Does Economic Progress Lead to Social Progress?

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Does Economic Progress Lead to Social Progress?
Anneke Zwart, Student (University), Netherlands

It is often assumed that in companies that upgrade economically – for example by increasing the efficiency of their processes, the quality of their products or by improving technology and knowledge – the conditions of their employees automatically increases as well. This is called social upgrading. Although social upgrading on a global scale might indeed be the result of economic upgrading, especially in labour-intensive and low-skilled labour sectors this is not the case. Even though employment often increases in times of economic upgrading, the nature of new employment is often exploitative and brings a high level of insecurity. In what cases does economic upgrading lead to better social conditions for employees and in which cases it doesn’t?

Barrientos, Gereffi and Rossi (2011) provide a view that takes into account multiple dimensions that together give us a greater understanding of the relationship between economic and social upgrading. The most important factors that shape this relationship are the following:

1. TYPE OF WORK PERFORMED: The type of work can range from small-scale home-based work and low-cost labour intensive work to high-skilled, technological-based and knowledge work. The demand for each type of work differs per sector. For example, the agricultural sector demands much low-skilled labour intensive work, while the IT and high-tech manufacturing sectors require high-skilled workers. Because economic upgrading is often associated with a shift in demand from low-skilled to high-skilled laborers, low-skilled workers become of less importance during this economic upgrade. Furthermore, low-skilled labourers are often not reaping the benefits of economic upgrading because of the fact that companies aim to remain cost-competitive, so wages remain low. As a result the correlation between economic-social upgrading is less positive for low-skilled workers compared to high-skilled employees.
2. STATUS OF WORK: another important factor that determines the relationship between economic and social upgrading is the status of the work. It is necessary to distinguish regular from irregular workers. Regular workers are characterized by a strong employer attachment, since they are permanent. They have lots of experience, and provide good quality. Irregular workers, on the contrary, are often performing jobs in unskilled segments of the production process, such as packaging. Employer attachment facilities getting access to employee protection and labour standards. As a result, regular workers are more likely to benefit from economic upgrading.

Source: Barrientos, S., Gereffi,G. and A. Rossi (2011) “Economic and Social Upgrading in Global Production Networks: A New Paradigm for a Changing World” International Labour Review Vol. 150 Iss. 3-4 pp. 319-340


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