Barriers to Development

Many late-industrialising countries (LICs) experienced high economic growth in the 1990s and early 2000s by integrating with the global economy focusing on labour-intensive production. Nevertheless, this growth generally depended on ‘low-road’ development strategies, which rely on building competitiveness through labour market deregulation and low-cost labour. Low-road development model has been unable to maintain LICs’ and their firms’ competitiveness in the global economy in the long run because not only labour costs in these countries have increased while new countries with lower wages joined the global competition, but also the low-skill labour-intensive production could not often adapt to technology changes. This has created an important barrier to a more inclusive and longer-term development in many LICs, leading many LICs in the infamous ‘middle-income trap’.

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At this point, LICs and their firms often have two, mutually non-exclusive, strategies to remain competitive in global markets in such critical moments: (i) increase productivity through investing in new technology, and/or (ii) suppress labour costs further through employing migrants/refugees. Although both strategies have been adopted by firms across LICs, the former has been much rarer because of the vested interests of businesses in labour-intensive production and the lack of political support (Doner and Schneider, 2016). In contrast, supressing labour costs through employing migrants and refugees has become a common strategy in many LICs: Currently, more than 30 per cent of world’s migrants are in LICs, with 8 per cent increase in 2013-2019 (Hajro and Zilinskaite, 2022), and migrants and refugees have become an important workforce in the key industries of many LICs such as electronics in Malaysia, textile in Turkey, and service and agriculture industry in Colombia.

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Investing in new technology and/or maintaining low labour costs through importing foreign labour have significant implications for the development experiences of LICs. On the one hand, continuing labour-intensive production can limit both economic upgrading, thereby constraining increases in the value-added of firms’ production, and social upgrading, namely improvements in workers’ rights and working conditions (Barrientos et al, 2011; Rossi, 2013). On the other hand, using new technologies can improve firms’ productivity and thus facilitate economic upgrading. While technology use and automation will require higher skills in certain positions, they can also cause de-skilling through the standardisation of tasks, which can lead to more labour-intensive jobs with precarious conditions, and hence limit social upgrading (Lopez et al., 2021).

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Despite the critical influence of new technologies and foreign workers on the inclusive and long-term development experiences of LICs, there is limited research about why firms from LICs (do not) pursue these strategies, the relations between the two strategies, and the impact of these strategies on firms and workers. Its overarching research question is ‘How are the barriers to inclusive and long-term development tackled in LICs?’. The project currently involves two main work packages in this regard.

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• Labour-intensive industries and development challenges: Dynamics of technology investment and refugees' employment in the Turkish textile industry

This project is funded by the British Academy and focuses on the textile and garments industry in Turkey. It investigates how the governance structures in the global garments industry are affecting Turkish suppliers’ technology investments and employment of foreign workers. It also analyses the implications of technology investment and employment of foreign workers for economic and social upgrading in these firms. This is based on a mixed method research which involves a survey of supplier companies from Turkey as well as interviews with relevant stakeholders. For more information, click here.

 

• Challenges of and opportunities for the employment of foreign workers in late industrialising countries

This work package is funded by Joint Fund at Loughborough University, and involves the workshop that will bring together non‐governmental organisations (NGOs), businesses, refugee representatives, policy institutions, think-tanks, and academics working on the employment and labour market integration of refugees. The aim is to understand why foreign workers end up working in labour‐intensive jobs that are prone to exploitation, and what can be done to improve foreign workers’ employment conditions. It will have a specific focus on the case of Syrian refugees in Turkey, as Syrians currently constitute the largest number of displaced population, and Turkey hosts the highest number of forcibly displaced population worldwide. For more information, click here.