Globalization and Labor

Globalization and labor refer to the interconnectedness of economies around the world, particularly how labor practices are influenced by global market dynamics. This phenomenon has resulted in global labor stratification, which creates a hierarchy among countries based on their access to resources, power, and economic development. In developed nations, practices such as outsourcing and offshoring—where companies contract work to foreign entities to reduce costs—are common. While these practices can provide employment opportunities in developing countries, they often lead to exploitative working conditions, such as low wages and long hours in sweatshops, which raise significant human rights concerns.

Critics argue that such labor arrangements perpetuate global inequality and social stratification, wherein wealth accumulates for a few while many remain impoverished. Efforts to ensure fair labor practices, such as corporate codes of conduct and monitoring by non-governmental organizations, aim to protect workers’ rights. However, the implementation of these standards can be challenging, especially in regions lacking strong regulatory frameworks. Ultimately, the complexities of globalization and labor highlight ongoing debates about economic development, social justice, and the pursuit of equitable opportunities for all workers, regardless of their geographic location.

Published in: 2021

By: Wienclaw, Ruth A.

Subject Terms

Globalization and Labor

Global labor stratification is a hierarchical condition existing between countries with different access to resources, power, and social development. On one level, this situation is linked to economics. However, the practices of more developed countries (in particular outsourcing and off shoring) can contribute to the problem. This situation becomes particularly egregious when a developed country trades in goods produced in poor countries through the use of sweatshops. Many observers criticize such labor arrangements as violations of human rights and the laws of social justice. However, as valid and important as these concerns are, they are only part of the problem. Social scientists and economists continue to address complex questions related to global inequality and unequal opportunity.

Keywords Class; Economic Development; Globalization; Harassment; Human Rights Movement; Interview; Norms; Off shoring; Outsourcing; Poverty Line; Scientific Management; Social Justice; Social Stratification; Society; Sweatshop

Global Stratification > Globalization & Labor

Overview

The United States is often referred to as the land of opportunity. Stories of poor immigrants who came from other countries with no money in their pockets only to become millionaires have been popularized for generations through works of television, film, and literature. The idea of being able to get ahead on individual merit, through hard work and perseverance, is deeply ingrained in American culture. However, it is likely that workers in the Western world take for granted the various provisions that governments have put in place to protect them from unscrupulous management, economic downturns, and other disasters. These provisions include labor unions, minimum wage guarantees, occupational safety standards, health regulations, and unemployment insurance. However, it is not this way in every country in the world.

Just as social stratification establishes a fixed hierarchical organization within a society in which entire subgroups are organized into social class with varying economic standards, global stratification creates hierarchical systems between countries. This phenomenon arises from fluctuations in the global economy. In a highly competitive global marketplace, myriad businesses work to earn market share and outlast their competitors. In support of this goal, they look for better ways to both reduce costs and increase profits. There are a number of ways that this can be done, including through the development of more efficient production processes and practices, reducing workforce size, or through innovation. Innovation is the process by which an organization systematically analyzes various indicators of customer needs and industry trends and leverages these into cutting edge products and services that allow them to maintain a competitive edge. However, as the marketplace for many industries has become globalized, many organizations turned to outsourcing and off shoring to help them remain competitive. Outsourcing is the practice of contracting work to another company, instead of doing that work “in-house.” For companies in developed economies, outsourcing can eliminate costs associated with hiring and training new workers. The term outsourcing refers to the practice of contracting work out to an external organization.

Off-Shoring / Outsourcing

Sometimes outsourcing means that the work takes place on foreign soil where costs can be significantly lower. When this is done, the practice is called off shoring. This refers to any of the organization's activities that take place in another country. Off shoring can take place within a company’s larger organizational structure. Just because work is off shored does not mean it is outsourced. Off shoring is a particularly attractive option when labor rates in a foreign country are significantly lower than domestic labor rates, and the concomitant employee credentials appear — at least on paper — to be the same as those of the domestic workforce.

Critics of off shoring contend that it allows organizations to reduce costs by exploiting foreign workers at the expense of the domestic labor market. Some observers argue that the foreign workers earn more than they would from local companies competing only in local markets. This means that although foreign workers are paid less than workers doing comparable work in developed countries, they have an opportunity to raise their standard of living. Further, the improvement of infrastructure needed to compete for outsourced jobs can help developing countries better compete in the global marketplace and achieve economic development. Other observers argue that the foreign workers are being exploited and low wages provided by companies in the developed world act to restrain economic development.

Bernstein, Shari, and Malkin (2000) discuss some of the problems associated with the practice of off shoring. Although some organizations are careful to enforce standards for workers that will ensure their human rights and safety, many do not. Further, the implementation of mechanisms to ensure the rights of workers (e.g., collective bargaining) can be hampered by the lack of appropriate legislation in countries that lack government regulation and oversight. It has been estimated that there are thousands of sweatshops in Asian and Latin America. Some sweatshops have been found to force employees to work 16-hour days and find ways to cheat workers out of wages. As retailers in the home countries attempt to reduce costs in order to increase or maintain profitability, in many cases it is the workers in the offshore facility that suffer.

Applications

Sweatshop conditions persist in many outsourced and off-shoring facilities worldwide. Many multinational corporations outsource or offshore manufacturing processes to factories in other countries where the labor is cheaper and the labor laws are often more lenient. From a purely economic perspective, this makes sense to the corporation's bottom line. Goods can be made more cheaply, enabling the corporation to undersell its competition and gain a larger share of the marketplace and make more profits and benefit its shareholders. However, this practice brings up questions of human rights when wages and working conditions are unfair or exploitative.

Sweatshops

Arguments have also been advanced that such practices increase social stratification within the home countries of large corporations, as smaller countries may go out of business. According to some critics, a situation develops in which the rich become richer and the poor become poorer. Further, in many cases, the company to whom the manufacturing work was off shored may be a sweatshop — a shop, factory, or other business establishment where employees are forced to work long hours under poor or hazardous working conditions for minimal or survival wages. Although the practice may appear on the surface to benefit individuals living in conditions of poverty in economically developing countries, it poses complex about questions of human rights, social justice, and corporate responsibility.

Corporate Codes

To address the problem of sweatshops, a number of companies have developed corporate codes of conduct to help ensure that employees in outsourced or offshore factories receive fair wages and are afforded safe working conditions. Corporate codes of conduct are common in textile, clothing, footwear, toy, and food and beverage industries. These codes articulate labor, human rights, environmental standards to which suppliers need to adhere (Yu, 2007). In addition, many of these codes also specify the norms and rules by which the labor practices of suppliers will be evaluated. Typically, these codes include prohibitions on child labor, forced labor, and discrimination as well as statements to protect freedom of association, collective bargaining, and similar principles to protect the health, safety, wages, and the hours of the employees in general, and female employees in particular.

Labor Unions

Yu conducted research during the period between 2002 and 2005 of a large supplier factory for Reebok located in China. Data were collected through observation, interviews, and review of existing documents. Reebok had instituted a corporate code of conduct in 1988. However, the company was publically criticized in 1992 for subcontracting to suppliers who violated the human rights of its workers. In response, Reebok wrote a document of standards for human rights of production workers, including stipulations concerning forced labor, child labor, freedom of association, non-harassment, wages, working hours, workplace safety, and non-retaliation. Yu examined the impact of this corporate code of conduct on the labor standards in Reebok's second largest footwear supplier in China. The company had 16 production lines, over 10,000 employees, and produced approximately 10 million pairs of shoes in 2002. The supplier was run by a joint Taiwanese and Chinese management team. The supplier was very hierarchical in nature, with over ten levels of supervision of the actual production workers. The workers primarily comprised young, unmarried migrant women from China. The company was organized using the principles of scientific management with tasks and workers separated into departments (e.g., cutting, stitching, assembling) and workers paid on a piecework basis to improve productivity and efficiency. In this spirit, production quotas were also set. An employee handbook articulated disciplinary codes including termination for the fifth infraction and loss of wages for sick leave. Management also often imposed arbitrary punishments. In addition, although Chinese labor laws limited work weeks to 40 regular hours and no more than 36 hours of overtime per month, workers at the supplier averaged 104 to 128 hours of overtime per month. If a worker refused to work overtime, wage deductions were taken from her or his paycheck. Further, there were significant occupational health and safety issues at the plant, including exposure to hazardous chemicals and lack of protective gear. Strong labor unions were not available to help workers with this situation.

Obviously, such working conditions would not be tolerated in the United States both because of governmental regulations and the influence of labor unions as well as ethical considerations for human rights. Reebok required the supplier to conform to higher standards. Among the changes mandated were improvements in the most intensively criticized aspects of working conditions (e.g., child labor, forced excessively long overtime, hazardous conditions, corporal punishment, managerial harassment). In addition, the weekly working hours were reduced to 60 and later to 49. The supplier was also required to pay fair wages and benefits (as defined by Chinese law) and install an employee-elected trade union. Although these new policies sound fine from a human rights point of view, such changes do not occur in a vacuum. The supplier was not in a position to get Reebok to agree to share the cost of implementing the new policies. In addition, they experienced continuous price-cutting from Reebok as retail prices for the product continued to drop in the market. This highlights one of the dilemmas of attempting to bring about greater global equality through the implementation of equitable labor practices: In less economically developed countries, the implementation of such policies can result in suppliers being unable to compete globally or even work as a supplier to a global organization. As a result, the global organization will similarly find itself in a position of being unable to compete. All this is not to say that ethical considerations should be ignored or that human rights violations should not be rectified. However, it does demonstrate that solving global stratification problems can be complex processes indeed.

Conclusion

Advances in technology have turned the entire planet into a global marketplace, which is good from the perspective of the corporation. Globalization has created a wider marketplace and also provides a larger pool of potential suppliers. Those in developing countries can often be hired for off shored facilities at wages greatly below those that would be expected in the United States. However, globalization is not without its drawbacks. Not only are the pools of potential employees and potential customers larger than if one was only dealing in the home country, so is the pool of potential competitors. Other companies, too, are taking advantage of the reduced labor rates and other advantages of dealing with economically less developed countries. This means that in order to successfully compete in the global marketplace, companies must either have a better product, a less expensive product, or both. As a result, an increasing number of organizations are opting for outsourcing and off-shoring part of their processes.

In theory, this may sound like a good idea — at least from the organization's point of view — particularly if the goods or services that have been outsourced are truly comparable (or at least acceptable) when compared with the goods were manufactured or services provided in the home country. Even when this is true (and it often is not), the workers hired to do the outsourced work in developing nations are often exposed to deplorable conditions that keep them in poverty or near poverty. This only serves to continue or increase economic global stratification rather than alleviate it. For many people, this becomes a matter of human rights and social justice. Corporate codes of conduct and oversight by non-governmental organizations can help ensure that human rights are not violated. By paying workers a fair wage can help developing nations to become contributing members of the global economy.

The question, of course, is what is a fair wage? Miller intriguingly argues against the concept of global egalitarianism and for global equality of opportunity, instead, in which people of similar talent and motivation would have similar sets of opportunities no matter the society of which they are a member of (2005). Unfortunately, as he points out, there is currently no way to measure whether or not opportunity sets are equivalent. The question of global stratification, global equality, and equivalent opportunity is a complex one, and more research is needed to objectively understand the problem before realistic solutions can be developed.

Terms & Concepts

Class: A group of people or stratum within society that shares a similar level of wealth and income and that have access to the same resources, power, and perceived social worth. Social class is the stratum of the group within the society. (See also: social stratification)

Economic Development: The sustainable increase in living standards for a nation, region, or society. More than mere economic growth (i.e., a rise in output), economic development is sustainable and positively impacts the well-being of all members of the group members through such things as increased per capita income, education, health, and environmental protection. Economic development is progressive in nature and positively affects the socioeconomic structure of a society.

Globalization: Globalization is the process of businesses or technologies to spread across the world. This creates an interconnected, global marketplace operating outside constraints of time zone or national boundary. Although globalization means an expanded marketplace, products are typically adapted to fit the specific needs of each locality or culture to which they are marketed.

Harassment: The process of persistently irritating or tormenting another person or group.

Human Rights Movement: An international movement that promotes the cause of human rights throughout the globe. According to Article 1 of the United Nations Universal Declaration of Human Rights: "All human beings are born free and equal in dignity and rights. They are endowed with reason and conscience and should act toward one another in a spirit of brotherhood."

Interview: In survey research, an interview is a data collection technique in which the researcher directs a conversation with the subject for the purpose of gathering specific information. Interviews can range from highly structured instruments (with questions that are specifically worded and administered in a prescribed order from which the interviewer may not deviate) to unstructured (in which interviewers only follow a general form and are allowed great latitude in what specific data are collected or what follow-up questions they are allowed to ask). Interviews can be carried out in person or over the telephone.

Off-shoring: The practice of relocating part of an organization's business to another country with lower costs. Offshore work is performed by local employees in the new country and was previously performed by domestic employees.

Norms: Standards or patterns of behavior that are accepted as normal within the culture.

Outsourcing: Work that could be done by an organization that is instead performed by another company on a contract basis. Outsourcing can include support (e.g., cleaning and janitorial services), production (e.g., the manufacture of parts needed to make a product), or services (e.g., customer service provided by a contract organization).

Poverty Line: The minimum annual income necessary for an adequate standard of living. The poverty line is determined by the government and differs from country to country. According to the United States Census Bureau, the poverty line for individuals in the U.S. is $10,590.00, and for a household of two adults and two children it is $21,027.00. This figure in the United Sates is based on income before taxes and does not including capital gains or noncash benefits such as public housing, Medicaid, or food stamps. If a family's total income is less than the family's threshold, then that family and every individual in it is considered in poverty. Globally, the poverty line is typically considered to be approximately $1.02 per person per day. However, this figure varies depending on the country and its level of economic development. Also referred to as the poverty threshold.

Scientific Management: A school of management thought founded by American engineer Frederick W. Taylor in the early 20th century. Scientific management involves studying jobs to break them down into their component tasks (see "time and motion study") to determine the most efficient way of performing the tasks and paying employees on a piece rate basis to encourage them to adopt these methods. Also referred to as "Taylorism."

Social Justice: A striving to achieve justice in every aspect of society not merely through the application of the law. Social justice is based on the principle of universal human rights and working to ensure that all individuals receive fair treatment and equally share the benefits of society.

Social Stratification: A relatively fixed hierarchical organization of a society in which entire subgroups are ranked according to social class. These divisions are marked by differences in economic rewards and power within the society and different access to resources, power, and perceived social worth. Social stratification is a system of structured social inequality.

Society: A distinct group of people who live within the same territory, share a common culture and way of life, and are relatively independent from people outside the group. Society includes systems of social interactions that govern both culture and social organization.

Sweatshop: A shop, factory, or other business establishment in which employees are forced to work long hours under poor or hazardous working conditions for minimal or survival wages.

Bibliography

Bernstein, A., Shari, M., & Malkin, E. (2000, 6 Nov). A world of sweatshops: Progress is slow in the drive for better conditions. BusinessWeek, (3706), 84-86. Retrieved September 18, 2008 from EBSCO online database, Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=3706697&site=ehost-live

Dunn, B. (2014). Skills, Credentials and Their Unequal Reward in a Heterogeneous Global Political Economy. Journal of Sociology, 50, 349–67. Retrieved December 5, 2014, from EBSCO Online Database SocINDEX with Full Text. http://search.ebscohost.com/login.aspx?direct=true&db=sih&AN=98368001

McShane, S. L. & Von Glinow, M. A. (2003). Organizational behavior: Emerging realities for the workplace revolution (2nd ed). Boston: McGraw-Hill/Irwin.

Merk, J. (2011). Production beyond the Horizon of Consumption: Spatial Fixes and Anti-sweatshop Struggles in the Global Athletic Footwear Industry. Global Society: Journal Of Interdisciplinary International Relations, 25, 73-95. doi:10.1080/13600826.2010.522984 Retrieved November 13, 2013 from EBSCO online database SocINDEX with Full Text. http://search.ebscohost.com/login.aspx?direct=true&db=sih&AN=57379181&site=ehost-live

Miller, D. (2005). Against global egalitarianism. Journal of Ethics, 9 (1/2), 55-79. Retrieved September 15, 2008 from EBSCO online database Academic Search Premier. http://search.ebscohost.com/login.aspx?direct=true&db=aph&AN=16177117&site=ehost-live.

Seidman, G. W. (2012). Regulation at Work: Globalization, Labor Rights, and Development. Social Research, 79, 1023–44. Retrieved December 5, 2014, from EBSCO Online Database SocINDEX with Full Text. http://search.ebscohost.com/login.aspx?direct=true&db=sih&AN=86234739

Yu, X. (2008). Impacts of corporate code of conduct on labor standards: A case study of Reebok's athletic footwear supplier factory in China. Journal of Business Ethics, 81 , 513-529. Retrieved September 15, 2008 from EBSCO online database Business Source Premier. http://search.ebscohost.com/login.aspx?direct=true&db=buh&AN=33281550&site=ehost-live.

Globalization and Labor

On this Page

Subject Terms

Globalization and Labor

Global Stratification > Globalization & Labor

Overview

Off-Shoring / Outsourcing

Applications

Sweatshops

Corporate Codes

Labor Unions

Conclusion

Terms & Concepts

Bibliography

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