The global value chains (GVC) developmental model, central to much contemporary development strategy, encourages countries to compete for access to global capital by lowering overall labour costs and increasing labour market ‘flexibility’. Incorporation into GVCs can be a powerful motor for poverty eradication, increase formal employment and create jobs for women. But it can also end up concentrating value-capture and market power at the ends of GVCs (design and sales), while pushing risk to the middle (production). This can force countries to compete on labour costs, incentivizing coercion and labour exploitation.

GVC management practices that sometimes foster precarious work include: short-term supplier relationships, downward price pressures, volatility in order volumes and specifications, late payment and lack of access to working capital, labour subcontracting and production quotas. The result can be that GVCs reproduce vulnerability in the workforces and communities they depend on, undermining their sustainable development. The managerial challenge differs from value-chain to value-chain, depending on how they intersect with local institutions (laws, policy regimes, social norms), vulnerabilities and business strategies. Factors that emerge as particularly important are:

• industry structure (with excessive market power amongst buyers increasing modern slavery risks);
• skills-intensiveness (higher skill work is less prone to exploitation); and
• conditions of production (isolation and precarity increases modern slavery risk).

GVCs work through economic unbundling of production into different tasks, each performed wherever is cheapest. This drives efficiency and increases overall welfare. The danger is that GVCs may accidentally unbundle communities, detaching high-skill, high-wage workers who operate at the ends of the value-chain (design, sales), from low-skill, low-wage workers who are pushed into the risky, precarious middle (production). This can put different communities within the same country on different development pathways, and contribute to structural inequality, political polarization and vulnerability to modern slavery.

Addressing modern slavery requires a developmental model that reaps the pro-growth and job-creating benefits of GVCs, while also protecting people’s economic agency. GVCs are the product of State choices, so State policies on trade, FDI, intellectual property, tax, competition law, labour regulation and land will all be involved in adjusting the GVC model to reduce modern slavery risks. The exact solution will depend on the dynamics of a particular GVC. Different businesses at different points in the GVC have different levels and forms of leverage to address these risks.