All CDDRL Publications Journal Articles World Development Volume 159 November 2022, 106037

Labor conflict within foreign, domestic, and Chinese-owned manufacturing firms in Ethiopia

A large firm survey shows that labor conflicts in Ethiopia are more frequent in foreign-owned firms, especially those that are Chinese-owned. Foreign firms hire similarly educated and experienced workers, while offering similar salaries and benefits. We draw on case studies to explore reasons why foreign, and especially Chinese-owned firms, face exceptional levels of labor conflict. Misaligned perceptions about the role of local labor laws may be an important driver of conflict.

August 14, 2022

Research has documented labor conflict within foreign-owned, and especially Chinese-owned, manufacturing firms in sub-Saharan economies. Yet, systematic comparisons of foreign versus domestic firms are rare, and it remains unclear whether labor conflict is a phenomenon that affects emerging industries or is specific to foreign firms. Drawing on a large firm survey in Ethiopia, we show that foreign firms hire similarly educated and experienced workers. They also offer comparable salaries, benefits, and hours than domestic firms, after controlling for firm size and age. Nevertheless, they experience more complaints, strikes, and protests, with Chinese-owned firms reporting particularly high rates of labor conflict. To scrutinize these findings, we conduct case studies of labor management in six domestic and eight foreign-owned firms around Addis Ababa, Ethiopia. We observe antagonistic labor relations in five foreign-owned firms, four of which are Chinese-owned. In these firms, managers perceive employees as using labor laws to take advantage of them, whereas employees see labor laws as a basis for harmonious labor relations. In the remaining firms, managers frame their firm policies as consistent with employee perceptions of labor laws. We conjecture that the visibility of formal labor institutions leads employees to interpret disagreements as intentional disrespect, rather than ignorance. Our findings suggest that misaligned perceptions about the role of local labor institutions may be an important driver of conflict in foreign-owned firms.