Academic journal article
By Milberg, William; Winkler, Deborah
International Labour Review , Vol. 150, No. 3/4
Economic development has increasingly become synonymous with "economic upgrading" within global production networks (GPNs). Yet, while there has been much research on connecting economic upgrading with economic growth and international trade, there has been less analysis of the relationship between economic and "social upgrading", i.e. improvements in the wages, conditions, rights, gender equality and economic security of workers in GPNs. Focusing on developing countries, this article reviews the ways in which economic and social upgrading are measured and scrutinizes the theoretical connection between these two dimensions of upgrading. The authors conclude with a brief discussion of policy implications.
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The massive globalization of production led by large firms in industrialized countries, combined with the policy shift in developing countries toward export-oriented growth, has meant that economic development has increasingly become synonymous with "economic upgrading" within global production networks (GPNs), that is, moving into higher productivity and higher value added niches of production and export. There has been much research on economic upgrading in GPNs, connecting economic growth and economic upgrading to international trade performance. But there has been less analysis of what such upgrading means for living standards, including wages, working conditions, economic rights, gender equality and economic security. In this article we refer to improvements in these aspects of economic and social Ufe as "social upgrading".
With a primary focus on developing countries, the article reviews the ways in which economic and social upgrading in GPNs are measured. In the process, we also scrutinize the theoretical connection between these two dimensions of upgrading within GPNs.
The growth of developing countries' exports of manufactures since 1980 has been impressive - explosive in some cases, such as Brazil, China, India and Mexico (see table 1). While including 2009 as the final year underestimates the dramatic growth rates seen especially in the 2000s, this better reflects the postcrisis trade environment, which is characterized by more South-South linkages. Much of this trade expansion has occurred within the framework of GPNs rather than through more traditional, arm's-length channels described by international competition in markets for final goods and services. Yi (2003) calculated that 50 per cent of the growth in United States trade over the period 1962-1997 was due to "vertical specialization", that is, "the amount of imports embodied in goods that are exported". A series of recent studies of Chinese trade finds that vertical specialization accounted for 35-40 per cent of the growth of China's trade in the period 1992-2003, with very rapid growth in vertical specialization in the 2000s, exceeding 50 per cent of trade in some sectors (ILO, 2008, p. 8).
The globalization of production is also reflected in the data on offshoring by developed countries. Materials and services offshoring, measured as the amount of imported inputs in total non-energy inputs, rose through the 1990s, with materials offshoring accounting for almost 30 per cent of input use in the United Kingdom, 23 per cent in Germany and over 17 per cent in the United States. In the cases of Germany and the United States, these levels reflect slow but steady growth in reliance on imported inputs of materials, growing about 50 per cent over the ten-year period considered. For services, the range is much lower (between 0.8 and 3 per cent), but the rates of growth are, for all three countries, higher than for materials offshoring. As a number of recent studies indicate, services offshoring is likely to continue to expand more rapidly than materials offshoring in the years to come (see Blinder, 2007, for estimates of the number of services jobs that have become vulnerable to offshoring). …