Global supply chain jobs fell by 39 million since financial crisis, says ILO

21 June 2015

The number of jobs associated with global supply chains has still not recovered to the levels before the financial crisis, according to research.

The International Labour Organization (ILO) said global supply chains developed at a fast rate over the past two decades and the number of jobs associated with them grew rapidly from the late 1990s until the financial crisis, reaching almost 500 million by 2007.

But after a sharp drop in 2009, global supply chain-related jobs have only recovered modestly and their share of total employment in emerging economies has continued to decline, the organisation said.

The ILO's World Employment and Social Outlook 2015 report looked at a sample of 40 countries with available data, and estimated that global supply chain-related jobs increased from 296 million in 1995 to 492 million in 2007. They then dropped to 453 million by 2013.

“In some cases, previously outsourced activities were brought back to the country of origin of the lead enterprise,” said Raymond Torres, director of the ILO research department and lead author of the report. “But there are other root causes behind this slowdown.”

Sluggish global growth and weak aggregate demand has continued to weigh on trade, which is growing much more slowly than in previous decades, the ILO said. Export-oriented sectors, such as transport equipment and machinery, were hit particularly hard by the financial crisis. The increased domestic availability of things such as manufacturing parts and components that were previously imported, has impacted trade in some emerging countries. This also explains part of the slowdown in global trade growth since the crisis, ILO said.

“We do not know if the decline in global supply chain jobs is a short-term phenomenon or the beginning of a longer term trend, due to shrinking differences in wages between countries and lesser potential for outsourcing and offshoring to create savings on production costs,” said Torres. “Trade growth is expected to stagnate in coming years, so the number of global supply chain-related jobs is not likely to rebound quickly.”

Currently, global supply chain-related jobs represent 20.6 per cent of total employment, up from 16.4 per cent in 1995, the report said.

Taiwan and China have the largest share of jobs associated with global supply chains, more than half of its workforce. In South Korea and the European Union, around one third of workers have a job related to global supply chains. In Japan and the United States, global supply chain-related jobs represent 15 and 11 per cent of the workforce respectively.

The ILO’s report also found that although global supply chains are associated with higher productivity for firms, they do not necessarily benefit workers’ wages. Domination by lead firms and lower margins for supplier firms, along with restrictions on workers in supplier firms in some countries to negotiate wage improvements, contribute to this.

Although globalisation of the apparel sector has created many employment opportunities, working conditions in many developing countries have not kept pace with economic growth, it said.

Broad-based policies and policies directed at specific sectors are needed to enhance productivity and economic development, and create decent work opportunities, the report concludes.

Social dialogue on wages, work organisation, safe work practices, technological change or restructuring are also needed to ensure respect for workers’ rights while also improving productivity.

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