Shortcut to work areas:

Global supply chains and EPZs

Global supply chains, where goods cross at least one international border as they flow downstream from raw materials extraction to final products, are not new and have been part of the global economy since the beginning of trade between the first city- and nation-States. Moreover, they exist in all countries, developed and developing, and flow in all directions: between and among both developed and developing countries.

Recent advances in technology and communications have accelerated the opportunity for networked production by allowing firms to specialize in areas where they have unique skills or competencies to produce intermediate products that can be integrated into final products anywhere in the world, enabling both enterprise growth and job creation and making global supply chains a central characteristic of the global economy.

However, the expansion of networked production to a growing number of developing countries initiated a fierce policy debate about wages and working conditions in developing countries: were global supply chains taking advantage of workers in less developed countries or were they providing better jobs and wages than were otherwise available in those countries?

A key challenge in that debate is that most of the studies look at wages and working conditions in global supply chains in isolation and have not considered the national and developmental context in which they take place. More specifically, they have not compared wages and working conditions in global supply chains (e.g. export-oriented sectors) to alternative employment options in the domestic and informal economies in the same countries.  Most anecdotal evidence indicates that exporters have better compliance rates and provide higher wages than firms in the domestic economy, and markedly better when compared to those in the informal economy.

The Bureau for Employers' Activities developed a research note to examine existing academic literature to identify studies that compared wages and working conditions in and out of global supply chains, recognizing that global and domestic supply chains are both interwoven and overlapping in most countries.  The key findings were that there is limited research comparing firms in and out of global supply chains, and that more comparative research is necessary; exporters in emerging markets generally pay higher wages than domestic firms; there are some exceptions to the exporter wage premium, particularly depending on skill levels; and that there are limited and mixed findings on non-wage working conditions due to the lack of comparative research.