Over the last three decades, the world has seen a shift away from arms-length trade brokered through trade agreements between governments toward a fragmentation of production processes across nations carried out through private transactions between firms.
These production chains span a range of activities that firms and workers undertake to bring a product from its conception to its end use, adding different degrees of value at each stage. Enabled by cheaper technology, transportation and lower tariffs, global value chains (GVCs) have helped many developing countries employ surplus labor in specialized manufacturing processes in sectors such as electronics, textiles, and garments.
This shift fuelled economic growth in the medium or low-income countries that were able to claim their share of global production chains. In recent years, the discourse on GVCs has evolved from describing the phenomenon of the fragmentation of production to understanding economic and social implications.
However, there are few studies that examine the link between economic upgrading and social upgrading, which may go in both directions. Improvements in production processes can lead to a safer work environment and the upskilling of workers. Workers’ well-being and skills are a prerequisite for companies moving to higher tiers of GVCs where production employs more advanced technologies or diverse tasks.
Previous studies in manufacturing and agricultural production show that the economic gains from greater integration into global production may not automatically translate into improvements in living standards.
Beyond a few such examples, studies often do not delve deep enough into the local context to understand what drives governments, businesses, and workers’ decisions to integrate into GVCs, and how economic upgrading relates to social upgrading in labor-intensive production chains.
Understanding this is fundamental to assessing whether, and under what conditions, improvements in production processes lead to better living standards for workers.
To fill this gap, this study – conducted between 2017 and 2020 with support from the International Development Research Centre, Canada (IDRC), examines economic and social upgrading in the apparel sector in Vietnam and Myanmar, and the electronics sector in Vietnam and Thailand. The study is based on surveys of workers and firms, as well as semi-structured interviews with stakeholders including policymakers, industry representatives, and experts.
It seeks to assess the impact of GVC participation and economic upgrading in the apparel and electronics value chains on the quantity and quality of employment. It sheds light on what “inclusive industrialization” means in practice in countries such as Vietnam, Thailand and Myanmar.