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Social up- and downgrading ª The Author(s) 2016
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DOI: 10.1177/1024258916636577
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Fast fashion, post-socialist
transformation, Europeanization,
and the global economic crisis

Leonhard Plank
Department of Spatial Planning, Centre of Public Finance and Infrastructure Policy, TU Wien

Cornelia Staritz
Austrian Foundation for Development Research (ÖFSE)

Summary
Although the expansion of global production networks (GPNs) has been an important source of
employment generation in many developing and transition countries, the qualitative aspects of this
employment are less promising, often being characterized by high flexibility, uncertainty and
precariousness. Drivers of these outcomes are industry dynamics and lead firm strategies such as
fast fashion in the apparel industry. Equally important are, however, multi-scalar institutional
contexts and state policies that influence social up- and downgrading trajectories. Against this
background, the article assesses the up-/downgrading of apparel workers in Romania, a key
regional supplier of western European markets. In addition to the sourcing practices of lead firms,
and particularly fast fashion, we highlight the legacy of the country’s state socialist past and its
post-socialist transformation, Europeanization and the global economic crisis as drivers of GPN
outcomes.

Résumé
Même si l’expansion des réseaux de production mondiaux (RPM) a constitué une source impor-
tante de création d’emplois dans de nombreux pays en développement et en transition, les aspects
qualitatifs de cet emploi sont moins prometteurs, en étant souvent caractérisés par un niveau élevé
de flexibilité, d’incertitude et de précarité. Ces caractéristiques sont le résultat de l’évolution du
secteur et des stratégies des entreprises de premier rang, comme la fast fashion dans le secteur du
vêtement. Mais les contextes institutionnels multiscalaires et les politiques publiques qui influen-
cent les trajectoires de progrès ou de régression sociales, sont tout aussi importants. Dans ce

Corresponding author:
Leonhard Plank, Department of Spatial Planning, Centre of Public Finance and Infrastructure Policy, TU Wien, Resselgasse
5/2/3, A-1040 Vienna, Austria.
Email: leonhard.plank@tuwien.ac.at

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contexte, l’article examine les avancées et les régressions vécues par les travailleurs du secteur du
vêtement en Roumanie, un fournisseur régional important des marchés d’Europe occidentale.
Outre les pratiques d’approvisionnement des entreprises de premier rang, en particulier pour la
fast fashion, les auteurs de cet article soulignent l’héritage du passé de l’économie d’État et de la
transformation postcommuniste, ainsi que celui de l’européanisation et de la crise économique
mondiale, comme autant de facteurs expliquant le bilan des RPM.

Zusammenfassung
Zwar ist der Ausbau globaler Produktionsnetzwerke eine wichtige Ursache für die Entstehung
neuer Arbeitsplätze in vielen Entwicklungs- und Schwellenländern. Die qualitativen Aspekte dieser
Arbeitsplätze sind jedoch weniger vielversprechend und oft gekennzeichnet durch einen hohen
Grad an Flexibilität, Unsicherheit und prekären Beschäftigungsverhältnissen. Zurückzuführen sind
diese Ergebnisse auf die brancheneigene Industriedynamik und Strategien führender Unternehmen
wie z.B. Fast Fashion in der Bekleidungsindustrie. Von gleicher Bedeutung sind jedoch institutio-
nelle Kontexte auf unterschiedlichen räumlichen Ebenen und eine staatliche Politik, die Einfluss auf
die Verbesserung oder Verschlechterung der Situation der Arbeitskräfte nimmt. Vor diesem
Hintergrund bewertet der Artikel das soziale Upgrading bzw. Downgrading der Beschäftigten in
der Bekleidungsindustrie in Rumänien – einem zentralen regionalen Zulieferland für die Märkte in
Westeuropa. Zusätzlich zu den Beschaffungspraktiken der führenden Firmen, insbesondere der
Fast Fashion, unterstreichen wir auch das Erbe der sozialistischen Vergangenheit des Landes und
seine post-sozialistische Transformation sowie die Europäisierung und die globale Wirtschaftskrise
als bestimmend für die Ergebnisse im globalen Produktionsnetzwerk.

Keywords
Global production networks, fast fashion, social upgrading, working conditions, apparel, Romania

Introduction
Since the 1990s scholars from different disciplinary fields have drawn on chain and network
conceptualizations to understand the rise and consequences of organizationally fragmented and
geographically dispersed global value chains (GVCs) or global production networks (GPNs) (Coe
and Hess, 2007). More recent literature has explicitly focused on the effects on workers and their
roles in GVCs/GPNs. One important finding from this literature is that, although the expansion of
GVCs/GPNs has been an important source of employment generation in many developing and
transition countries, the quality of this employment is often less promising, with jobs characterized
by high flexibility, uncertainty and precariousness (e.g. Barrientos et al., 2011).
These employment characteristics are specifically relevant in the increasingly important fast
fashion segment of the apparel industry. Fast fashion is a business model based on increased
variety and fashionability and on permanently shrinking product life and production cycles that
requires bringing new products to markets at an increasing pace and in shorter time spans (Tokatli,
2008; Plank et al., 2014). Retailers such as Zara and H&M have become known as the avant-garde
in this respect, making cutting-edge fashion trends available in a matter of weeks. Fast fashion
sourcing trends have however also become important for traditional retailers, particularly for
specific product lines. This business model implies not only increased organizational flexibility
and shrinking lead times for supplier firms but also the supply of high quality apparel items at low

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cost. With supplier firms struggling to accommodate these potentially conflicting requirements,
the pressure is often passed on to workers (Raworth and Kidder, 2009).
Against this background, this article assesses how integration into GPNs, in the fast fashion
apparel segment, has affected workers’ social up- and downgrading trajectories. The focus is on
Romania, a main regional and predominantly fast fashion supplier in Central and Eastern Europe
(CEE). The article shows that the role of workers and social up-/downgrading trajectories are
strongly influenced by industry dynamics and that certain working conditions are enablers of
prevailing lead firm strategies. Industry dynamics are however mediated by multi-scalar institu-
tional and regulatory contexts and state policies. In Romania – as in other CEE countries – the
legacy of the country’s state socialist past and its post-socialist transformation, Europeanization
and the global economic crisis have been influential drivers of GPN outcomes (Smith et al., 2014;
Plank and Staritz, 2015; Pickles et al., 2016).
The article is based on trade and sector data as well as primary data collected through semi-
structured interviews with institutional stakeholders, managers and workers’ representatives in
apparel firms as well as standardized interviews with workers. At the institutional level we inter-
viewed 41 representatives from the relevant ministries, labour inspectorates, employer associa-
tions, trade unions, NGOs and sector experts in 2008–2009. Five additional institutional interviews
were conducted in 2014. Firm-level interviews were conducted at 12 export-oriented apparel firms
specialized in fast fashion production for the EU-15 market in 2008–2009.1 The selection criteria
for firm interviews were based on geographical location (with a focus on Bucharest and the south
and south-east of Romania), firm size and institutional specificities (former state-owned and
greenfield locations, for the most part established in the early 1990s). Thirty-five standardized
interviews were conducted with workers, focusing on the terms and conditions of employment.
The interviews with local labour inspectorates were particularly useful in complementing and
triangulating these findings.
The next two sections discuss social upgrading as analysed in the literature on global value
chains and production networks, as well as regional suppliers in CEE and economic up-/down-
grading trajectories of firms in Romania. This is followed by a section analysing social up-/down-
grading experiences of workers in fast fashion apparel GPNs in Romania. The final section is
dedicated to our conclusions.

Social up- and downgrading in global production networks

The literature on global value chains and production networks analyses how production, distribu-
tion and consumption are globally interconnected along organizationally fragmented and geogra-
phically dispersed chains or networks of activities and actors. Considerable attention has been
dedicated to economic upgrading, defined as a firm’s, region’s or country’s trajectory from low- to
higher-value activities (Bair and Gereffi, 2003). GVC research in particular has focused on the role

1 Given the focus on the GPNs of EU-15 retailers, primarily domestically oriented apparel producers were
not at the centre of this research. Prior to 1989 apparel and textile conglomerates served the domestic and
regional COMECON market. In the 1990s these firms either closed down or divested their textile branches
and ‘specialized’ in Outward Processing Trade (OPT) apparel exports, while the domestic market was
initially largely served by imports. However, particularly in the 2000s, a number of apparel exporters
increasingly switched part of their production to the domestic market, motivated by growing demand and
better margins. But competition also increased on the domestic markets – increasingly owing to EU-15
retailers, and, hence, most domestically oriented firms continue exporting (for more information see Plank
and Staritz, 2015).

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of lead firms in governing chains and in enabling or restricting the entry and economic upgrading
prospects of supplier firms. In doing so, it has tended to overlook the institutional dimensions of
global production, even though these were conceptually mentioned early on (Gereffi, 1995). The
GPN approach stresses the importance of non-firm actors and the embeddedness of production
networks in social, institutional and policy contexts, stemming from the early recognition that
firms’ behaviour is strongly influenced by the context in which they operate (Bair, 2009; Hender-
son et al., 2002).
Both GVC and GPN research has recently focused on workers, labour processes and social
upgrading and how they interact with GVC/GPN dynamics and economic upgrading (e.g.
Barrientos et al., 2011; Coe and Hess, 2013; Rossi et al., 2014; Newsome et al., 2015). Social
upgrading is generally defined as changes in the working conditions or rights of workers which
improve the quality of their employment (Rossi, 2013). Such definitions relate to the ILO’s ‘decent
work’ approach, i.e. work taking place under conditions of freedom, equity, security and human
dignity, in which rights are protected and adequate remuneration and social coverage are provided
(ILO, 1999). Recent criticism of the social upgrading literature posits that it is largely based on an
elitist conception of labour relations that focuses on firms, states and international organizations,
while neglecting workers and local actors, their struggles and the centrality of power asymmetries
(Selwyn, 2013; Arnold, 2013).
Evidence on the outcomes for workers as a result of insertion in GPNs is mixed. On the one
hand, GPNs have created new employment opportunities for marginalized groups such as women
and unskilled workers without previous access to wage employment (ILO, 2015). At the same
time, globalization of production and especially requirements deriving from buyers’ sourcing
practices and their search for low costs often lead to high pressure being put on supplier firms
(Barrientos et al., 2011; Locke, 2013). This in turn often translates into low wages and precarious
labour arrangements, such as temporary, contract and migrant labour. In addition to low costs,
buyers also demand high quality, short lead times, flexibility and responsiveness, reflecting the
required lean production and just-in-time delivery principles which enable lead firms to reduce
inventory costs and risks (Abernathy et al., 1999). Lead firms’ demand for seamless and flexible
just-in-time supply goes hand in hand with an interest in avoiding disruptions through workers’
action or mobilization in GPNs (Anner, 2015). Hence, in contrast to standard conceptions of
flexible labour markets, production in GPNs has been linked to the emergence of a new type of
labour, characterized by a high degree of speed, flexibility and cost effectiveness but which also
meets consistency, quality and fashion standards (Barrientos and Kritzinger, 2004; Barrientos
et al., 2011), all of which are particularly pronounced in the fast fashion segment.
While industry dynamics and lead firms’ strategies significantly impact on workers, they are
mediated by multi-scalar institutional and policy contexts. These contexts greatly shape market
competition, firm behaviour, upgrading trajectories and GPN outcomes (Coe et al., 2008). But
firms and their associations also influence institutions and policies, making processes and out-
comes highly inter-related (Levy, 2008). Illustrative cases are labour control regimes that link GPN
dynamics to domestic institutional arrangements. In this regard, Anner (2015) suggests a threefold
typology for the global apparel sector, consisting of state control, market despotism and employer
repression. Post-socialist CEE countries do not fit into any single one of these models, instead
constituting a hybrid form. Taking Romania as an example, we find elements of all three: state
control declined after 1989, but there was still an important institutional legacy of the ‘workers’
state’ (Pickles and Smith, 2010), though anti-labour policies increased in the context of the global
economic crisis; market despotism became central in the 1990s in the context of deindustrializa-
tion, high unemployment and dependent trade relations; employer repression, as reflected in

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anti-union activity, was also observed, particularly in newly founded firms hostile to trade unions.
Looking at the social up-/downgrading trajectories in Romania’s apparel industry, the institutional
legacy of the state socialist past and post-socialist transformation, Europeanization and the global
economic crisis hence deserve special attention (for CEE see Smith et al., 2014; Pickles et al.,
2016).

Regional suppliers in CEE: diverse economic up- and downgrading

trajectories
In the 1990s and early 2000s, European macro-regional production networks deepened. This was
driven by relatively cheap but skilled labour close to core markets, time and flexibility becoming
crucial sourcing criteria, and regional trade agreements, particularly Outward Processing Trade
(OPT) arrangements (Begg et al., 2003). OPT allowed EU-based firms to export temporarily inputs
for processing to an OPT partner country and re-import products under preferential conditions, i.e.
only paying duty on the value added abroad (Pellegrin, 2001). For supplier firms in CEE, this led to
increased exports and employment, but also to a concentration of low-value activities and to the
disintegration of the domestic textile and apparel complex (Pickles and Smith, 2010). Although
Romania’s transformation during the 1990s differed from market radical prescriptions adopted in
other CEE countries (Pop, 2006; Bohle and Greskovits, 2012), this did not result in policies with
the potential to alter this dependent OPT integration. Furthermore, apparel was perceived as a sun-
set industry, despite being one of the few sectors buffering the ‘transition shock’. The industry
structure changed dramatically, with former state-owned plants being either closed down or split
into smaller units and privatized. Smaller private firms emerged, as reflected by the fact that more
than half of the firms were micro-enterprises in the early 2000s (Pincheson, 1995; IFM, 2004).
The apparel export boom lost momentum at the end of 2004 with the phasing out of the Multi-
Fibre Arrangement (MFA) quota system (Frederick and Staritz, 2011). The global economic crisis
had mixed effects – on the one hand it reduced demand in the core EU-15 markets, leading to a
dramatic drop in exports in 2008 and 2009; on the other hand a number of European buyers re-
assessed their largely Asian-focused sourcing strategies in the context of global insecurities, Asian
wage rises and a greater focus on flexibility (Plank and Staritz, 2015). As a result, regional supplier
countries continue to play an important role in the EU-15 market, accounting for 19 per cent of
total apparel imports in 2013 and with Romania ranking as the number six exporter.2 In Romania,
the apparel sector went through a consolidation phase starting in the mid-2000s in the context of
the MFA phase-out and rising domestic cost pressures related to EU accession and accelerated by
the global economic crisis. Exports increased again in 2011 (though employment increased to a
lesser extent) and subsequently stabilized at the level of the early 2000s (Figure 1). In 2013, the
apparel sector still accounted for 7 per cent of exports and for an important share of – largely
female (above 85 per cent) – manufacturing employment (14 per cent) (NIS, 2015). While depen-
dency on the EU-15 market has declined over the last decade, it was still 73 per cent in 2013.
Alongside German retailers with a long history of sourcing apparel from Romania (e.g. C&A and
KarstadtQuelle), a number of Italian branded manufacturers are important buyers in Romania, as
are fast fashion retailers such as H&M and Zara.
Romania’s continuing importance for the EU-15 market can be attributed to several economic
upgrading processes. In the second half of the 2000s, OPT production – referred to as the

2 Regional suppliers include CEE countries, Turkey, Egypt, Jordan, Morocco and Tunisia.

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350 6,000
300 5,000
250
4,000
Thousands

Mio USD
200
3,000
150
2,000
100
50 1,000

0 -
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Apparel Employment (le hand scale) Apparel Exports (right hand scale)

Figure 1. Exports and employment in Romania’s apparel sector.

Sources: UN Comtrade (2014); Employment: NIS (2014), Time series break in 2008 due to change from NACE Rev. 1.1. to
Rev. 2.

‘Lohnsystem’ in Romania – became increasingly unviable, since the main reason for using this
production model was low labour costs. This led to firms trying to move away from it, following
four broad categories (Plank and Staritz, 2015): (i) product upgrading to higher value products with
smaller runs (often combined with continued production under the ‘Lohnsystem’), (ii) limited
functional upgrading in traditional EU-15 markets, (iii) market diversification to non-traditional
export markets and the domestic market, and (iv) relocations to poorer regions within Romania and
neighbouring non-EU countries.

Social up- and downgrading in fast fashion: findings from Romania

We define social up-/downgrading in line with the ILO’s decent work approach, specifically
using the categorization of labour standards made by Elliott and Freeman (2003) and Barrientos
and Smith (2007) and consisting of two broad elements – a) measurable standards, including
wages, physical well-being (e.g. occupational health and safety (OHS), working hours) and
employment security (e.g. type of contract, social protection); and b) enabling rights, including
key trade union rights such as freedom of association and collective bargaining, the right to
freely choose employment, non-discrimination and voice. Buyers’ sourcing strategies as well as
institutional, regulatory and policy contexts are also discussed in this section as drivers of social
up- and downgrading.

Conflicting fast fashion demands

Flexibility requirements
Fluctuating, flexible and short-notice orders directly related to fast fashion sourcing practices are a
challenge for firms and workers and have an impact on working time and work intensity (i.e.
increased pace and stress at work). In our interviews we found that, when order levels were low,
workers were sometimes forced to work (and earn) less, whereas in peak times work intensity or
working time was very high. Piece-rates or a mixture of hourly and piece-rate payment and daily
minimum targets were commonplace in the sector. Managers and trade unionists acknowledged
that the scope for calculating ‘realistic’ targets in line with decent working conditions was often
limited by buyers’ requirements in terms of delivery schedules and price. In peak times increased

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Plank and Staritz 7

work intensity and overtime were often the only ways to meet targets. One recurring practice in
Romania with regard to overtime was that suppliers maintained two sets of working time records –
one ‘official’ set complying with national law and buyers’ CSR demands, and one ‘internal’ set
recording hours actually worked.
Romania’s position as a regional fast fashion supplier implies a focus on smaller order
volumes. This increased in the context of the MFA phase-out and the global economic crisis.
Small production runs meant that production arrangements had to be changed frequently, some-
times within a week. This led to additional pressure on firms and workers with regard to working
time and work intensity.

Contradictions between flexibility and quality

As the fast fashion strategy relies not only on flexibility, fast product delivery and low prices, but
also on high quality, reliability and to a certain extent more sophisticated products, lead firms’
requirements are particularly challenging to fulfil. Workers in Romania – and other CEE countries
(Pickles and Smith, 2010) – have a long history of producing sophisticated products, building on
their broader skills developed under state socialism. In this context, some workers (re-)upgraded
their skills in order to fulfil process and quality standards for fast fashion production and focus on
higher value/low volume production.
One way for suppliers to cope with conflicting buyer demands is to make use of different
types of workers. Compared to other countries (for Morocco see Rossi, 2013), the use of regular
and non-regular workers in the same factory was not commonly observed in Romania. How-
ever, a common strategy used by Romanian suppliers was to subcontract orders to smaller firms
and workshops in the proximity of the core firms as a way of quickly boosting production
capacity and cushioning order fluctuations. Using core workers in the core plants allowed
suppliers to maintain skills and workforce stability and safeguard quality, while resorting to
a network of smaller firms for mostly lower value tasks helped them cope with costs, flexibility
pressure and order volatility.

Differentiated social up-/downgrading experience

Workers in core and subcontracting firms experienced very different social upgrading outcomes.
While improvements in working conditions have taken place in core firms in certain areas,
particularly with regard to measurable standards such as OHS measures and formal employment
contracts, pressure on working time and work intensity as a result of short-term orders have
affected all workers. Subcontractor workers are however affected most as they are primarily used
as a flexibility buffer, with temporary and casual contractual arrangements leading to highly
flexible working hours.
We also found differences between the working conditions at former state-owned and mostly
larger firms on the one hand and newly created and often smaller firms on the other hand. This
difference partly overlaps with the previous one, as the remaining former state-owned firms are
generally core firms, while newly established private firms can operate as core firms or subcon-
tractors. In former state-owned firms, working conditions were generally better, trade unions
continued to exist and labour inspectorates continued to regulate working conditions. By contrast,
the majority of newly created firms (accounting for the bulk of employment since the 1990s) were
generally non-unionized and not consistently monitored by labour inspectorates. With regard to the
latter, cases of abusive dismissal or unfair treatment of union leaders or of employees wanting to
establish unions were common practice, and many employers – more or less openly – opposed
trade unions or encouraged the foundation of company unions.

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Selective impacts of CSR

Private codes of conduct have proliferated in the apparel sector as most buyers have implemented
their own CSR initiatives. These codes have led to improvements in working conditions, though on
a selective basis. Improvements have focused on measurable standards such as better lighting,
ventilation or ergonomic seating, i.e. a form of process upgrading increasing productivity by a
more ‘efficient’ use of the ‘human resource’. In contrast to these ‘win-win’ situations where a
‘business case’ can be combined with a ‘social case’, issues conflicting with the prevailing
business logic (e.g. living wages, working time, work intensity and key trade union rights) remain
contested. This trade-off was revealed by contradictory demands from and limited coordination
between buyers’ buying and CSR departments, with the tight price and delivery schedule demands
from buying departments conflicting with the labour compliance demands from CSR departments
and auditors who do not however have the means to reward suppliers for improvements (e.g. via
higher prices or more stable contractual relationships).
The findings show that social up- and downgrading is not linear. Social upgrading in Roma-
nia’s export-oriented apparel sector has been selective with regard to both the type of workers
and the dimension of social upgrading. Improvements have largely remained limited to areas
where a case for ‘enlightened’ human resource practices could be aligned with companies’
competitive strategies. However, other issues such as wages, work intensity, overtime and trade
union representation remain contested, since they potentially conflict with prevailing fast fash-
ion industry dynamics. We also found crucial differences between workers in core and subcon-
tractor firms, with the latter often suffering discrimination with regard to types of contracts,
flexibility and skill training opportunities. Specific types of work played a crucial role in
enabling and sustaining GPN dynamics with regard to flexibility and the contradictory demands
for low costs and high quality.

Multi-scalar institutional contexts and policies

Legacy of the state socialist past and post-socialist transformation
Due to Romania’s state socialist legacy, national labour codes, labour inspectorates and trade
unions played a role in safeguarding certain labour rights. This legacy distinguishes Romania from
other apparel-exporting countries in the Global South, where similar structures are often weak or
non-existent (Rossi et al., 2014). Labour inspectorates were in particular active with regard to OHS
standards and formal employment contracts in larger core and former state-owned firms. This
explains for example the limited use of non-regular and informal employment within these firms.
To accommodate flexibility demands, larger suppliers tended instead to use subcontractors. Recur-
ring issues, also in core firms, were however the use of employment contracts only covering the
minimum wage, the payment of additional wages off the books and the hiring of workers for long
probationary periods. Also criticized was the fact that enforcement by labour inspectorates had
only a limited impact, given the generally low fines (Lukas, 2013). Moreover, low staff numbers
also limited the effectiveness of regulation, an aspect further exacerbated by the austerity measures
adopted in the aftermath of the global economic crisis under which labour inspectorate staff was
reduced by more than 20 per cent (EPSU, 2012).
However, the legacy of state socialism not only entailed ‘assets’ such as existing regulation and
inspection structures but also ‘liabilities’. In particular the traditional trade union role as ‘trans-
mission belts’ for the communist party limited their legitimacy in safeguarding workers’ interests
after 1989 (Trif, 2004). Trade unions also faced major challenges in the years immediately after the
‘transition shock’ and the implosion of the economic system. The ensuing massive restructuring,

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Plank and Staritz 9

including firm closures and privatization, and the subsequent rise of the ‘Lohnsystem’ resulted in a
complete overhaul of the firm landscape. The number of firms rose from 544 to almost 5700, while
total apparel employment decreased from 260,000 to 180,000 between 1989 and 1997 (Surubaru,
2007; NIS, 2015). This trend towards smaller private firms continued throughout the early 2000s
and was a key obstacle to organizing efforts (Surubaru, 2007). The situation was further compli-
cated by the emerging company-based and decentralized bargaining systems where workers’
power is generally weaker than at the sectoral or national level (Schulten, 2005; Surubaru,
2007). These challenges were compounded by the exclusion of trade unions by leading institutions
in the early transformation process, in particular by the World Bank, the IMF and the European
Bank for Reconstruction and Development which created what Standing (2002) called the ‘first
revolution by international financial institutions’. Furthermore, Romanian trade unions were
highly fragmented, had no joint strategy and were slow in adapting to changing conditions related
to global production and fast fashion and to organizing a feminized industry. However, Romania’s
trade unions were generally still relatively successful in maintaining their influence over strategic
national policy areas during the 1990s, in contrast to other CEE countries (Varga and Freyberg-
Inan, 2015). But this has changed in recent years, as reflected by the adoption of anti-trade union
policies, in particular in the context of the global economic crisis (Trif, 2013; Varga and Freyberg-
Inan, 2015).

Europeanization and EU accession

EU accession has influenced the national institutional context in a variety of policy fields. In
particular the economic integration model promoted by the EU and the key role of OPT trade
in the apparel sector have greatly circumscribed the potential for economic and social upgrad-
ing. Europeanization has also impacted labour legislation and, more directly, the social
upgrading prospects of Romanian apparel workers. As Romania had a national labour code
rooted in state socialist ideology, and thus offering high levels of workers’ protection (Pickles
and Smith, 2010), EU accession had varying effects on labour legislation. In areas such as
discrimination legislation has been improved (Trif, 2008). However, in others, in particular
with regard to the flexibility of employment relationships and working time, labour legislation
has been weakened (Lukas, 2013). In this regard the role of the IMF and foreign firms and
their representatives, particularly the Council of Foreign Investors, needs to be highlighted.
They criticized the strong influence of trade unions and the too restrictive regulations on
working hours in the new and comprehensive Labour Code adopted in 2003 in preparation for
Romania’s EU membership. This led to it being renegotiated in 2004 by the government, the
Council of Foreign Investors and the IMF – without trade union involvement (EIRO, 2004).
Foreign TNCs such as Nokia and certain employer associations continued to lobby for a
further ‘flexibilization’ of labour legislation after EU accession in 2007, with success in the
context of the global economic crisis.
Against the backdrop of continued limited decent employment opportunities in Romania (Stan
and Erne, 2014), EU accession and the associated lifting of visa and work permit requirements
boosted the out-migration of Romanians and contributed to labour shortages – in particular in the
apparel sector with its relatively low wages and poor working conditions (Ciutacu, 2006). Unlike
earlier migration waves, the composition of migrants changed – from predominantly male, middle-
aged, better educated urban workers to female, younger and less educated people (Surubaru, 2007;
Stan and Erne, 2014). In addition, workers also moved to other emerging sectors within Romania
such as retailing which had a better image and promised better working conditions. Notwithstand-
ing regional differences, this led to additional efforts by employers to retain or attract skilled

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workers in particular. Real wage developments with average growth rates of around 9 per cent in
the pre-crisis period reflected this relative improvement of bargaining power.3
In view of these developments, suppliers relocated production to poorer regions within and
outside Romania. Thus, subcontracting networks set up to cope with the divergent demands from
buyers in GPNs remain important but have been extended domestically and regionally. A few large
firms also resorted to lower-cost workers in their production sites, with the result that migrant
contract workers increased in importance in the apparel sector in the mid-2000s. These foreign
workers came primarily from Asian countries and information on them and their working conditions
is scarce. In January 2007 this issue gained publicity when 300 female Chinese workers, employed
legally under the work permit scheme in an apparel factory in Bacau, protested for higher wages
(BBC News, 2007). They had worked in Bacau since mid-2006 on contracts concluded between the
Romanian employer and an Italian and a Chinese employment agency. According to the ITUC, the
workers were promised wages of US$700 per month at the time of their recruitment. In fact they only
received US$300 per month. Their contract with the recruitment agency stipulated that they had to
pay up to US$4000 to be selected for working. Twenty-five per cent of the workers’ wages went on
repaying this sum every month. Additional deductions were made for food and accommodation by
the employer (ITUC, 2008). The Romanian manager initially threatened to send the workers back to
China. Only after pressure from international trade unions was a solution negotiated. Since then
similar cases have become public, involving apparel workers from the Philippines (in Sibiu) and
Bangladesh (in Bacau), and further firms announced plans to hire migrant workers from Asia
(Gelich, 2008). However, with the onset of the global economic crisis this practice lost importance.

Global economic crisis

The CEE region was particularly hit by the sharp decrease in financial inflows and export demand
in the context of the global economic crisis (Myant and Drahokoupil, 2012). As a consequence
Romania’s apparel exports declined by 24 per cent in 2009 and sector employment dropped by
around 30 per cent from 193,000 in 2008 to 138,000 in 2010. The subsequent recession also had a
negative impact on public finances and spending in most CEE countries and reduced the public
policy space (Myant and Drahokoupil, 2012). In Romania, the crisis was also used as a pretext to
push through further neoliberal reform agendas, particularly in the labour market (Trif, 2014). One
particular feature that distinguished Romania from other ‘dependent market economies’ in the
CEE (Nölke and Vliegenthart, 2009) was its relatively strong labour code and collective bargaining
rights (Bohle and Greskovits, 2012; Trif, 2014). This institutional pillar was, however, further
dismantled in the context of the crisis. Austerity measures agreed with the IMF, the World Bank
and the European Commission involved amongst others a 25 per cent pay cut for public sector
employees, a 15 per cent reduction of social protection benefits and a VAT increase from 19 per
cent to 24 per cent. Furthermore, the government pursued structural reforms in response to the
crisis, flexibilizing the labour market and reducing social dialogue. This was applauded by inter-
national business groups, including AmCham and the Foreign Investors Council, both of which
were involved in drafting the ‘reform’ laws (Trif, 2013).4

3 There is however no ‘automatic’ positive link between out-migration, labour shortages and outcomes for
workers, as EU enlargement also weakened the overall position of workers and trade unions (Hardy et al.,
2014).
4 As in other CEE countries business representatives, particularly foreign investors’ associations, have
played a key role in aligning domestic institutional reforms with their interests (Drahokoupil, 2008; Sellar,
2013; Sokol, 2013).

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Plank and Staritz 11

15.0%

10.0%

5.0%
Total Economy
0.0%
1990-1999 2000-08 2009-13 Industry
Manufacturing
–5.0%
Apparel
–10.0%

–15.0%

–20.0%

Figure 2. Real net earnings growth for selected branches in Romania (1990–2013, simple average).
Sources: NIS (2015); UNCTADstat-Database (Consumer Price Indices).

The increase in workers’ bargaining power in the context of EU accession and the pre-crisis
labour shortage fell apart under the austerity measures and the structural reforms undertaken by
the government in the immediate crisis years. These measures also had a negative impact on the
nascent domestic market that some apparel suppliers had been targeting since the mid-2000s
and boosted the negative effects of collapsing export revenues. Post-crisis real wage develop-
ments are an indication of these developments (Figure 2). They contrast with Romania’s pre-
crisis real wage growth (Schulten, 2013) – albeit against the background of dramatic losses in
the 1990s (see Figure 2). It was not until 2007 that average real earnings reached their 1990
level (Stan and Erne, 2015). As highlighted in a publication by the Clean Clothes Campaign
(CCC), recent field research has revealed that some workers have to struggle even to achieve
the minimum net wage per month (€133 in 2013) and earn far from what workers regard as a
living wage (CCC, 2014).
Furthermore, relocations, in particular of low-value production, to more remote and
poorer regions within Romania or to lower-cost neighbouring non-EU countries have con-
tinued in the crisis context. The relatively stronger expansion of new firms in poorer
counties since the crisis underlines the internal relocation pattern. More capable firms relied
on cross-border subcontracting to neighbouring non-EU countries, including the Republic of
Moldova, Ukraine and Serbia. The rise of OPT apparel imports5 to Romania from these
countries shows the increasing importance of cross-border relocations in sustaining cost-
competitive production, with OPT apparel imports from Ukraine, Moldova, Serbia, Mace-
donia and Turkey increasing sixfold between 2007 and 2012 (Plank and Staritz, 2015).

Conclusions
The analysis of social up- and downgrading trajectories in fast fashion apparel GPNs in Romania
reveals the strong impact of industry and GPN dynamics on workers and their prospects for social

5 OPT trade with now EU members such as Romania was phased out during accession but it continues to be
an element in the EU’s external trade policy vis-à-vis non Member States in CEE and North Africa.

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12 Transfer

up-/downgrading, and in turn the central role of workers in enabling these dynamics and lead firm
strategies. The fast fashion business model, relying on quick responses to fashion changes, high
production flexibility, low costs and high quality puts particular pressure on workers in supplier
firms. While EU-15 retailers were key to ensuring continued apparel exports from and employment
in Romania, integration into their production networks had mixed outcomes for the quality of
employment. In particular, short lead times and highly fluctuating order levels had negative
implications in terms of flexible work arrangements, unrealistic production targets, excessive
overtime and high work intensity.
Social up- and downgrading was, however, selective both with regard to the dimension of
upgrading and the type of workers. A number of workers with regular contracts in core firms
have experienced a certain degree of social upgrading as a result of the increased need for skills
demanded by fast fashion and higher value-low volume production, public and private monitor-
ing efforts and labour shortages in the context of EU accession. Workers in subcontractor firms
were however largely excluded from these social upgrading opportunities, given their role as a
buffer for containing costs and meeting flexibility demands. There are also differences with
regard to former state-owned and newly established private firms, particularly with regard to
trade union representation, with former state-owned firms being broadly unionized in contrast to
the largely union-free newly established firms. However, social upgrading remains limited for all
workers, since certain issues such as wages, working time, work intensity and trade union
representation are contested, as they are in contradiction to fast fashion business strategies.
Industry pressure within GPNs is mediated through institutional structures and regulatory con-
texts. In particular, the legacy of the state socialist past and post-socialist transformation, Europea-
nization and the global economic crisis are crucial to understand how industry dynamics and
pressure from lead firms have affected workers in the Romanian apparel sector. The legacy of
state socialism provided certain structures with regard to labour regulation, labour inspectorates
and trade union representation. Given stricter legislation and inspection, employment contracts are
more widely enforced in core firms, in turn preventing the emergence of a dual workforce within
core firms but promoting subcontracting to small firms or workshops. The ‘transition shock’ and
the ensuing massive restructuring and rise of the ‘Lohnsystem’ resulted in a complete overhaul of
the firm landscape, with smaller and private firms now dominating the apparel sector. This
fragmentation has hampered organizing efforts, as have the emerging company-based and decen-
tralized bargaining systems. EU accession has had contradictory impacts, resulting in certain
improvements in such areas as discrimination, but in deteriorating conditions in other areas such
as flexibility and overtime. A further consequence of EU accession was a labour shortage which
increased the bargaining power of skilled workers in particular before the crisis. But the global
economic crisis changed this situation, reducing export demand and allowing austerity measures
and structural reforms to be introduced by the government. In this respect the role of the EU in the
de facto reduction of workers’ protection and the recent attack on social dialogue and particularly
trade unions need to be critically scrutinized (ILO, 2013; Trif, 2014).
As an alternative to the ‘dependent’ export focus, the domestic market has played an
increasing role in the Romanian apparel sector, though with the global economic and subse-
quent eurozone crisis halting demand growth. More generally, political debates and struggles
need to focus on the core fields of the labour market, social protection and industrial relations
policies. But they must also go further, encompassing strategic economic, trade and industrial
policies. It is of key importance to move away from dependent export-based development and
to ensure more sustainable socio-economic outcomes for firms and workers (Plank et al., 2014;
ILO, 2015, Anner, 2015).

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Plank and Staritz 13

Funding
Parts of the research for this article were conducted in the context of the interdisciplinary disserta-
tion project ‘Accountability of States and Transnational Corporations for Labour Rights in Global
Production Networks’, funded by the Austrian Academy of Sciences through its DOC-team
Fellowship. Funding was also provided by the ‘Netzwerk Wissenschaft’ of the Vienna Chamber
of Labour.

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