Globalisation and manufacturing employment: Contrasting impacts in Asia and Africa

A crucial way in which increased integration with the global economy can potentially reduce poverty is through the creation of new jobs in export industries. However, greater openness also brings increased competition from imports for previously protected industries. This can lead to job losses in certain sectors, with workers falling into poverty as a result of retrenchment.

Globalisation creates winners and losers among workers and from this, two immediate questions arise: in terms of employment, are there more winners than losers? And who are the winners and losers likely to be?

Research carried out by the University of East Anglia and local researchers in Bangladesh, Kenya, South Africa and Vietnam looked at the impact of changes in trade flows and foreign investment on manufacturing employment in the four countries. All four economies became increasingly open during the 1990s (see Figure 1).

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However, their experience in terms of manufacturing employment contrasts sharply. In Vietnam, more than 900 000 new jobs were created in manufacturing between 1990 and 2000, with a similar number being created in Bangladesh during the first half of the 1990s. In contrast, in South Africa manufacturing employment (in the formal sector, at least) actually fell during the 1990s while unemployment rose. Manufacturing employment rose gradually in Kenya but remained at relatively low levels.

Imports and exports

The research estimated the impact of increased exports and increased import penetration on employment. It confirmed that export growth made a significant contribution to increased employment in both Vietnam and Bangladesh during the 1990s. In South Africa, however, although export expansion did contribute to employment, this was not enough to offset the overall decline in employment. In Kenya, manufactured exports made no contribution to employment growth. All four countries experienced increased import penetration during the 1990s, which means that the overall impact of greater openness was less positive (or more negative) in terms of employment than might appear from looking only at exports. However, in the case of Vietnam and, to a more modest extent, Bangladesh, the net employment created by trade changes was still significant.

Skill and gender impact

The research also looked at the skill and gender impacts of the globalisation of manufacturing. Evidence from Kenya and South Africa suggested that there was a skill-bias associated with greater openness in that there was a tendency for the demand for more skilled labour to increase faster than that for unskilled labour. Yet in Vietnam and Bangladesh, the growth in demand was mainly concentrated on unskilled labour. In the two Asian countries, the bulk of export jobs was filled by women and exports employed far more women per US dollar of output than import competing industries. In contrast in Africa, women workers were far less prominent in the industries that were the main exporters.

The research highlights the impact that globalisation can have on labour markets in the south. It found that:

• Integration with the global economy has led to a significant increase in the number of unskilled jobs, particularly for women, in Bangladesh and Vietnam.
• Job creation as a result of greater openness has been minimal in Kenya and South Africa and is biased towards more skilled workers.
• Where export growth is limited, increased competition from imports can significantly depress the employment impact.
• Unless a significant number of unskilled jobs is created, globalisation is unlikely to lead to poverty reduction.

These findings suggest that:

• Greater openness does not necessarily – but can – lead to increased employment and is not a cure-all in terms of poverty reduction.
• The specific context in terms of resource endowments, market access and geographical location plays a part in determining the likely impact of globalisation on poverty.
• Trade policy can also play a part in ensuring that the gains from increased employment in export industries are not offset totally by increased import penetration.

Rhys Jenkins and Kunal Sen
School of Development Studies
University of East Anglia
Norwich NR4 7TJ
UK

T +44 (0)1603 592330
F +44 (0)1603 451999

R.O.Jenkins@uea.ac.uk
k.sen@uea.ac.uk

See also

‘Globalisation and Employment in Bangladesh and Kenya’, Globalisation, Production and Poverty Discussion Paper No.7, School of Development Studies, by K. Sen, 2002
www.gapresearch.org/production/Globkunalbgdken.pdf

‘Globalisation and Employment in Vietnam’, in the Journal of International Development, R. Jenkins, 2004 (forthcoming)

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