Analyzing sustainable economic development and labor justice compliance: A dual method approach with SEM and fsQCA

Achieving sustainable economic development while ensuring labour justice remains a critical challenge for policymakers. This study investigates how macroeconomic structures and governance quality influence labour justice compliance across diverse economies. Employing a dual-method approach, Structural Equation Modelling (SEM) for causal inferences and fuzzy-set Qualitative Comparative Analysis (fsQCA) for configurational analysis, the research explores how manufacturing employment share, national export volume, urbanization growth, and informal employment shape labour rights enforcement. The analysis is based on secondary data collected from 47 countries between 2015 and 2022, utilizing internationally recognized databases: the International Labour Organization (ILO), World Development Indicators (WDI), and Worldwide Governance Indicators (WGI). SEM results reveal that informal employment, when supported by proactive governance, significantly enhances labour justice compliance. Conversely, high export dependency negatively impacts compliance due to cost-driven labour policies. Urban growth and manufacturing sector expansion contribute positively, contingent on institutional robustness. fsQCA findings uncover multiple sufficient configurations for compliance, emphasizing the value of low export reliance and institutional engagement with informal sectors. While urbanization can promote collective bargaining and regulatory oversight, its unmanaged expansion may destabilize labour markets. Moreover, informal employment, often perceived as a governance challenge, can act as a catalyst for reform under targeted policy interventions. This study offers actionable insights for policymakers, labour advocates, and global institutions. It recommends embedding labour justice principles into economic policies, formalizing informal labour practices, and aligning urban development with regulatory effectiveness to achieve equitable and sustainable outcomes.