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Globalisation and employment: working for the poor?

Globalisation is one of the most controversial development issues of the day. ‘Globaphobes’ attribute most of the ills of the world to globalisation. The anti-globalisation movement has focused attention on the extent to which decisions affecting the lives of millions of the world’s poorest people are made in international fora – at which the poor have no voice. Globalisation is seen as marginalising a large part of the world’s population and contributing to increased international inequality.

On the other hand, ‘globaphiles’ see extending globalisation as the key to eliminating world poverty. They point to the rapid economic growth of countries that have integrated with the global economy and poverty reduction achievements in countries such as China and Vietnam, which have opened up their economies to foreign investment, imports and competition in recent years. But despite the heated debate on globalisation, there is still a lack of empirical research examining the links between globalisation and poverty in detail.

Analysing impacts

This issue focuses on one of the key channels linking globalisation and poverty – that which operates through the labour market and leads to changes in employment opportunities and wages. All of the pieces (except Te Velde) report on a three-year joint project between the Overseas Development Group at the University of East Anglia and the Institute of Development Studies at the University of Sussex. This project focused on two Asian countries, Bangladesh and Vietnam, and two sub-Saharan African countries, Kenya and South Africa, which have become increasingly integrated with the global economy in a number of ways. 

Bangladesh, as an important exporter of garments, has taken advantage of the restrictions imposed on other countries’ exports by the Multi-Fibre Arrangement (MFA) which regulates international trade in textile products. Vietnam has moved from being a centrally planned economy trading with other countries from the Soviet bloc in the 1980s to a much more market-oriented economy exporting to the world market. Kenya has emerged as the most important exporter of horticultural products to the Europen Union market in sub-Saharan Africa, while South Africa has greatly strengthened its ties with the global economy and opened up its domestic market since the ending of apartheid.

Boosting employment

One of the positive outcomes highlighted by advocates of globalisation has been the increased employment opportunities in the south as the result of the growth of labour-intensive exports – which rely heavily on labour as opposed to largely technological input. The studies of the garment industry in Bangladesh and Vietnam by Kabeer, and of Kenyan vegetable exports by McCulloch, Ota and Humphrey, confirm that integration into global markets can indeed create important income earning opportunities for poor workers and households. Moreover, since the workers involved are often migrants, they also remit part of their earnings to rural areas where the bulk of the poverty is concentrated.

However, there are also negative aspects for labour from such involvement. Both the garment and horticulture value chains are subject to increasing competitive pressures. These lead buyers to demand higher quality at lower prices with faster and more timely delivery of products (Nadvi and Dolan and Barrientos). These competitive pressures are felt by workers in terms of demands for greater flexibility and long hours of work. In horticulture, as Dolan and Barrientos show, this has led to the increased use of casual labour on large-scale farms and in processing plants in Kenya, while in South Africa there has been increasing use of contract labour and a reduction in permanent on-farm labour. In garments the ‘quality’ of jobs is problematic because women work extremely long hours (Kabeer).

There are also other pressures that threaten the long-term livelihoods of workers in these chains, such as the ending of the MFA and increased competition from China in garments (Nadvi), and the risks that could be posed by loss of tariff preferences in the European Union in horticulture.

Effects of liberalisation

While economic restructuring as a result of globalisation creates new employment opportunities in export industries, it can also lead to job losses in those industries that were previously protected from international competition by import taxes and duties. The textile industry has historically been highly protected. For many developing countries, the opening up of their economies has lead to major adjustment in this industry as a result of competition from low-cost fabrics from East Asia. Thoburn analyses the impact of restructuring and retrenchment on workers in Vietnam and South Africa.

Although there has been a substantial reduction in employment in the textile industries of both countries, the impact on the income levels of workers and their households has been much more severe in South Africa than in Vietnam, reflecting the greater level of social protection for Vietnamese workers and greater income opportunities in the informal sector.  Similarly, Kabeer contrasts the higher level of formal protection and labour standards enjoyed by Vietnamese garment workers compared to their Bangladeshi counterparts. This highlights the importance of the local context in determining the poverty impacts of globalisation in particular countries. 

However, several of the studies attempt a more comprehensive analysis of the effects of globalisation on the poor. Jenkins and Sen focus on the overall impact of greater openness to the global market on employment in the four case study countries. There is a very sharp contrast between the two Asian countries, which have specialised in labour-intensive manufactured exports leading to a net gain in employment, particularly for women workers, and the two sub-Saharan African countries, where employment gains have been negligible or negative.

Edwards explores the South African case in more detail, based on firm level surveys as well as sectoral data. In South Africa, globalisation has been associated with a pronounced skill bias, so that the employment effects of export growth have been very limited as far as unskilled workers are concerned. This is important since it is unskilled jobs that are most likely to have a positive effect in terms of reducing poverty. Te Velde comes to a similar conclusion from analysing the evidence on the impact of foreign direct investment (FDI) in Latin America.

A contradictory process

The evidence reported here does not offer unambiguous support for either globaphobe or globaphile. The impacts of globalisation on poverty are both complex and context dependent. However, it is not simply a matter of ‘managing globalisation well’ in order to make it work for the poor. Some of the studies show that there may be real contradictions in the process. Integration with the global economy which creates new income earning opportunities may also result in a less stable position for labour. Countries may have to choose between increasing employment in the unskilled sector as a way of lifting the largest number of people out of poverty, or trying to upgrade within value chains and developing niche markets as a way of raising income and skill levels.

The research also indicates the importance of the local context within which global forces operate and this suggests that there is scope, as some of the authors suggest, for the state to intervene more decisively, both in terms of encouraging training and skills and in providing social safety nets.


Insights #47 'Globalisation and employment: working for the poor? Full document.
See id21's links page on globalisation and employment Full document.
'Globalisation and demand for skills in South Africa'

id21 Research Highlight: 24 June 2003

Further Information:
Rhys Jenkins
School of Development Studies,
University of East Anglia,
Norwich NR4 7TJ, UK

Contact the contributor: R.O.Jenkins@uea.ac.uk

School of Development Studies, UEA, UK

Other related links:
'Globalisation and manufacturing employment: contrasting impacts in Asia and Africa'

'Cutting cloth to fit: competing in global garment value chains'

'Labour flexibility in African horticulture'

'The poverty impacts of female employment'

'Smallholder production: more pro-poor than commercial farming?'

'Restructuring and retrenchment: the textile industry in South Africa and Vietnam'

'Foreign direct investment in Latin America: good news for inequality and poverty'

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