Early View Article - Come In, We’re Open (and Flexible): Trade Openness, Labour Flexibility, and Varieties of Capitalism

Come In, We’re Open (and Flexible): Trade Openness, Labour Flexibility, and Varieties of Capitalism

For decades now, scholars have questioned the influence that international trade has had on labour regimes across the globe. This article seeks to contribute to this body of literature by assessing the relationship between trade openness and labour flexibility across countries while controlling for institutional complementarities and industrial relations values included in the varieties of capitalism (VoC) literature. In parallel, the article’s empirical core assesses the relationship between labour flexibility and trade openness within OECD and Latin American countries. As the empirical sections will highlight, the paper’s examination of the cited bivariate relationship points to a policy convergence toward labour flexibility among OECD countries that were originally considered by the VoC framework. Conversely, in Latin America, the cited relationship exhibits diverging trajectories in policy outcomes, suggesting an influential impact of the ‘pink tide’ that swept across the region at the turn of the century.

Policy Implications

  • Increasing labour flexibility in pursuit of trade and industrial opportunities without an emphasis on higher-quality employment and improvement of workforce skills will prolong developing countries’ middle-income traps.
  • Due to pervasive labour precarity among developing countries, the role of labour policies in developing countries should make an emphasis on human capital accumulation through the creation of specialised training programmes.
  • Developing countries should engage with organisations such as the International Labour Organization when searching for a more inclusive combination of both labour measures aiming to increase employment quality and trade enhancing measures.
  • Decision-makers should explicitly establish labour inspection costs in their annual budgets in order to guarantee effective enforcement of labour-related regulations.
  • Decision-makers in more developed nations can play a proactive role in ensuring that preferential or bilateral trade agreements serve as a conduit for improving labour standards in developing and middle-income countries.

 

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