State Matters: The Political Economy of Vocational Training and Employment

by Merve Sancak*

Skills have been shown as an answer to ongoing socio-economic problems such as unemployment, economic inequality, or lack of economic growth both in the Global North and Global South. The issue has been particularly prominent in the debates about the ‘lack of’ economic development in the Global South countries. It has been argued that these countries cannot achieve high economic growth because they do not possess a skilled labour force. Skill formation has also had a critical part in the debates about income inequality and class mobility, where education and training have been shown as key a key method for the upward mobility of kids from poorer families.
Despite the heated arguments about the importance of education and training, there is little evidence about what factors influence education and training activities in the Global South countries, and how education and training actually affect class mobility and economic development.
In my recent book titled Global Production, National Institutions, and Skill Formation, I try to answer some of these questions. I look at two countries of the Global South, Mexico and Turkey, which have first experienced fast economic growth but have been in the middle-income trap for a while. I concentrate the analysis on local manufacturing firms and study these firms’ methods of finding shop floor workers with the necessary skills. More specifically, I investigate firms’ hiring, training, and employee development practices, which I call ‘skilling practices’ in the book. I examine how these firms’ position in global value chains (GVCs) and the national institutions that surround them affect their skilling practices. For this, I carry out a multi-level analysis involving a firm-level inquiry on skilling practices, a nation-level investigation on institutions, and a global-level study on the governance of GVCs.
The book focuses on the automotive industry, and the Mexican and Turkish supplier firms producing parts and components for global auto parts-automotive chains (AACs). The data involves interviews with Turkish and Mexican auto parts suppliers (20 and 19 firms respectively), and interviews with several stakeholders such as the bureaucrats from the ministries of education and labour, and the representatives of labour unions and industry associations.
The book’s main argument is the state matters the most for skill systems, and higher state involvement in the skill system is more likely to lead to longer-term and inclusive development. Even though the pressures in GVCs influence the types of skills needed, these pressures are mediated by national institutions, which are predominantly shaped by the state’s involvement in them. The different institutional arrangements lead to distinct hiring, training, and employee development practices in suppliers, which then has specific implications for economic growth and class mobility. This main argument is built on the following sub-arguments:
Governance structures in global AACs influence firms’ skill needs: The Turkish and Mexican auto parts producers participate in the AACs of original equipment manufacturers (OEMs) mostly as Tier-2 and sometimes as Tier-1 suppliers. The suppliers produce for multiple AACs with different governance structures at the same time, which lead to two main groups of workers in firms both in Mexico and Turkey. Firstly, price is the main expectation in some AACs, which pushes the firms to have a group of low-wage workers with flexible employment arrangements. Most of these workers are unexperienced, have low levels of education and/or minimal previous training. Secondly, quality and just-in-time delivery of products constitute key expectations in AACs led by other OEMs, because of which both Mexican and Turkish firms claim that they need to have a group of skilled workers. However, GVC structures do not directly affect firms’ methods to find these skilled workers. It is rather the national institutions.
National institutions play the major role in affecting firms’ strategies to address their skill needs: Although the Turkish and Mexican firms have similar skill needs, they have very different strategies to address these needs, and this is due to the distinct nature of institutional arrangements in the two countries.
In Turkey, the vocational education and training (VET) system is statist with some collectivist elements, the minimum wage is relatively high, suppliers are located in areas with cheap or free public transportation, temporary employment of unexperienced/untrained workers is enabled through subcontracting and the military service requirement, and the firms are required to employ workers only with valid vocational certification. Consequently, firms in Turkey employ students/trainees or recent graduates of public VET programmes for about two years until they leave to conduct their military service. These individuals re-join the labour market as workers with a VET certificate and some experience, and are employed as operators on a permanent basis. These operators have career development opportunities and can be promoted to higher level positions such as foreman, team leaders, shift supervisors, even plant managers.
In Mexico, the public VET system is liberal with low state commitment and minimal firm involvement, the minimum wage is extremely low, and suppliers are located in remote locations with limited public transportation, making workers dependent on firms for employment and training. This leads to distinct skilling strategies for the production positions and for posts that require some general skills such team leaders or maintenance workers. For the former, the individuals residing in the area of the company are employed at a very low wage and are provided basic firm-level training. The content and length of the training varies significantly depending on firms’ size and location. For the latter, Mexican firms recruit individuals with post-secondary certificates. Therefore, the possibility of production operators to move to posts with some general skills, which are also the posts with higher salary, is extremely limited in Mexican firms.
The state plays the major role shaping the national institutions: All critical institutions affecting firms’ skilling strategies are influenced by the state involvement in Mexico and Turkey. The state in both countries plays the key role in the public VET system, labour regulations including the minimum wage and contract terms, firms’ accessibility to workers via cheap public transportation, and, for Turkey, the military service requirement.
Skill systems with higher state involvement are more likely to lead to longer-term and more inclusive development: The skill system with more state involvement in Turkey creates a higher possibility for class mobility due to the career development opportunities of operators. Also, the small-and-medium-sized firms can access skilled workers more in these systems via public VET programmes. In contrast, operators’ career development is restricted in Mexico while firm-based training restricts the skill profile of smaller firms. The smaller firms’ access to skilled workers and operators’ career development opportunities can bring longer term and more inclusive development, although this aspect is not empirically examined in the book.
All in all, with its empirical richness and theoretical approach, the book aims to contribute to distinct fields including comparative political economy, international political economy and economic sociology. To my knowledge, it is the first extensive analysis of skill formation in Global South countries and I hope it will be followed by others trying to understand the skill systems of these countries and their political economy.
———
* Dr. Merve Sancak is a Lecturer in the Institute for International Management at Loughborough University London. Her research sits between international political economy, comparative political economy, and economic sociology to understand capitalist societies in the context of globalization.