Labour Share and Value Distribution

Labour Share and Value Distribution

Labour Share and Value Distribution

Executive Summary

Forced labour remains a prevalent and pernicious problem in global supply chains — and an issue over which business leaders, governments, and civil society alike have expressed concern. The presence of abuse in supply chains results from a series of business decisions, financial practices, and government policies that have skewed the distribution of value across the supply chain so dramatically that exploitation is a feature, not a bug, of the modern economy. The financial and non- financial gains of production are concentrating among brands, retailers, and investors. Amidst skyrocketing corporate profits and increasing financial rewards for CEOs and shareholders across a number of sectors, workers struggle to access a declining share of created value.

Such downward pressure on workers’ wages results, in part, from a global retail production model that is increasingly characterised by a fast-paced, low-cost dynamic. Notable power differentials between various supply chain actors enable brands, retailers, and investors to extract and retain value generated elsewhere in the supply chain. For example, profits obtained by implementing aggressive purchasing practices come at a cost to suppliers and workers, as lead firms make it difficult for suppliers to ensure adequate margins to properly compensate workers, set reasonable working hours, or invest in safe working environments.1 This is especially common in low-wage, labour- intensive industries, where the environment is ripe for severe labour exploitation, including forced labour and debt bondage. Profits flowing up the supply chain through this ‘squeeze’ should no longer be seen as coming from efficiencies, but recognised as another form of extraction.

These trends emerge after several decades of globalisation and trade liberalisation that have embedded a neocolonial approach into the global economy, reflecting the perpetuation of historic marginalisation, dispossession, and discrimination. There are a number of underpinning dynamics that further drive uneven value distribution in supply chains:

→ Financialisation: As the global economy centres increasingly on financial activity, lead firms have shifted attention to profiting from financial activities — such as stock buybacks — and prioritised short- term returns for shareholders and executives over long-term investment in productive activities, including worker wages.

→ Market concentration: A proliferation of mergers and acquisitions, and tendency toward common firm ownership by large investment companies further add to lead firms’ already disproportionate power in global supply chains. Reduced competition — notably amidst the rise of uber-productive and efficient superstar firms — means more control over pricing and input costs, including labour. The greatest decline in labour share is in industries that are most concentrated.

→ Limitations on labour organising: The era of globalised production in which buyers can freely choose from whom and where they source is also one marked by a notable decline in union membership, with many states and employers intentionally repressing freedom of association
to attract business. Often facing poverty, unequal access to education, and infringements on fundamental rights, workers at the bottom of supply chains are left with few opportunities to take collective action or enforce their rights (where these exist at all) out of fear of retaliation.

→ Outsourcing and subcontracting: Shifting production to geographies with weaker legal frameworks, lower wages, poorer enforcement of labour standards, and lower rates of unionisation opens up access to new populations of workers that are easily exploited, and exacerbates the problems posed by financialisation, market concentration, and anti-labour activities.

At the same time, because they do not significantly disrupt prevailing business models, current efforts to regulate supply chains — such as voluntary due diligence and social compliance reporting, ethical certifications, or private-led corporate social responsibility efforts — have not produced demonstrable results in rooting out forced labour. Reducing the business demand for forced labour requires more value to be distributed throughout the supply chain to ensure it reaches workers’ pockets. This will require a concerted and multi-pronged effort among businesses, states, and civil society alike.

→ State-driven solutions: Governments must enact critical regulations to support effective governance in supply chains, including: creating meaningful accountability that reaches the top of the supply chain, where key decisions are being made; closing legal loopholes that mask accountability for human rights violations; enacting human rights due diligence legislation that mitigates and prevents the negative implications of business practices on workers; ensuring more equitable ratios of worker-to-executive pay; and strengthening antitrust legislation to serve its intended purpose of ensuring fair market competition to serve as a check on outsized firm power.

→ Market-based solutions: Firms can demonstrate leadership in tackling forced labour by reorienting corporate ethos toward stakeholder value, which includes ensuring they are covering the true cost of a living wage and safe working conditions. Further, supporting workers’ ability to be involved in decision-making and promoting their ability to organise is key.


Millions of people around the world face situations of forced labour, most often in the context of poverty, discrimination, weak rule of law and labour enforcement in both buyer and supplier states, and lack of access to sustainable education and employment opportunities. Global supply chains — in which an estimated 450 million people2 are employed — are marked by inequitable distribution of value as well as colonial legacies of capital accumulation and worker dispossession across the economy.3 Because of this value distribution imbalance, in which the monetary gains of production amass among brands, retailers, and investors while workers and communities are left scrambling for an increasingly small piece of the pie, severe labour exploitation is a predictable and prevalent feature of the global economy.

Though conceptions of value in supply chains are varied and not well- agreed, for the purposes of this Brief we understand value distribution as the “allocation of retained earnings among those who contributed resources to value creation and appropriation.”4 More broadly, value can be conceived as a concept of human rights: forced labour and inequitable value chains reflect power differentials that nullify the relationship between a person’s inherent worth as a human being and a worker, and the value they are afforded by society and their employer, respectively.5

While it is often assumed that each contributing party in a supply chain is compensated at a rate commensurate with their contribution, skewed power dynamics arising from varying levels of dependency7 between firms in a supply chain make it all too easy for brands, retailers, and investors to easily extract and retain value generated elsewhere in the supply chain
for themselves,8 leaving those with less power vulnerable to exploitation.

This is especially true in low-wage, labour-intensive industries9 in which lead firms can be much nimbler than their suppliers. Unsurprisingly, it is the very segments of the supply chain that capture the lowest value share where exploitation and forced labour are most highly prevalent, such as among cotton harvesters,10 factory workers sewing garments,11 farmers cultivating cocoa,12 or miners excavating coltan.13 Relatedly, lead firms can exert pressure on dependent suppliers to cooperate in tax avoidance schemes14 or other dodging of regulatory compliance — actions that undercut states’ ability to provide governance, worker protections, and sufficiently funded social safety nets.15 Furthermore, historical legacies across sectors, such as in agriculture, can lead to accumulation at the top of the chain through dispossession at the bottom. For example, a study on sugarcane commercial farming in Uganda16 explored how changes in land use — with commercial farming displacing subsistence crops — led to a path of development that resulted in modern food insecurity and poor working conditions.

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