The Impact of Off-Shoring on Wages and Unionization in Latin American Export Processing Zones
Early Career Research Award
While there is much debate over the adverse effects of economic globalization on manufacturing workers in developed countries, there is often an assumption that manufacturing workers in developing countries, as recipients of outsourced jobs, are achieving economic benefits and organizational power. In fact, job growth in developing countries through outsourcing to rival firms often results in declining unionization and lower wage rates relative to traditional manufacturing firms. Competitive outsourcing hurts labor at the plant-level in three ways: 1) it reduces labor’s strike leverage by geographically dispersing the production process, 2) it increases the threat of plant mobility by decreasing plant-level investments, and 3) it increases labor costs relative to total costs, which creates an incentive for employers to keep wages low and unions out. Data for this project were gathered over the course of several research trips to El Salvador and Honduras. OLS regression analysis is used to examine the determinants of unionization rates and wages in the manufacturing sectors.