Bu makaleyi alıntılamak için: Özge Özay, “Implications of Trade Policy Changes on Gender Inequalities,” Fe Dergi 3, sayı 2 (2011), 33-53.

Implications of Trade Policy Changes on Gender Inequalities

Özge Özay^*

The aim of this paper is to survey theoretically the effects of trade policy changes on gender and skill- differentiated labor market. Following this aim, the paper first discusses the implications of neoclassical trade theory. Then, focusing on the feminist trade theory, the paper tries to account for the stylized facts of world economic order in the last thirty years in gendered labor market from a developing country perspective. By presenting a brief empirical survey focusing on the effects of trade policy change on gender-wage gap and/ or female intensity, we argue that the specific global competition strategy chosen for a country determines the framework for various dynamic interplays of class and gender.

Keywords: Trade policy, gender inequalities, gender-wage gap, demand for female labor, technological change.

Özet

Bu çalışmanın amacı teorik olarak ticaret politikasının emek piyasasındaki etkilerini toplumsal cinsiyet ve işgücü niteliğine göre ayrıştırılmış bir biçimde incelemektir. Makale, amacına yönelik olarak öncelikle ana-akım ticaret teorisini tartışmakta. Daha sonra feminist ticaret kuramının yardımıyla son 30 yılda dünya ekonomik sistemindeki dönüşümlerin toplumsal cinsiyet açısından ve gelişmekte olan bir ülke perspektifinden açıklamaya çalışmaktadır. Çalışma, dış ticaret politikalarının cinsiyete dayalı ücret farklılıkları ve/ veya kadın istihdam yoğunluğu açısından etkilerini inceleyen ampirik çalışmaları tarayarak, ülkenin seçtiği küresel rekabetle baş edebilme stratejisinin ekonomik sınıf ve toplumsal cinsiyet arasındaki etkileşimleri belirlediğini savunmaktadır.

Anahtar Kelimeler: Dış ticaret politikası, toplumsal cinsiyet eşitsizliği, cinsiyete dayalı ücret eşitsizliği, kadın emeği talebi, teknolojik değişim.

Introduction

The feminization of labor force has been a widely recognized phenomenon since the 1970s especially for low and middle-income countries following export-led growth schemes.¹ This feminization trend went hand in hand with labor market deregulation and transformation of the conditions of paid work into casual, irregular, flexible and precarious jobs.² In these economies, women tend to be concentrated in labor-intensive manufacturing sectors such as textiles, apparel and electronics.³ The phenomenon is important for feminist economists as the primary notion for them is the acknowledgement of the different experiences of women and men within the economy. As has been noted by numerous feminist economists, feminist economics has an agenda of bringing into front the marginalized voices within the economy and to support these marginalized groups in their emancipation struggles. Hence, feminist economics tries to transform economic and social life so as to reduce gender, race and class inequalities and promote the expansion of people’s capabilities to lead satisfying lives. Although this absolute and sometimes relative increase for women’s labor demand compared with men may not manifest itself as a remunerative gain or empowerment within the household or elsewhere in the economy, it certainly presents a potential for empowerment. The feminization trend is reversed for some countries, but we still need to acknowledge the reasons for this phenomenon and possibly for the reversal of it. This paper aims first to review mainstream trade theory in economics as it can be- has applied to explain the feminization trend. Secondly, I will discuss the contribution of feminist economics on theoretical and empirical grounds to analyze the effects of trade policy changes on women and men workers, especially from a developing country perspective. Last part will present the concluding remarks.

Mainstream Theories of Trade

Since historically women workers have consistently been employed in exporting sectors that hire unskilled labor to perform repetitive tasks in the low and middle-income countries specialized in export oriented growth, it has been customary to apply trade theories having implications for unskilled and skilled labor to women and men, respectively. The most popular of these is the Heckscher- Ohlin trade theory for predicting the direction of trade. Coupled with the Stolper- Samuelson theorem, Hecksher- Ohlin theory can be used to present income distribution effects of trade liberalization based on factor abundance. Specifically, Heckscher-Ohlin-Samuelson (HOS) model together with Stolper-Samuelson (SS) theorem propose that the expansion of trade will increase skilled labor wages in the North or the developed world. The HOS model postulates that the comparative advantage of nations is based on the relative abundance of the factors of production. Taking the two factors of production as capital and labor, the basic HOS model proves that the capital-abundant developed country will have an increased price for the good that uses capital more intensively under trade liberalization. SS theorem ties the change in the good prices to the factor of production prices for a given level of factor endowment supply. Therefore, increased trade or decreased tariffs will increase the price of the factor in which country’s comparative advantage lies. If we generalize this basic model for the skilled and unskilled labor as our factors of production, the two countries can still be taken as the developing and the developed ones, the two goods can be a skilled labor intensive good (machinery) and an unskilled labor intensive good (apparel). Two factors of production are the unskilled and skilled labor. In this setting, one would expect the trade liberalization to increase the price of skill-intensive good in the North and hence increasing the wages for skilled workers via SS theorem. For the South, we have the opposite result of increasing the price of unskilled intensive good and hence the wages for the unskilled labor increase as well. Therefore, it is proposed that trade increases wage inequality in the North and decreases the wage inequality in the South.

This result is proven under strict assumptions of fixed-shared technology for both countries, constant returns to scale (CRS), factor specialization irreversibility, perfect factor mobility within the country, immobility of factors across countries and identical tastes. There are other trade theories that incorporate the more realistic assumptions of imperfect competition and increasing returns to scale into their framework. However, as the IMF and the World Bank shape the stabilization programs for the developing world with the goal of trade liberalization, and because they use the HOS model as showing the relevant recipe that the developing countries should follow, I focus more on the HOS model.

The gender-wage gap implications for the theory is that if we take women workers as the unskilled ones, we would expect an increase in the demand for women workers and hence their wages in the South following trade liberalization. Hence, the theory in this sense predicts a decrease in gender wage gap and an increase in women’s employment in the South. However, it does not address the possibility of any difference either between unskilled males and unskilled females, or between skilled males and skilled females. Nonetheless, after controlling for the productivity differences, there are still residual gender wage gaps and gender inequalities in the employment with respect to gender. Moreover, this theory failed most recent empirical tests in the case of developing countries.⁴ Furthermore, women in most of the countries including Latin American and Southern Asian ones are rapidly catching up to men in terms of educational attainment, so summing up all the women workers under the heading of unskilled workers is becoming increasingly questionable.⁵ To understand this latter fact, we need to focus on the feminist theories of trade.

The Contribution of Feminist Economics

Although in practice it boils down to disaggregating employment according to sex in empirical research using official statistics, the main category of analysis is gender in feminist economics. As mentioned before, feminist economics proposes that gender relations permeate all levels of economic, political, social and cultural life.⁶ Gender should not be read as pertaining to women, but is conceptualized as the social meanings given to biological sex differences.⁷ Gender is a social and economic stratifier like race, class and ethnicity in shaping the bargaining power of women in relation to economic processes of wage/ working condition negotiations in the labor market, access to productive resources, the distribution of work, income, and wealth.⁸ These gender relations that are embodied by social, political and economic institutions may change over time, and may have internal ambiguities and inconsistencies.

A theory that has been recently reformulated to predict a relationship between trade liberalization and gender inequalities is Becker’s theory of discrimination (1971). He argues that discrimination with respect to gender is a market imperfection and rooted in the prejudiced preferences such as having a taste for employing males over females, giving males a remuneration that is higher than their marginal products. This means that discriminating firms will have higher costs compared with the non-discriminating ones and in a perfectly competitive environment these firms will be driven out of market by the more efficient competitive firms. Black and Brainerd extend this theory into international framework and state that if a domestic country’s firms share this prejudice against women, the cost is born by every and each of them⁹. However, when there is international trade, and if foreign firms do not share this prejudice against women, non-discriminating firms will be able to supply much more cheaply than discriminating ones. This will lead to discriminating firms to feel competitive pressure to go bankruptcy and reduce the wage premium paid to men. However, the empirical evidence shows otherwise, specifically that export industrialization itself has a high correlation with increased female employment in the developing countries.

For a study to specifically address the women workers’ experiences in the labor market, it needs to mention the peculiar nature of women’s labor and the specific characteristics of the demand for it. It also needs to address the specific conditions and the context for this need to arise and the specific conditions for it to be recognized by the response of women. Following the foundation of world economic system, it has been necessary to take into account the capital’s search for the lowest labor cost throughout the world and the interdependency of world production schemes. Writing in the 1980s, Elson and Pearson refer to this as the latest phase of the internationalization of capital and emphasize the re-location of production of certain kinds of manufactured products from developed countries to the third world. Grouped under the headlines of sectors using old established (traditional) technology requiring production (including garments, textiles, sporting equipment, toys, soft goods and furniture etc.) and those using modern technologies (electrical goods and electronics industries), they underline the specific demand for women’s labor in the sectors. Another peculiar nature of these sectors is the standardized, repetitious, monotonous and highly labor intensive nature of production processes. Here, within the confines of the world system and capital’s search for the lowest labor cost, gender comes into play since the systematic use of female labor in these industries must mean they are either cheaper to employ or have higher productivity or both. This implies female labor constituting a competitive/ absolute advantage itself due to its supposedly docile, easily manipulated or controlled nature. They are supposedly more suited to tedious, repetitious, and monotonous work by nature.¹⁰ Elson and Pearson question this notion of being naturally docile nature of female labor and argue that this supposed docility and easily controllable nature of women stem from the women’s subordination as a gender¹¹. Coupled with their invisible reproductive functions within the family, women have the secondary status within the labor market and the types of jobs they do are usually labeled as semi-skilled, if not unskilled. The very fact that the employers see women as requiring little or no training transferring their supposedly natural abilities to perform tasks with their nimble fingers is itself a result of gendered institutions of family. Elson and Pearson attribute this little training to women’s former training in needlework or sewing within families, which is easily transferable to other assembly operations¹².

Writing about the feminization phenomenon, Standing also contextualize the increase in the demand for women’s labor with mostly the supply side policies of the 1970s¹³. economic formula can Underlining that no general explain the rise in female labor participation, he mentions one of the reasons for this rise as the direction of trade and investment into economies in which labor costs have been relatively low including patterns of wages, nonwage labor costs, productivity and supporting infrastructure. The other side of the coin is the widely applied structural adjustment policies including radical changes in labor market relations such as erosion of protective and pro-collective labor regulations, decentralization of wage determination, erosion of employment security and a trend to market regulation rather than statutory regulation of the labor market.¹⁴ This latter together with the fall of the welfare state and increasing selectivity of targeting of state benefits created the conditions for women to supply their labor in the formal labor market. This is called the “added worker effect” in the literature. Moreover, women were the perfect candidates for this flexible labor demand since they had lower aspirations, a lower efficiency wage, and were more easily employed as casual, contract, or part-time labor with little or no benefits.¹⁵ Furthermore, the increased flexibility of labor markets requiring easier hiring and firing practices proved more applicable to women’s labor market participation patterns of entering to labor force while single, and then withdrawing from the labor force when they get married in the 1970s. The same trend also increased the framework of informal market together with precarious forms of work in formal market having characteristics of informal market jobs without regular wages, benefits and employment protection. Especially for developing countries applying the structural adjustment policies of IMF and the World Bank meant mobilizing large numbers of low-paid women workers. Standing argues that this export-led industrialization strategy has meant that subsidies for domestic non-tradable sectors which usually hire women have been cut, creating another force for additional worker effect¹⁶. He also emphasizes the change in the production techniques in terms of a decline in the jobs requiring craft skills learned through apprenticeship or prolonged on-the-job-training. These jobs were mainly dominated by men historically. He also mentions the trend to skill polarization with a minority of workers required to possess specialist skills and a majority required to possess minor training, typically imparted through “modules of employable skill” in which docility, application, rote learning and related “capacities” figure prominently.¹⁷

There is now a consensus among researchers that the female intensity (i.e. female share of employment) of the manufacturing sector in developing countries has increased with the trade liberalization. Joekes refers to this stylized fact as “no strong performance in manufactures by any developing country has ever been secured without reliance on female labor”¹⁸. This conclusion reflects a cost reduction strategy whereby the unskilled female labor demand will be increased as much as unskilled male one, if not more, since female workers are not only chosen due to the their lower unit labor cost but also the jobs that recruit women predominantly themselves become feminized in the sense that unionization opportunities become slim and workers’ control over the work decreases. Joekes states that for the labor intensive, exporting sectors of the developing countries feminization would mean keeping the wage bill low without sacrificing labor productivity¹⁹. Seguino also points out a similar fact and argues that “job segregation that crowds women into export industries where price elasticities of demand are relatively high may artificially lower women’s wages, due to their restricted bargaining power”.²⁰ She also states that this may itself be a stimulus for export expansion.

Thus, feminist trade theories would support the idea that persistent gender inequalities will have effects on the trade policies adopted and vice versa. According to HOS model and SS theorem reviewed above too, trade is supposed to increase the demand for female labor in the South since they are usually perceived as low skilled and low productivity associated workers. However, Elson, Grown and Cagatay argue that feminist economists reject the idea of comparative advantage and focus more on heterodox trade theories in explaining the inequalities resulted from international trade²¹. Rather than being firm believers of perfect competition in which case wages are equal to the marginal product of labor, they focus on imperfect competition and the bargaining power of workers, specifically that of women, in the wage determination process. Borrowing from the approaches of institutional economics and Marxian economics, they believe that production itself is a social process that could transmit the social institutions including prejudices within the social realm into the economics realm. Furthermore, international trade is not only based on comparative advantage, if at all, but a form of competitive (absolute) advantage that needs to be strategically protected, since every country cannot have the absolute advantage in every good. Technology differences are deemed important since unless the country upgrades its technology, the only possible way to compete internationally will be on lower wages.

We can generalize these notions as a development strategy for low and middle-income countries integrating into the world economy by competing mostly on lowering their cost/price. In general, the late industrializers had two basic strategies to compete internationally: that of competing on the basis of prices and hence wage suppression (low road) or competing on the basis of quality and hence improving their technology (high road)²². Milberg and Houston define the low road as emphasizing cost-cutting, conflictual labor relations and a narrow set of social programs²³. High road is in turn defined as requiring rapid productivity growth and innovation based on cooperative labor relations and generally stronger and more centralized labor unions, high quality production and higher wages as well as greater state-supported social protection. In this framework, the low road strategy is generally used by developing countries with Structural Adjustment Programs (SAP) written under the auspices of IMF and the World Bank. The same phenomenon of low road is called the cost-reduction strategy or constructing a gendered-competitive advantage in the feminist economics literature. According to this strategy, the unskilled female labor demand will be increased as much as unskilled male one, if not more, since female workers are not only chosen due to the their lower unit labor cost but also the jobs that recruit women predominantly themselves become feminized as mentioned above. Therefore, international competition, rather than eroding the gender discrimination by making it costly as Becker argues, may itself make use of gender-based inequalities in labor markets as a strategy to incorporate into the world economy.

Distinguished by technological change and more harmonious relations with the labor unions, the effects of moving to high road strategy are not very obvious within the feminist economics literature. In other words, the choice of skilled females or skilled males as improved production technology creates new better paying jobs provides us with the opportunity to discuss the interactions of class and gender in the sense of whether the same supposedly feminine qualities of docility, patience, nimble, non-militancy, and being easier to control etc. would be applicable to the skilled females as well. In that sense, who will get the now better paying good jobs would be determined according to the relative bargaining powers of skilled females and skilled males. Therefore, in the high strategy case, we do not have a one to one relationship of patriarchal forces of exploiting female labor due to its supposedly feminine qualities and capital exploiting labor regardless of its gender. Hence, the high strategy negotiations within the labor market will be more contextual and time/ space specific.

Hence, as Standing states the gendered outcomes in the labor market do not reflect natural or objective differences between men and women but rather reflect the outcome of discrimination and disadvantage and the behavioral reactions by workers and employers²⁴. The feminization trend that started in the 1970s was more predictable in terms of seeing the increased demand for female labor as the process constructed a gendered-competitive advantage for the countries employing export growth schemes. There is now sporadic evidence in feminist economics literature that trade liberalization could reverse the feminization trend in the case of technological upgrading and capital deepening.²⁵ Ozler states that the reversal is attributed to the introduction of new technologies, skill upgrading of export producers, and reorganization of production, especially multi-skilling of flexible labor engaged in high performance production²⁶.

I argue that in the case of high-road strategy the determination of who gets the good jobs will be determined by the relative bargaining powers of the skilled females and skilled males vis-à-vis employers on the one hand and employers’ preference for skilled females or skilled males on the other, all of which might be shaped by the patriarchal ideology. The limited number of studies identifying the reversal of the feminization trend with capital deepening, I argue, can itself be attributed to the more dynamic interplay of class and gender in the case of a high road strategy.

Empirical Evidence

I will now focus on the empirical work on the skill-differentiated gendered effects of trade liberalization from a developing country perspective. To see the effects of trade liberalization on gender inequalities, it has been customary to use either skill-gender differentiated employment level changes or the changes in gender-wage gap with trade liberalization. From a developing country using low road scheme of international competition perspective, both the gendered competitive advantage approach of feminist economics and mainstream neoclassical economics expect to see an increase in the relative demand for women workers. For gender-wage gap, the gendered competitive advantage approach focuses on the relative bargaining power of women and men on the one hand and labor versus capital on the other. However, in the case of low road, it is probable that labor loses ground over capital, and women (most notably the unskilled women) lose ground over (unskilled) men in terms of remuneration. Mainstream trade theory proposes a decline in the gender wage gap for a developing country after trade liberalization, presuming the faith of women coincide with unskilled workers.

Paul- Majumder and Begum use existing surveys, empirical research and documented literature on exports in Bangladesh to find out the characteristics of gender inequalities in the garment sector in the 1990s²⁷. The sector is chosen due to the female domination of it and its higher contribution to the GDP of the economy in terms of export earnings. They state that reasons for employing women in this sector have been the following: Women are more patient and nimble; women are more controllable than men; women are less mobile and less likely to join a trade union; and that women can do better in sewing jobs.²⁸

They also state that women in the garment industry are typically young, unmarried, have little education, are of rural origin and from poor families and have no prior work experience most of the time. The differences in earning between males and females still hold even when the education differences are controlled for. They state that these advantages amply compensate for the cost of employment of women in terms of maternity leave and high absenteeism and other factors. Based on these surveys, they argue that when a garment job becomes technologically skilled and more remunerative, female workers are ousted from that job and concentrated more in unskilled jobs. When some sectors of the garment industry like knitwear became more technologically advanced, they argue that the female intensity is decreased, even though the sector and the job (sewing) is traditionally a female job. Hence, they argue that the gender advantage associated with a traditionally female job is lost when jobs become technologically skilled, supporting the above-mentioned reversibility of feminization in case of high road schemes.

Oostendorp analyzes the effects of trade and economic growth on occupational gender wage gap using the ILO October Inquiries for about 80 countries in the period 1983-1999²⁹. Occupational gender wage gap measures the gender gap wage within the same occupation in a given country and year. Hence, Oostendorp argues that it provides a direct measure of the unexplained wage gap, “without relying on the availability of good human capital data and a regression method to control for gender differences in qualifications”.³⁰ He distinguishes between higher and lower skill occupations by defining the former as those occupations that are within the top half of the occupational wage distribution within a country and the low skill occupations are defined as those occupations that are within the bottom half of the occupational wage distribution by using the fact that skill and wage levels are strongly correlated. He argues that if trade has its effects more as expanding the sectors with abundant factors, then we would expect to find a decreased low skill gender gap in poorer countries and a decreased high skill gender gap in richer countries. He furthermore suggests that if gender gap is reduced primarily by sector contraction resulting from trade with increasing competition from imports, then we would expect a large impact on the high skill gender gap in poorer countries. He finds out that trade has a positive (widening) effect on the gender wage gap for high skill occupations for the poorer countries. He concludes that this can be tied to the hypothesis that technology embodied in Foreign Direct Investment (FDI) and skilled labor may be complementing each other for the poorer countries. He argues that trade and foreign investment can therefore significantly raise the demand for skilled workers, such as engineers, accountants and finance specialists. However, the finding that the same factors increase the gender wage gap in high skill occupations means that FDI benefits male engineers, male accountants and male finance specialists more than their women counterparts. He attributes this to the hypothesis that there are significant gender gaps in human capital within high skill occupations in poorer countries. This study is important in terms of recognizing the different impact of trade on gender within the same skill categories.

Berik, Rodgers and Zveglich discuss the effects of increased competition through international trade on the gender wage gap for South Korea and Taiwan³¹. They distinguish between two hypotheses concerning the effects of increased international competition on the gender wage gap. The first one is the Becker’s theory mentioned above. The second one is a non-neoclassical approach which takes into account the bargaining power of the worker groups and states that rising competitiveness can be compatible with the discrimination and cost cutting practices which usually done through cutting female wages. They test the Beckerian hypothesis for the South Korea and Taiwan cases, by focusing on concentrated and non-concentrated industries separately. For Taiwan, they find out that increased openness to imports over time in concentrated industries is positively and significantly associated with a widening residual gender wage gap. The results are more mixed for Korea. They conclude that increased openness, through creating incentives to cut the costs in the concentrated industries, increase the residual wage gap.

Berik points out that the above-mentioned observation that rising capital intensity, technological upgrading and improvement in the quality of export products may reverse the trend in female employment in the higher stages of export orientation³². She argues that a possible explanation is the existence of employer discrimination against hiring women in the new, higher paid, skill intensive jobs and capital intensive production processes.³³ Export orientation, female share of employment and female residual labor supply decrease women’s wages and capital intensity and firm size increases it. She also finds out that wage penalty for men in the case of export orientation are higher for men than women. Also, female share has a higher negative influence on men’s wages compared with that of women’s. Furthermore, one important conclusion is that while women benefit from an increase in the number of waged over salaried workers, men are disadvantaged by it. Berik argues that this can be a result of a job restructuring within the production workers that places women in lower paying jobs compared to men³⁴.

Concluding Remarks

In this paper, we tried to account for the effects of trade policy changes on gendered labor market. First, we talked about the mainstream trade theory’s implications for women workers if we take women workers as the unskilled ones. For a developing country, HOS model with SS theorem implies an increased demand for unskilled labor and a rise in its remuneration. Hence, adapted to gender, we would expect a decrease in gender-wage gap and increased relative demand for labor of women. This might explain the feminization trend that started in the 1970s following trade liberalization. However, we argued that there is no general rule in economics that might explain the preference for men workers versus women workers. The increase in the female share should be contextualized whereby the appropriate unit of study is the international economic order. Specifically, a theory that uses gender as its most important variable has to explain the peculiar nature of women’s labor that is demanded in the exact place and time and its interaction with other social and economic stratifiers. There is no unified theory of feminist economics that might be called a feminist trade theory. Nonetheless, we generalized what might be called the gendered competitive/ absolute advantage theory as a development strategy of late industrializers whereby specifically “female” labor is used as a cost advantage. This is the same route of low road, whereby international competition is tackled with lowering the price/ cost of the export product as much as possible. The case of defeminization presents a trickier subject in that wherever realized it is associated with capital deepening and/ or technological upgrading. Hence, the high road strategy of competing on the grounds of quality by establishing more harmonious relationship between the state and the labor unions might result in the reversal of the feminization trend.

The evidence or the theory is too sporadic to account for any generalization for this reversal. However, if we accept the Marxist notion that the wage rates and employment levels are determined by the respective bargaining powers of capital and labor on the one hand, and women and men on the other, it is obvious that any study that tries to account for the relative increase or decrease in female share or change in gender-wage gap should study the labor market institutions, the state of the patriarchal ideology, the technological changes in the production processes, and the international competition strategies adopted by the country.

Before closing, we need to note that the aforementioned secondary status of women in the labor market stem from the fact that women’s main responsibility in economy is perceived as the reproductive/ care labor that they expend within family. In this essay, we considered the effects of trade liberalization of a developing country on formal labor market/ monetized sphere of the economy. Although, it is no coincidence that low road to international competition is often associated with the rise of informal economy or transformation of the formal economy jobs to include informal characteristics. Hence, the development strategy chosen will have effects on the unpaid/ care economy as well. In fact, some feminist economists think that care economy is even more important under the low road regime in terms of buffering the negative effects of deflationary policies.³⁵ Furthermore, the increase in paid employment together with unpaid household labor of women might end up raising women’s overall work as a result of trade liberalization with supply side policies.