Outsourcing and the globalization of exploitation: declining labor shares in manufacturing global value chains

This paper investigates the association between outsourced production through global value chains (GVCs) and the globalization of exploitation in developing and developed countries. It assesses the impact of higher participation rates by countries in manufacturing GVCs on their labor shares of value added. In this paper, I find that a rise in a country’s participation rate index in manufacturing GVCs is associated with a decline in its labor share of value added for manufacturing workers in both developing and developed countries. I also construct two indices of GVC participation and find the decline in labor shares to be significantly associated with the market share or the importance of the country in the GVC. Workers in both developing and developed countries are squeezed by global capital for profits regardless of value addition and market share. This calls into question the neoliberal policy that has constructed export-oriented industrialization and economic upgrading in GVCs as a strategy for developing economies to become internationally competitive and for developed economies to remain competitive.