Production Globalization and the Segmentation of the Global Manufacturing Sector*

Abstract

I review three key claims regarding the impact of production globalization on manufacturing workers worldwide, and subject them to empirical scrutiny. Some argue that production globalization causes a “race to the bottom” that leads to a downward convergence of manufacturing workers’ labor power worldwide. Others suggest instead that production globalization leads to an upward convergence of labor power among manufacturing workers worldwide. A third perspective is agnostic with respect to the average level of this labor power, but predicts divergence between the global North and global South. Using a novel empirical approach to cross-national and temporally comparable measurement of manufacturing labor market power, I show that both the (country-average) level and (between-country) dispersion of labor market power have increased worldwide since the mid-1960s. To explain these trends, I juxtapose insights from Heckscher-Ohlin trade theory with those from the interdisciplinary literature on global value chains and production networks. Both predict that globalization should increase labor market power more in the global North than in the global South. However, the former focuses on labor demand shocks from international trade, while the latter focuses on relationships between firms in the North and South in light of the strategic behavior of network/chain leaders. Augmenting the empirical approach to the measurement of the aggregate positional power of national manufacturing firms developed elsewhere, I show that both international trade and positional power matter for the distribution of manufacturing labor-market power worldwide, but the latter effects are stronger. I conclude by positioning these results within larger debates about the fate of labor in a globalized manufacturing economy.