consumers are demanding that those who produce our goods are employed on decent terms and conditions whether they work in Europe, Africa, India, Russia, China or South America. Sweatshop labour used in one continent is often named and shamed in another and these reputational effects can affect demand for goods. But as consumers ask for more fairtrade goods from the developing world, workers in the so called global North are finding that their employment is more insecure, as greater numbers are employed on zero hour contracts, while all workers are finding it harder to access employment tribunals to enforce their employment rights.

The Centre for Business Research at the University of Cambridge has turned conventional wisdom on its head, and through a series of quantitative research projects over a number of recent years, has constructed a new database that reveals how improvements in labour rights can lead to increased productivity and employment as well as greater equality in society. These datasets are now online for others to access and use.

International organisations are taking note of these findings and national governments would do well to consider them. Globalisation, rather than inducing a so called ‘race to the bottom’ as many commentators predicted, is making governments more aware of the need for improved protections for workers, and of the importance of enforcement. Better informed and discerning consumers who are switched on to the web and social media where they can check the sourcing of the products they buy, along with campaigning civil society groups and NGOs, are helping to enforce these values.

The statistical studies carried out by the CBR complement qualitative research carried out by the Global Development Institute at The University of Manchester.

In a recent CBR workshop held in Cambridge in September 2016 researchers from both Universities discussed the findings from ESRC-funded research on labour law reforms, labour standards and corporate social responsibility (CSR) practices in Rising Powers, including China, India, South Africa and Brazil.

Many commentators have doubted that worker-protective labour laws can be made effective in developing countries with high levels of informal work and weak states. This has led to interest in alternative modes of regulation including codes of practice and consumer boycotts focused on global supply chains. But this focus neglects important changes on the ground in low- and middle-income countries in Africa and Asia which over the past decade have been implementing systematic reforms to their labour laws and codes, sometimes after much publicised strikes.

Admittedly the aims of these reforms are diverse: they include promoting industrial peace, encouraging employers to invest in training, and cushioning the effects of labour migration. Often these interventions have had the effect of encouraging formalisation of work and building state capacity. They have also operated in conjunction with, rather than in opposition to, voluntary measures and soft-law initiatives aimed at improving labour governance in value chains.

Encouragingly, while there are still many difficulties associated with the operation of labour standards in emerging markets, empirical work is revealing a more complex and differentiated picture than that frequently presented. There is good reason to be optimistic about these trends.

The two day workshop presented findings of two main types:

• Results from quantitative research analysing a unique dataset of labour laws around the world, constructed at the CBR in Cambridge. 
• Research from fieldwork conducted in case study countries, including China, Brazil, India, and South Africa, by teams based respectively at the Universities of Cambridge (Simon Deakin and colleagues) and Manchester (Khalid Nadvi and colleagues). 

The research undertaken by the Cambridge team deploys a unique dataset, the CBR Labour Regulation Index, which codes for labour laws in 117 countries over the period 1970 to 2013 (43 years). It is the first time that the laws of so many countries have been coded in this way and the dataset will be of very considerable interest to research users and policy makers.

The fieldwork research also breaks new ground in offering in-depth analyses of the implementation of labour law reforms in such contexts as Guangdong province in China, and on the interaction of labour laws with private labour standards operating in global supply chains.

The qualitative case studies undertaken by the Manchester team explore how lead firms in the rising powers engage with labour standards and CSR practices in their now increasingly global supply chains, and investigate the influence of civil society actors as well as the state in the development of private regulatory initiatives and in framing the discourse on labour standards.

For more details:

Listen to our CBR podcast series that features interviews with speakers at the workshop on Labour Standards and Labour Law Reforms in the Rising Powers, held in Cambridge on 5-6 September 2016.

Publications from the two projects are also available here:

• output from the Manchester project on the Rising Powers website 
• output from the Cambridge project on the Rising Powers website and on the University of Cambridge website

How do Rising Powers Shape Global Innovation?

On 6-7 October 2016, the Manchester Institute of Innovation Research and the ESRC Rising Powers and Interdependent Futures programme hosted a thematic workshop to discuss the roles of rising powers in shaping global innovation. Our policy brief summarises the findings and practical implications that come out of different projects under the ESRC programme working on the theme of innovation.

How do Rising Powers Shape
 Global Innovation?

Overall, the research findings discussed at the workshop underline that the Rising Powers, such as China, India, and Russia, represent one of the key drivers of global economic and social change today. Notwithstanding recent short-run fluctuations in economic growth, these Rising Powers are becoming increasingly important players in global innovation. Non-Western models of innovation challenge Western approaches to research and development in some areas, but also offer opportunities for research cooperation and technology transfer.

The emergence of Rising Powers as global players in key technologies, but also the need to look more closely at the differences between them, can be seen from the findings of our project on Innovation Systems Development in China and Russia. Both China and Russia have undergone periods of market reform and developed new strategic goals for their innovation policies that show some parallels, for instance in the field of nanotechnology. Despite these similarities China appears to be more clearly on a path to becoming a world-leading country on innovation than Russia. For the UK, innovation developments in China, as well as in other Rising Powers countries, can present new collaboration opportunities although they also heighten competition for leadership and global market success in emerging and advanced technologies. 

This is also apparent from the research presented by our project at King’s College London on state strategiesof governance in global biomedical innovation in China and India. The emergence of bioinformatics, meaning tools that make biology legible with the help of computer science, is changing the way science works. This opens new opportunities for Rising Power countries to establish themselves in this new territory. Western models of innovation have dominated global research on bioinformatics, but increasing engagement of Rising Powers such as China and India in the area of bioinformatics could challenge established norms and practices of research in Western countries. Effective regulation of biomedical research in the UK needs to take into account stem cell therapy in countries such as China and India, different emerging national and international governance approaches for innovation, as well as data and incentives issues. 

Finally, looking beyond the Rising Powers’ impact on developed country innovation systems, their investment in innovation offers opportunities for South-South technology transfer and addressing key global development challenges such as climate change. Our project based at SOAS explores these dynamics in its comparativestudy of Chinese hydropower dams in Africa and Asia. Findings show that Chinese investment into low carbon energy in developing countries offers opportunities for technology transfer and mitigation of climate change. In addition, its development impact could be further enhanced by strengthening social safeguards and environmental impact assessments. Watch the video on the project's findings here:

As a collection, our projects show that the Rising Powers’ engagement in innovation has a profound impact beyond their borders, both in the UK and globally. Within the UK, policies on research and innovation need to take innovation dynamics in countries such as China, Russia, and India into account to be effective. Globally, innovation and technology transfer from the Rising Powers has the potential to address key policy challenges such as climate change, provided that social and economic side effects of South-South investment projects are dealt with effectively.

For more details, please refer to the full thematic policy brief on 'How do Rising Powers shape Global Innovation?' produced by the ESRC Rising Powers and Interdependent Futures programme. 

For a more general overview of the findings of all 12 research projects under the Rising Powers and Interdependent Futures programme, please have a look at our briefing on 'How do Rising Powers Drive Global Change?'.

Rising Powers at the DSA 2016: China and the rising powers as development actors

By Corinna Braun-Munzinger 

The Rising Powers Study Group of the Development Studies Association (DSA) and the ESRC Rising Powers and Interdependent Futures programme jointly convened a full-day panel at the DSA annual conference in Oxford on 13 September, titled “China and the rising powers as development actors: looking across, looking back, looking forward”. These issues were approached from various angles – ranging from a macro perspective on fundamental shifts in the global world order to the micro-level perceptions of individual development workers in South-South cooperation.

The discussions began from a broad perspective on how the rising powers influence development prospects globally. Rory Horner, University of Manchester, started out by tracing how the traditional distinction between developed and developing countries has become blurred as a result of the emergence of the rising powers, calling for more research on a beginning new era of more universal, global development. Albert Sanghoon Park, University of Cambridge, complemented this forward-looking perspective by taking a look back at the historical geopolitical patterns underlying the developed-developing country dichotomy since the 1940s. Seen from this angle, possible tensions between the ideals and the geopolitics of development are neither new, nor are they likely to disappear with the rising powers taking on stronger roles in shaping global development. Following from these broader thoughts, Anna Wrobel, University of Warsaw focused on trade policy as one specific aspect in which China engages in shaping the global economic order, both through the WTO and through bilateral agreements.

The main theme discussed throughout the day focused more specifically on rising powers’ engagement in South-South cooperation, in particular looking at China and Brazil. One particular strength of the panel was that it brought together diverse primary insights from interviews with individual practitioners engaged in such South-South cooperation projects that again help looking back and looking forward.

Looking back, South-South cooperation continues to be influenced by the past. Susanne Ress, Humboldt University Berlin, and Katia Taela, University of Sussex, showed how transatlantic slavery and the historically complex relations between Brazil and Mozambique still affect Brazilian development workers’ perceptions and discourses today. Juliet Lu, University of California, Berkley, discussed how China’s own development experiences shape Chinese investment in rubber in Southeast Asia.

Looking forward, new principles of international cooperation seem to be emerging with the rising powers. Looking at Brazil and Venezuela’s engagement in Caribbean countries, Bethany Tasker, UCL, found that the rhetoric around new principles of solidarity, respect for sovereignty, mutual benefit and partnership was generally believed and seen in South-South cooperation on the ground, even though frustration could emerge in instances where these principles were not met. Similarly, in Chinese cooperation with Tanzania, Xiuli Xu, China Agricultural University found a new paradigm of South-South cooperation based on mutual learning and sharing of development experiences.

However, despite these new principles of partnership, asymmetries between cooperation partners remain. Examples of these appeared in several presentations on China’s interactions with individual countries and with regional institutions on the African continent. On the one hand, Folashade Soule-Kohndou, Sciences Po Paris, discussed the challenges small African countries like Benin face in negotiations with China as a much larger partner and highlighted how and when smaller partners can nevertheless exert agency in such asymmetric relations. On the other hand, contributions from Georg Lammich, University Duisburg-Essen, and Han Cheng, Cambridge University, both highlighted a shift in China-Africa cooperation from the bilateral to the regional level, in particular through the African Union, potentially creating different types of asymmetries of country-to-continent cooperation.

Finally, another aspect that was apparent throughout several presentations is the wide diversity of actors engaged in South-South cooperation. While public discussions of South-South cooperation often paint a straightforward picture of state-to-state cooperation, a closer look shows that things are much more complex. Not only does cooperation take place between government agencies at regional, national and local levels, but also private sector and civil society are playing an active part. For example, Wei Shen’s, Institute of Development Studies, case study highlights opportunities and challenges of private Chinese investment in the South African renewable energy sector. Adding further to the complexity of actors involved, Timothy Hildebrandt, London School of Economics and Political Science, offered a conceptualisation of government organised non-government organisations (GONGOs), which are important in Chinese development cooperation but may not be unique to China.

Overall, the panel highlighted various way in which the rising powers are actively engaging in shaping the landscape of development globally. Nevertheless, presentations also cast some doubt on whether rising powers are necessarily different from established Western powers in all aspects of development cooperation. On the one hand, paradigms seem to be changing, emphasising the mutual learning and partnership aspects of international cooperation, at a time where the distinctions between developing and developed countries are increasingly becoming blurred and new institutions of South-South cooperation are emerging such as FOCAC. On the other hand, some patterns seem to persist, for example geopolitics seems to be an important driver for international engagement for rising powers and Western countries alike, and rising powers are participating in dialogue on global rules in existing fora such as the WTO. Time and further research may be able to tell to what extent the emergence of the rising powers as development actors changes the nature of development and development cooperation that we have experienced so far.

Many of these issues are discussed further in specific research projects under the ESRC Rising Powers and Interdependent Futures programme and in the framework of the DSA Rising Powers Study group.

Can Bangladeshi suppliers progress and achieve economic upgrading when promised contracts, but never given?

By Samia Hoque, Noemi Sinkovics and Rudolf Sinkovics

Image by anankkml. FreeDigitalPhotos.net

In a recent article published in the European Journal of International Management, the authors explore the effects of international outsourcing without legally binding contracts on knowledge transfer and upgrading of suppliers.

This paper is written in the context of a special form of international outsourcing relationship in which suppliers in the Bangladeshi garment industry make recurrent discrete transactions with the same buyers over a long period of time without the existence of any original legally binding written agreement. In this study, we find that the suppliers firms only had access to buyers’ explicit knowledge that they needed to smoothly perform the production function such as, design instructions and published quality and labour standards. The absence of legal contract seems to have discouraged the buyers to share their core knowledge and thus reduce unintended spill-overs to a minimum level.

Nevertheless, the supplier firms had to develop relevant technological and marketing knowledge to maintain economic and other performance-oriented dimensions, which was a precursor to continue the relationship with the buyers and survive in the business. The suppliers had acquired a part of this knowledge from their firm-level experiences of managing buyers’ repetitive purchases. They had also used a range of external sources to acquire technological knowledge, such as, attending training by trade associations, hiring external consultants, recruiting experienced workers and following competitors. Social networks, personal overseas visits, existing buyers’ references, web sources and trade association meeting had been the major sources of information on new buyers. Nevertheless, with their limited resources, the suppliers could only access information-oriented or publicly available explicit knowledge, which only enabled them to improve technocratic or output-oriented dimensions of process upgrading rather than in labour/skill-oriented ones.

The paper highlights that the absence of a legally binding contract enhances the level of uncertainty in buyer-supplier relationship, which in turn limits the possibility of tacit knowledge transfer from buyers to their suppliers. This lack of access, thereof, restrains the likelihood of economic upgrading of higher level by the suppliers. This clearly reinforces the need for legal commitment from buyers’ end in order to stimulate supplier upgrading. The government of Bangladesh can play an important role in pressurising buyers to make legally enforceable contract in order to enhance the level of certainty in buyer-supplier relationship.

For the full paper, see:
Hoque, Samia Ferdous, Noemi Sinkovics, and Rudolf R. Sinkovics (2016), "Supplier strategies to compensate for knowledge asymmetries in buyer-supplier relationships: Implications for economic upgrading," European Journal of International Management, 10 (3), 254-283. (DOI: 10.1504/EJIM.2016.076292)

More details can be found on: Slideshare and Kudos

Sharing perspectives on labour standards and labour laws in rising powers

Many in Western countries think of emerging economies such as China and India as places with weak labour standards where workers are being exploited. This ignores changes on the ground in many ‘rising powers’ countries, such as China, India, South Africa and Brazil, which have seen systematic reforms in labour laws and codes as well as an emergence of voluntary corporate social responsibility (CSR) standards over the past decade.

A workshop held in Cambridge at 5-6 September 2016 brought together researchers from two projects under the ‘Rising Powers and Interdependent Futures’ programme with practitioners and experts to discuss these trends. Stimulating discussions over the two days not only drew on diverse perspectives across academic disciplines but also allowed policy-oriented exchange between academia and practice.

To investigate the complex changes in labour regulation and CSR in the rising powers, the two projects combine very different disciplinary and methodological approaches. From a law and economics perspective, researchers on the ‘Law Development and Finance’ project at the University of Cambridge explore trends in public labour regulation based on the Centre for Business Research (CBR) Labour Regulation Index, a unique quantitative dataset that documents labour laws in 117 countries over the period 1970 to 2013. The data first of all shows that labour regulation in rising powers is becoming increasingly strict. Another finding that may be surprising for some is that stronger regulation does not necessarily lead to losses in employment and productivity, but can improve economic performance.

Coinciding with these reforms in public regulation, the project on ‘Labour Standards and Global Production Networks’ at the University of Manchester finds an emergence of voluntary standards and local norms around CSR in China, India, South Africa and Brazil. Researchers from Manchester draw on qualitative methods and case study analysis to understand how these local CSR standards interact with state regulation and with global labour standards set by international organisations and Western multinational companies. Discussions during the workshop highlighted the very different understandings of CSR across rising power countries. They also underlined the need to take into account the different ways in which CSR interacts with public regulation in these countries.

Following from the lively exchange around labour reforms, academic researchers and practitioners arrived at the question: How can we bridge the gap between academia and practice better and more often? One key lesson was that closer academia-policy interaction could result in better ‘co-production’ of research, and in ways that might have greater impact. Discussions revealed, however, some challenges around the current debate on the wider impact of academic research. For instance, often practical impact is difficult to measure for a single researcher or piece of work, but becomes clearer for an entire body of literature that changes thinking and policy-making. Another challenge is that communication channels may not be conducive to academic research informing policy, e.g. if academic papers only draw conclusions for the literature, or if media interviews are cut too short to allow a researcher to communicate a differentiated idea. Some of the ideas for moving forward were to highlight policy conclusions also in academic journals and to foster links between media and academics that have become weaker over the past years.

For more details, please refer to the publications from the two projects:

• output from the Manchester project on the Rising Powers website 
• output from the Cambridge project on the Rising Powers website and on the University of Cambridge website

Why do South African fruit workers feel left behind in global production networks?

By Matthew Alford

Image by Mister GC,
FreeDigitalPhotos.net

In a recent article in Geoforum, Matthew Alford explains how the concept of trans-scalar embeddedness helps to understand the governance deficit around working conditions in the South African fruit sector.

On face value, the South African workers who harvest fruit for UK supermarkets should be happy with their jobs: They enjoy a local minimum wage and their employers adhere to the Ethical Trading Initiative that sets out comprehensive rules to ensure good working conditions. Yet, in 2012 workers took to the streets demanding higher wages. Actions of largely unorganised casual workers on a handful of farms escalated across the whole Western Cape region. Why did this happen even though workers were apparently protected by both national and global labour regimes?

The issue of working conditions in global production arrangements led by large multinational brands has received increasing public attention over the past decades, for example in debates around sweat shops in developing countries. The literature on global production networks grasps this from an academic perspective and highlights the influence of multinational lead firms on working conditions in their supplier firms around the world. For example, commercial pressure to reduce costs can have a negative effect on wages and working conditions. Research on initiatives to improve working conditions in global production networks (GPNs) has mostly focused on codes of conduct adopted by multinationals, the roles of NGOs or on multi-stakeholder initiatives. In contrast the role of state regulation, e.g. through labour laws in producing countries, has received only little attention by GPN scholars. This is surprising given that an emerging ‘regulatory renaissance’ literature highlights a renewed role for governments in regulating labour in global production, often complementing private codes of conduct.

I argue that the concept of trans-scalar embeddedness is helpful to understand the interactions of different kinds of labour standards within global production networks and their impact on workers. In the context of global production, initiatives to improve working conditions at local, national and global scales often influence each other. This means that national labour laws in a producing country need to be seen in the context of multinationals’ sourcing practices and codes of conduct and of global standards such as the Ethical Trading Initiative or ILO standards. In addition, the role of civil society at local, national and global levels needs to be taken into account. Similarly, the effectiveness of global initiatives is likely to depend on the kind of labour regulation in place in a producing country.

The South African fruit sector illustrates how important it is to consider the ways in which sourcing practices and private standards demanded by multinational buyers interact with national labour regulation. Looking at the trans-scalar embeddedness of labour governance in the sector helps to understand why the most vulnerable workers are losing out. In order to remain competitive under commercial pressures, many South African farms producing fruit for UK supermarkets rely heavily on seasonal workers. These seasonal workers are usually paid the legal minimum wage, which should in theory ensure fair remuneration. However, many workers report that the minimum wage is set so low that they are not able to make a living. Trade unions contribute little to addressing the issue because participation in unions is generally low among farm workers due to historical reasons, with seasonal workers facing additional challenges to organise due to the unsteady nature of their work. Overall, even though a legal minimum wage is in place and is widely implemented, the most precarious seasonal workers are insufficiently protected by national labour regulation.

But what about efforts by UK supermarkets, who claim to be protecting workers’ rights in their supply chain by participating in the Ethical Trading Initiative? The ETI includes a comprehensive set of requirements around working conditions, but does not manage to address the issue of low pay for seasonal workers either. This is because ETI principles state that a supplier needs to comply with national legislation on wages and supermarkets argue that they do not have the legitimacy to interfere with how wages are set in foreign countries. As a result, neither national laws nor private standards by buyers in the global production network served to protect the most vulnerable seasonal workers who went on strike in 2012/13.

Summing up, the South African case shows that trans-scalar interactions between labour regimes are crucial to understand governance deficits in global production networks. For instance, international buyers’ efforts to ensure workers are paid according to local legislation were of little benefit for workers as long as the local minimum wage was set too low. Hence, even though farms were compliant with both the South African minimum wage and the requirements of the Ethical Trading Initiative, seasonal workers felt left behind. Beyond South Africa, such interactions between different kinds of labour regimes at local, national and global scales need to receive more attention by researchers aiming to understand the situation of workers in global production.


For further details, see:

Alford, M. (2016) Trans-scalar embeddedness and governance deficits in global production networks: Crisis in South African fruit, Geoforum, 75, October 2016, pp. 52–63. doi:10.1016/j.geoforum.2016.07.005

Podcast: John Knight on China’s effective but flawed economic governance

by Global Development Institute (GDI), University of Manchester

Professor John Knight, The University of Oxford, recently spoke at the GDI on ‘the principal-agent problem, the developmental state, subjective well-being and social instability: China’s effective but flawed economic governance.’

Listen to the talk in full below:


This blog post was originally published on 21 June 2016 on development@manchester. Read the original post.