Structure
1. Emerging trends and patterns in Global Supply Chains
(GSCs)
2. Impact of GSCs on firms and workers
3. Policy challenges
Export growth and wage and salaried employment have been growing hand-in-hand
Relationship between export and wage and salaried employment, 2000-2013, (% point change)
Source: ILO, Trends Econometric Models, April, 2015 and World Bank, World Development indicators.
Rwanda
Burkina Faso
Uganda
Sierra Leone Mozambique
Sri Lanka
Nicaragua
Zambia
Morocco
Liberia
Zimbabwe
Bolivia
Mauritania
Ukraine
Cambodia
Viet Nam
-1
-0.5
0
0.5
1
1.5
2
-1.5 -1 -0.5 0 0.5 1 1.5 2 2.5 3
Wa
ge
an
d s
ala
rie
d e
mp
loym
en
t (%
to
tal
em
ply
om
en
t),
ave
rag
e y
ea
rly
perc
en
tag
e p
oin
t ch
an
ge, 2000-2
013
Export (% GDP), average yearly percentage point change, 2000-2013
Slowdown in trade since the crisis, notably with
respect to intermediate goods
1.50
1.55
1.60
1.65
1.70
1.75
1.80
1.85
1.90
1.95
90
110
130
150
170
190
210
230
250
270
290
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Inte
rme
diate
-to-fin
al goo
ds ratio
Tr
ade
in in
term
ed
iate
an
d f
inal
go
od
s (V
alu
e,
Ind
ex: 2
00
0 =
10
0)
Intermediate-to-final-goods ratio Trade in final goods
Global trade value in intermediate and final goods (Index, 2000=100)
Source: ILO Research Department calculation based on OECD STAN database.
Factors behind GSCs
• Lower transportation costs
• Freer international trade and (especially) investment
• New technology which facilitates fragmentation of production
Freer trade in goods boosts GSCs in services
Estimated impact of a 1-pp-decrease in trading partner’s average applied
goods tariff on a country’s number of related GSC jobs, by sector (in %)
Developed economies Emerging economies
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
4.50
5.00
Manufacturing Services
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
4.50
5.00
Manufacturing Services
Recent trends in re-shoring
• Re-shoring is the relocation of activities closer to country of origin
• More and more cases of re-shoring (GE moving manufacturing from China to Kentucky; Nestlé closing offices in Africa)
• Possible factors: role of proximity of new technology hubs and a large/stable pool of consumers that change habits fast; rising wages in China; stable labour relations
- Is this indicative of a new trend?
Increasing incidence of FDI inflows, and lower outflows
Source: Eurostat. Note: EU refers to EU-27 countries
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2004 2005 2006 2007 2008 2009 2010 2011 2012
Inflows Outflows
Composition of EU FDI flows by directions
Rising incidence of jobs associated with GSCs
40 countries (66% of the global labour force)
Source: ILO Research Department estimates based on WIOD.
Export growth and wage and salaried employment have been growing hand-in-hand
Relationship between export and wage and salaried employment, 2000-2013, (% point change)
Source: ILO, Trends Econometric Models, April, 2015 and World Bank, World Development indicators.
Rwanda
Burkina Faso
Uganda
Sierra Leone Mozambique
Sri Lanka
Nicaragua
Zambia
Morocco
Liberia
Zimbabwe
Bolivia
Mauritania
Ukraine
Cambodia
Viet Nam
-1
-0.5
0
0.5
1
1.5
2
-1.5 -1 -0.5 0 0.5 1 1.5 2 2.5 3
Wa
ge
an
d s
ala
rie
d e
mp
loym
en
t (%
to
tal
em
ply
om
en
t),
ave
rag
e y
ea
rly
perc
en
tag
e p
oin
t ch
an
ge, 2000-2
013
Export (% GDP), average yearly percentage point change, 2000-2013
Many women work in jobs related to GSCs in emerging economies…
Source: ILO Research Department estimates based on WIOD and ILO, Trends Econometric Models, October 2014.
Many of the newly created jobs linked to GSCs are in the service sector…
Change in number of GSC-related jobs by sector (millions), 2000-13
Source: ILO Research Department estimates based on WIOD and ILO, Trends Econometric Models, October 2014.
0
5
10
15
20
25
30
35
Agriculture Industry: manufacturing Indusry: non-manufacturing Services
Emerging economies Advanced economies
…and the share of GSC jobs in business services has increased
Annual change in the share of GSC jobs in total employment, 2000-11, by services sector (percentage points)
-0.4
-0.2
0
0.2
0.4
0.6
0.8
Wholesale, retailtrade, incl motor
vehicles
Hotels andRestaurants
Transportationand
Communication
FinancialIntermediation
Business Services Education andHealth
Other services
Developed economies Emerging economies
… but the quality of employment and social upgrading require additional effort.
Notes: For detailed notes, see Chapter 5 of World Employment and Social Outlook: The Changing Nature of Jobs. Source ILO Research Department estimates based on OECD Trade in Value-Added (TiVA) database and WIOD.
Garment industry
• Growing role of “fast fashion” and on-time production
• Profit margins of suppliers are typically low, limiting the extent to which
working conditions can be improved, e.g. Bangladesh (Ahmed et al, 2014)
Electronics industry
• Ever shorter product cycles, but also by relatively high knowledge intensity
• Incidence of temporary workers, e.g. Mexico, Thailand (Holdcroft, 2012)
• More overtime work, e.g. Malaysia (Samel, 2012), China (Chan et al., 2013)
Working conditions in GSC-related jobs
• Between corporate finance and those working in the
real economy
• Between core firms and suppliers
• Between top workers and those at the bottom of the
chain, notably women in developing countries
Positive impact on productivity and job creation but shift in bargaining power
Broad based policies to tackle imbalances
• Labour market regulations & institutions
• Labour provisions in trade & investment agreements
• Improved tax compliance (see G20)
• What should be the role of finance vis-à-vis real economy?
Policies for achieving decent work in GSCs
• Corporate social responsibility within the GSC
• International Framework Agreements
• ILO Better Work Programme
• Enhanced regulation on responsibility of buyers
• Compensation mechanisms: the Bangladesh Accord on Fire and Building Safety
Thank you!
ILO World Employment and Social Outlook: www.ilo.org/research