Reinforcing the State: Transnational and State Labor Regulation in Indonesia

Abstract

Research on global programs to regulate labor standards has emphasized interactions between transnational and state regulatory institutions. If transnational initiatives can make state institutions more relevant, they have the potential to reinforce, rather than displace, state labor regulation. Through a study of the Indonesia-based program of a leading initiative to improve working conditions in the garment industry, Better Work, this article identifies the conditions under which transnational regulations reinforce domestic ones. Drawing on two case studies comparing regulations governing fixed-term contracts and minimum wage renegotiations in four Indonesian districts, the authors find that reinforcement is likely when two conditions jointly occur: unions mobilize to activate state institutions, and transnational regulators have support to resolve ambiguities in formal rules in ways that require firms to engage with constraining institutions. The authors further test the findings through a quantitative analysis of factory participation in state-supervised wage renegotiations. The findings reveal opportunities and constraints to designing global programs that can both improve factory-level standards and support the functioning of state labor market institutions.