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World Bank note (May 2012) on wage and poverty alleviation trends linked to the garment sector. "A radical shift in apparel production between countries over the last few years has had mixed results in wages and poverty reduction across the developing world. This is particularly true since the end of the Multi-Fibre Arrangement (MFA) and the Agreement on Textiles and Clothing (ATC) in 2005, which abolished export and import quotas. While most people predicted that China would gain, because of low wages, and all others would lose, many other Asian apparel exporters in fact benefited, such as Bangladesh, India, Vietnam and Pakistan. And not just because of low wages -salaries tended to increase in most exporting countries-but because of domestic policies supporting the textile industry. On the other hand, countries like Honduras, Mexico, Morocco and Sri Lanka experienced falling apparel employment, something that would appear to be bad news as jobs for women and workers most likely to be closest to poverty, were lost. But Mexico's experience suggests that shifting out of apparel may not be necessarily negative news when the country is moving up the value chain into more advanced manufacturing. In fact, this would be a sign of economic development as long as the shift into higher-value goods and services is possible. What matters is for countries to have policies that focus on improving competitiveness in the long-run, but also workforce programs to help workers make the transition. Increasing apparel exports is a good thing for poverty reduction in developing countries but moving up the ladder is an inevitable step in the quest for prosperity. Let's allow the textile industry to keep moving across borders and to help countries lift themselves out of poverty."

Despite growth estimates going down for China (now at 7.4% in Q3/2012), the labour market is still tight and wages are still rising. Growth figures below 8% were previously considered cause for concern, but this article suggests that demographic trends (i.e. impact of the one child policy) are lessening the pressure on the government for job creation. There simply are not as many workers joining the workforce.While the latest slowdown has led to some temporary job cuts, these have not been near the figures reached in 2008-9. All of these factors suggest that further large-scale stimulus measures in China are unlikely.

Improvement in labor market conditions has been the main explanation behind many of the poverty success stories observed in the last decade-that is the primary conclusion of an analysis of changes in poverty by income source. Changes in labor earnings were the largest contributor to poverty reduction for a sample of 16 countries where poverty increased substantially. In 10 of these countries, labor income explained more than half of the change in poverty, and in another 4 countries, it accounted for more than 40 percent of the reduction in poverty. A declining dependency rate accounts for over a fifth of the reduction in poverty in 10 out of 16 countries, while transfers and other nonearned incomes account for more than a quarter of the reduction in poverty in 9 of these countries. A further decomposition of the contribution of labor income to poverty reduction in Bangladesh, Peru, and Thailand found that changes in individual characteristics (education, work experience, and region of residence) were important, but that overall, increases in real earnings among the poor matter the most.

Recent blog by Naila Kabeer for Guardian

Short video interview (3m) with Jayati Ghosh