Labor Issues in the Global Supply Chain: An Indian Perspective.

AuthorDash, Sasmita


Globalization led industrial supply chain in the developing nations has provoked a heated debate on improvement in the labor standards. As per one International Labor Organization (ILO) report, one in every five workers has been employed in global supply chain/networks (GSC) which have grown in the last two years (ILO, 2015). Hirway (2010) revealed that transnational corporations which control global supply chains, account for two-thirds of global trade. One could gauge the tremendous employment generation capacity of GSCs as well as the possible degree of their control on labor standards in the operating nations. "Global supply chain/network", "global production networks", "global value chains", & "international production network" are synonymous and regarded as facilitating globalization and international trade. According to ILO (2015:132) GSCs are defined as "demand-supply relationships that arise from the fragmentation of production across borders, where different tasks of a production process are performed in two or more countries."

Studies highlighted the plight of workers, human cost of cheap labor, public cost of globalization linked to the firms integrated in this process (Lee, 1997; Locke & Romis, 2007). Global brands like Nike (Locke & Romis, 2007; Milberg & Winkler, 2011), Nestle, Nokia (Dutta, 2009) have been criticized for their overseas sourcing practices. Civil society organizations and NGOs have campaigned against the poor labor conditions, growing social inequalities in the outsourced countries (Barnes, Lal Das & Pratap, 2015; Barrientos, 2008) resulting in some mandatory labor standards and codes of conduct to be followed by the supplier firms. Social audit mechanism turned to be instrumental in the implementation and verification of labor standards (De Neve, 2009). Global pressure of fair labor relations has reinforced the corporate social responsibility of the global brands which have enjoyed a bigger portion of profit after international trade restricting and splitting of production activities among geographically dispersed firms (Mezzadri, 2014a, 2014b). From supplier point view, there is eagerness among the suppliers to comply with the order to show their higher competitiveness than competitors in India as well as China.

Code of conduct in the factories and global pressure on brands to set corporate social responsibilities regarding labor standards have even generated more numbers of sub-contractors; home workers turned in to an untraceable supply network (Hirway, 2010). Code of conduct initiatives like Ethical Trade Initiative (ETI) are comparatively less impacting in the case of contract or casual workers sourced through sub-contractors than permanent and regular workers (Barrientos, 2008). Sub-contractors are an integral feature of supply chain focusing on low value adding products (Hirway, 2010). Knitting industry in Tirupur (Tamil Nadu), having minimum of 20-30 sub-contractors are involved in the process before being dispatched to overseas locations (De Neve, 2009; Neetha, 2002). Another criticism of developed countries setting working and production standards could be the treatment of developing countries as inferior to them (Nathan & Sarkar, 2014).

Researchers have recognized challenges in establishing labor standards along with facilitation of flexible labor practices in the informal sector (Hill, 2009). Shyam Sundar (2015:156) noted that free market theory argues for flexibility in the labor market to respond to the fluctuating demands in domestic as well as international markets. Employment of more contract workers and reduction in the number of direct employees are turning to be a trend not just in networked organizations; rather these are practiced by the others as well. In addition, all members of supply chain networks turning untraceable with the growing number of sub-contractors and home-based workers could be extended to Indian context. Many authors have highlighted the exploitative role played by labor contractors in India, when contractors and employers create a nexus for not providing benefits to laborers (Barnes, Lal Das & Pratap, 2015). India's 92% informal work force increases the potential participation in the GSC and might have higher average than the stated 20% of workforce in GSC given by ILO. This article explores various difficulties faced by workers in the supply chain networks and the labor standards followed by firms along with the role played by national authorities (government). It covers three major components, working conditions, governance system, and role of labor legislation pertaining to global supply chain in developing countries with dominant focus on India.

Literature Snapshot

In the 1960s and 1970s, many developing countries, mostly East Asian, turned to be the hub for manufacturing of products sold in the developed nations. In the 1970s with the introduction of neoliberal economic policies that aimed at low state interventions has shifted overall economic and social policies globally. This was the era, when ILO witnessed neoliberal thinking that majorly targets compromising values in the labor standards in general. Other nations accepting this trade liberalization pact are different from the Indian story. Towards the end of 1980s and beginning of 1990s macro-economic crisis forced India to take bailout package from International Monetary Fund (IMF) subject to liberalization guidelines (Hill, 2009). It was the birth of liberalization, privatization and globalization pact and beginning of a new economic and labor era in India with enhanced inflow of large-scale investments resulting in opening of new avenues for employment generation along with multiple production units.

Globalization brought a paradigm shift in the production process of goods and services. It is no more a single firm doing designing, manufacturing and marketing of products or services, rather the whole process has been segregated into well-defined activities which could be performed by several firms dispersed all over the globe connected through subcontracting, and licensing. As discussed by Abonyi (2007) these networks are of two kinds depending on the control exercised by the lead firm; inter-firm international production networks and intra-firm production networks. It could further be designated as producer driven and buyer-driven. Producer driven supply chains are mostly technology oriented and capital-intensive products like semiconductors, telecommunications and automobiles where R & D plays the central role. Because of its very nature, producers keep the rights with them and ask firms produce for them and finally inspections done to check the matching of set standards. Buyer-driven networks are labor intensive and do not keep any close quality watch, like manufacturing of shoes, leather items like wallets, belts, apparels, footballs, electronic chips, assembling of computers, mobile phones, and auto component industry produce depending on the buyers' need. It contained both unskilled labor, required for packaging of apparels and skilled labor for making computer chips (Gereffi & Guler, 2010:104). Buyer driven firms are comparatively a new concept than producer driven firms. New concepts of global supply-chain network are "backshoring", the opposite of "offshoring" (Mezzadri, 2014b). Backshoring referred to as sourcing locally, e.g., Westside garment retail brand of TATA sources all its products from local factories and cottage industries.

In 2013, Rana plaza in Dhaka (Bangladesh) collapsed, referred to as the deadliest garment factory accident in history, which took thousands of lives mainly because of irresponsibility on the part of the owner. Big brands like GAP, Tommy Hilfiger, Walmart and many more global cloth brands have outsourced their manufacturing activities to these units, but denied taking accountability (Manik & Yardley, 2013). These incidents have brought in global attention to the labor in the developing nations working day in and day out to contribute to day to day fashion and life accessories. In view of higher consumer responsiveness, developed countries with concentrated consumer base and brand head offices have faced embarrassment and serious bottom line hits.

In India, labor unrests in Honda Motors and Maruti Suzuki are incidental in exerting pressure on the global authorities and policy makers to investigate globalization led supply chain issues from the perspective other than economic development. A recent press release traced 8000 child labor only in garment industry in Delhi out of which 70% have been girls. (1) Labor plight in the closed down Nokia plant in Chennai gives a view of social impact of industrial uncertainty generated by these outsourcing activities (Dutta, 2009). Working conditions in these factories have been question marked since the last two decades (Bonacich et al., 1994; Bonacich & Appelbaum, 2000, Locke & Romis, 2007; Soundararajan & Brown, 2016). Factories in Gurgaon who are suppliers to Marks and Spensors, GAP and Next Store have been caught for lower than legal wage rates, forced overtimes and these brands declared their ignorance (Chamberlain, 2010).

Labor Standards

Globalization has fostered steep competition between developing nations exposed to global value chain. To gain export competitiveness and attractive venues for overseas investment, nations reduced their labor standards (De Neve, 2009; Hirway, 2010). Boom in the international apparel market suddenly increased the export potential of the Asian countries. China has...

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