Layering Global and Domestic Labor Regulations in Indonesia

As global programs for regulating labor standards have developed in the last two decades, international institutions are increasingly “layered” on top of domestic ones across a large number of industries and countries.  This process of institutional interaction is tremendously consequential for regulating labor standards.  On the one hand, it has become widely accepted that compliance with global regulatory programs in many industries depends mainly on the functioning of domestic institutions where production is located. On the other hand, the introduction of international institutions into national contexts has the potential to influence the functioning domestic institutions that will ultimately be decisive in the longer-term trajectory of working conditions.  Scholars have hypothesized that international institutions can complement, substitute, reinforce, or have no effect on domestic ones.  Theoretical expectations for how and when these different outcomes should obtain are unclear because research on institutional layering has been mainly confined to contexts in which institutions are strong, yet in most of the world institutions are weak and there is little reason to expect that the process of layering should take place in the same way in both sets of contexts.   Through a study of one of the leading global programs to regulate labor standards in the garment industry, Better Work (BW), this paper  seeks to identify mechanisms through which layering international institutions over domestic ones results in complementary, strengthening, substitution, or no effect, as well as the conditions that trigger these mechanisms.  To develop this analysis, we draw on data from fieldwork conducting in Indonesia, including interviews with over 120 factory managers, government officials, union leaders, BW staff, and buyers, as well as data from BW factory assessments, surveys, and government records.  These data allow us to trace the processes by which domestic and international institutions layer upon one another under a variety of different political and social conditions.  Our findings suggests that mechanisms to strengthen institutions are triggered when two forces converge: action from “below” by labor groups that activate institutions, and support from “above” by officials with domestic policy making authority.  Activation is key because in contexts where institutions are weak the existence of the rules of the game is not a sufficient condition to influence actors’ behavior.  Local mobilization by activists creates conflicts that put pressure on both domestic and international institutions.  Such pressure, however important, is not sufficient, because local actors often do not have direct power over the stewards of international institutions, and international institutions lack their own authority to intervene in domestic processes.  To trigger strengthening mechanisms, domestic actors must use their authority to formally determine how the rules of the game should function, and transnational actors must use their power to create incentives for firms to follow the rules.  Thus, the conditions for global actors to reinforce domestic institutions are created by alignments in the localized power of worker mobilization, the authority of state officials, and ability of transnational regulators to create incentives.