Regulating Labour Standards via Supply Chains: Combining Public/Private Interventions to Improve Workplace Compliance
| Published date | 01 December 2007 |
| Author | Carlos Mallo,David Weil |
| DOI | http://doi.org/10.1111/j.1467-8543.2007.00649.x |
| Date | 01 December 2007 |
Regulating Labour Standards via
Supply Chains: Combining
Public/Private Interventions to
Improve Workplace Compliance
David Weil and Carlos Mallo
Abstract
Concern over global labour standards has led to a profusion of non-
governmental forms of regulation. Systematic evaluation of these systems has
been very limited to date. This article empirically explores an innovative system
to regulate labour standards in the US garment industry combining public
enforcement power and private monitoring, thereby drawing on different
elements of global labour standards systems. We examine the impact of this
system over time and in two distinct markets on employer compliance with
minimum wage laws and find that these initiatives are associated with substan-
tial reductions in minimum wage violations. The system therefore offers a useful
model for international labour standards regulatory systems.
1. Introduction
The advisability and impact of efforts to regulate global labour standards
remain extremely contentious topics. Fundamental aspects of that debate
remain open including the appropriate definition of labour standards, the
merits of linking standards to trade agreements and the determinants of
who actually wins and loses after the imposition of standards. A second set
of questions revolves around the efficacy of the largely private, non-
governmental systems that have emerged for regulating labour standards. Do
these systems — ranging from voluntary codes of conduct created by indi-
vidual companies or groups representing different stakeholders, to privatized
monitoring and inspection systems — ultimately improve conditions at
covered factories and workplaces? Do they have spillover effects on non-
covered workplaces? Are they sustainable over the long term?
David Weil is at Boston University. Carlos Mallo is at Ernst & Young.
British Journal of Industrial Relations doi: 10.1111/j.1467-8543.2007.00649.x
45:4 December 2007 0007–1080 pp. 791–814
© Blackwell Publishing Ltd/London School of Economics 2007. Published by Blackwell Publishing Ltd,
9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA.
The latter questions are particularly compelling given the proliferation of
non-governmental systems of global labour standards over the past decade.
Most approaches involve private organizations and non-governmental orga-
nizations (NGOs) operating in a variety of ways to monitor factories and
suppliers. The absence of detailed or comparable data from these efforts has,
for the most part, precluded a systematic evaluation of relative effectiveness,
so the debate regarding the merits of different approaches has been limited to
comparing cases on a more qualitative basis or looking at outcome measures
only for suppliers overseen by those systems.
This article provides insight into these questions by empirically examining
the impact of an innovative form of regulation in the US garment industry
that combines government enforcement and private monitoring. Controlling
labour standards in apparel has been a perennial problem in the US as it has
been throughout the world. In the mid-1990s, the US Department of Labor’s
Wage and Hour Division (WHD), the government agency in charge of
enforcing the federal minimum wage and overtime law, began an initiative
that uses the agency’s ability to interrupt the flow of goods from manufac-
turers to retailers as a means of establishing private, manufacturer-level
monitoring of those companies’ network of subcontractors.
The Department of Labor’s effort to regulate labour standards offers a
unique model of combining the benefits of private monitoring with the virtues
of a public enforcement system. Even though it is a US-based system, this
novel arrangement sheds light on the larger problem of regulating global
labour standards in a number of ways. First, it provides a unique case of a
system that utilizes both public and private regulatory mechanisms. Second,
the approach has been applied to the same industry — apparel — that has been
the focus of international efforts to regulate labour standards. Third, the effort
has continued over a number of years and in several different markets. Finally,
evaluations of global labour standards have been unable, for the most part,
to quantitatively gauge their impacts on workplace outcomes. In this article,
we measure the impact of monitoring carried out by manufacturers on
contractor-level compliance with minimum wage standards. We analyse these
monitoring effects in two different markets and over several years, using data
from a random survey of apparel contractors that includes both contractors
that are monitored and not monitored by the manufacturers.
We begin with a brief discussion of the spectrum of non-governmental
mechanisms currently employed to regulate global labour standards. We
then place the regulatory strategy employed by the US Department of Labor
within that spectrum. After a description of the datasets and methodology,
we estimate the effects of the monitoring system on the behaviour of subcon-
tractors in two different apparel markets and over time. We then evaluate
how two factors — (1) the direct effect of manufacturer monitoring on
contractor behaviour and (2) the effect of manufacturer selection of subcon-
tractors — contribute to the overall monitoring effects. We conclude with a
discussion of the implications of our findings for future global monitoring
efforts.
792 British Journal of Industrial Relations
© Blackwell Publishing Ltd/London School of Economics 2007.
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