Industrial Determinants of Labor Regimes in Developing Economies

• In Event: Poster Session: Comparative Politics of Developing Countries I

Abstract

Labor control regimes, the institutional process by which industry owners seek to manage labor demands, vary significantly by country, by industry and within industries among developing economies. Studies have generally identified institutional and structural causes as explanations for this variation in labor regimes. In this study I argue that structural conditions shaped by industry characteristics, determine to a large extent the relative power between owners and labor in an industry and the type of labor regime emerges from the contention between disruptive power of labor and collective action capacity of owners. I then classify industries in developing countries according to their respective disruptive power of labor and collective action capacity of owners and outline the type of industry labor regime predicted by the theoretical framework of contention. Finally, I discuss types of labor regimes found in leading industry sectors cross-nationally among developing economies. This paper adds to the literature by systematically laying out contribution of various industry characteristics to structural power of labor and owners and by categorizing some of the leading industries and services in developing countries according to the power differences. The study seeks to answer why firms in developing countries pursue labor management goals individually or collectively through owners’ associations.
In any industry, firm owners and labor contend over wages and workplace conditions. In that contention, the bargaining power of the labor stems from its ability to disrupt economic production of the firm and the main way labor can do that is by organized action. The structural perspective argues that ability of labor to organize and threaten disruption, is a function of firm workers position in labor market and owners exit options. There are several industry characteristics that shape workers’ capacity of organize in important ways. For example, left-skewed firm size distribution with more workers employed in large firms, geographical agglomeration, high-skilled labor, these characteristics generally enhance organizational effectiveness and bargaining power of labor. Firms can meet the bargaining challenge of the labor either on individual firm-basis or through collective firm-owners associations. Firms prefer collective action because it incurs less cost of repression and can bring in the state as enforcers on owners’ side. However, collective action capacity of firm owners is also shaped by structural conditions from industry characteristics. For example, lower industrial heterogeneity, agglomeration, asset specificity, increase likelihood of successful collective action.
I argue that the relative strength of labor disruptive power and owners’ collective action capability, determine to a large extent, the types of equilibrium labor regime found in industries in different countries. When the disruption capability of workers is low or medium, firms resort to individual or collective action to repress workers according to the ease of collective action in that industry. When labor disruptive capacity is high, owners resort to individual or collective collaboration with workers. Workers prefer collaboration from owners for realization of their demand, however if workers do not have sufficient structural power to force collaboration, they can either moderate their demand or try to bring in third parties to the bargaining, such as the state or international and domestic rights organizations.
I then, from existing reports and studies, analyze and review industry characteristics that affect structural power of labor and firm-owners. The characteristics discussed are, power in global value chains, firm-size distribution, agglomeration, human capital intensity and asset specificity. The study then characterizes and categorizes several industry and sectors according to the level of structural power. The industries discussed are apparel, tourism, electronics, IT servicing, mining and agricultural products. For example, our analysis suggests that apparel industry will be characterized by high collective action capacity of owners, medium disruptive capacity of workers and thus will generally have collective labor repressive regime. Finally, I corroborate our theoretical framework by discussing the labor regimes found in the above-mentioned industries across developing economies. I try to reduce the effect of institutional variation by confining the discussion among democracies or electoral hybrid regimes and excluding outright non-democracies. The discussion shows that there is significant industry-wise similarity in labor regimes across different countries, corroborating that industry characteristics is a crucial determinant of labor regimes

Author

• Mohammad Shafiqur Rahman, University of Oregon