Trade liberalization has plunged the textile and clothing industry in many countries — both in the developed and developing world — into a crisis with important employment losses. Important differences across countries exist regarding the extent of decline, the productivity performance, and the working conditions for the remaining workers in this industry. Based on elements of global commodity chain analysis and the varieties of capitalism (VoC) approach, these different patterns have been explained for developed countries, placing particular emphasis on the scope and effective implementation of industry-wide minimum wages and labour regulations, as well as on retail concentration.
In this article, we apply the above framework to Chile, where the process of downsizing of the industry has followed the least virtuous pattern, with meagre productivity results and precarization of remaining employment. Part of the remaining textile and clothing employment has moved to the informal economy and sweatshop-type enterprises. This outcome is explained by the high degree of retail concentration in Chile, the virtual absence of sectoral collective bargaining and the partial coverage of labour inspection among micro and small enterprises.
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