The IFIs and Labour Standards

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The IFIs and Labour Standards

• Presentation by Peter Bakvis, Director
• ITUC/Global Unions Washington Office
• to Civil Society Workshop on Labour standards,
  human rights, democracy Role of the IMF and WB
• Washington, 12 April 2007

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2. Summary of presentation The IFIs and Labour
Standards (The Good, the Bad and the Ugly)

1. Labour standards and their relevance to poverty
   reduction and broadly-shared development the
   ILOs Core Labour Standards (CLS)
2. Evolving attitude at IFIs to labour standards
3. Recent developments regarding observance of CLS
   in World Bank operations (the Good)
4. An anti-labour standards approach the World
   Banks Doing Business (the Bad)
5. IMF/WB involvement in labour market reforms
6. Country-level IFI intervention on labour law
   reform (one Ugly example)
7. Recommendations

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3. Labour standards and poverty

• A majority of the worlds extreme poor are
  working poor 60 per cent of working poor are
  women
• Countries characterized by severe-to moderate
  poverty more than half population less than 2 a
  day have some of the highest labour force
  participation rates in the world (ILO, Key
  Indicators of Labour Market)
• Elimination of child labour over twenty-year
  period would result in net increase of global
  gross national income by 22, Sub-Saharan Africa
  GNI by 54 (ILO, Investing in Every Child)
• In most cases, labour is poor peoples principal
  or only asset
• Labor markets generally are not competitive
  lead to unfair and inefficient outcomes when the
  bargaining power of workers is weak. Employers
  may underpay workers , force workers to work in
  hazardous conditions or discriminate against
  vulnerable groups (WB, WDR 2005 Equity and
  Development)

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4. The Core Labour Standards (CLS)

• CLS based on 8 ILO conventions (out of total of
  187), considered fundamental rights conventions
• Elimination of forced labour (C. 29 C. 105)
• Elimination of discrimination in respect of
  employment (C 100111)
• Abolition of child labour (C 138182)
• Freedom of association and right to collective
  bargaining (C 8798)
• CLS promoted by international trade union
  movement for many years, first official forum to
  endorse CLS was World Summit on Social
  Development (Copenhagen, 1995)
• ILO made observance of CLS a de facto condition
  of ILO membership in 1998 ILO Declaration on
  Fundamental Principles and Rights at Work adopted
  by ILO conference

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5. Significance of Core Labour Standards

• CLS are defined as enabling standards that do
  not directly set specific norms (e.g. maximum
  hours, minimum wages) but enable workers to push
  for improvement of income, safe and healthy
  working conditions, adequate social protection
  laws
• In most cases, countries that engage in violation
  of CLS also engage in violations of other human
  rights
• Struggle for democracy in the workplace often
  leads to broader struggle for democratic rights
  Key role played by trade unions in
  democratization in Poland (1980s), Brazil
  (1970s-1980s), South Africa (1980s-1990s), Guinea
  (2006-07), Zimbabwe (currently)

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6. IFIs and Core Labour Standards (i)

• 1999 World Bank endorses three of four CLS that
  have been shown to consistently accord with
  economic development. On freedom of association
  and collective bargaining FOA/CB the Bank is
  currently undertaking analysis work
• 2001 FOA/CB have political as well as economic
  implications and evidence about their economic
  benefits is mixed (WB Social Sector Strategy)
• 2002 the Bank supports the promotion of all
  four CLS but does no apply conditionality on
  these standards in its lending (WB president)
  similar declarations by IMFs MD
• 2003 WB publishes Unions and Collective
  Bargaining, which finds that FOA/CB in general
  have a neutral impact on growth but also reduce
  earnings inequality

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7. IFIs and Core Labour Standards (ii)

• Sept 2003 IFCs executive VP states that IFC
  will make CLS a requirement of all IFC clients
  after loan safeguards revision process
• 2004-05 After including a CLS condition in a
  loan, 300 Haitian garment workers are rehired
  after being dismissed for trying to form a union
  collective agreement signed in Dec 2005
• Feb 2006 IFC board adopts introduction of CLS
  requirement for all IFC borrowers enters into
  effect May 2006
• Dec 2006 WB president announces that CLS will be
  introduced into WB-funded procurement of works
  contracts (infrastructure construction) new
  measure should take effect May 2007

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8. Contradictory message on CLS

• WB tells China to view so-called labor
  standards as threats to export capacity and
  to comply with them only to minimum necessary to
  avoid provoking protectionism (WB, Essay on
  Economic Reform and Social Change in China, Nov
  2006)
• WBs annual Doing Business (highest volume WB
  publication), which scores countries on
  investment friendliness, gives best performer
  status to Palau (2006) and Marshall Islands
  (2007), countries that have not ratified a single
  ILO convention, for their (absence of) labour
  regulations
• DB gives perfect score to Saudi Arabia for ease
  of hiring/firing (unions are outlawed women
  barred from some professions), but bad score to
  South Africa because of affirmative action rules
• DB labour market flexibility indicator used in
  many IMF/WB country-level recommendations and
  conditions and used to calculate CPIA country
  scores

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9. IFI involvement in labour market reforms

• WBs stated philosophical approach on labour
  market reform Protect the worker, not the job,
• i.e. make employment protection rules that may
  discourage investment more flexible, but improve
  social protection such as income support and
  universal health care so that workers and
  families dont fall into poverty as they search
  for new jobs
• In many developing/transition countries, trade
  unions have been willing to engage in tripartite
  dialogue on such an approach
• However, Banks practice on the country level is
  usually Decrease job protection now, maybe well
  support improved social protection later

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10. IFIs and labour market deregulation

• Relative country ranking of Doing Business hiring
  and firing indicators are often the basis of
  IMF/WB proposals to deregulate labour markets
• No assessment is made of why the regulations
  exist, what benefit they may have or costs of
  removing the regulations
• There is generally no proposal to accompany the
  deregulation with compensatory mechanisms
• The result is often a loss of jobs or other
  benefits for workers (e.g. loss of health care,
  pensions), as protection is removed
• These measures are put forward as policy advice,
  for example in WB CEMs or IMF Article IVs, or
  made loan conditions
• Often the measures lead to major social upheavals
• Seven specific country cases documented by ITUC
  in 2006

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11. One example World Bank and labour market
reform in Nepal (i)

• January 2005 Nepalese trade unions, employers,
  government, supported by the ILO, agree on labour
  law reform process through tripartite
  negotiations
• Process would make job termination rules more
  flexible and concomitantly establish a social
  security system, improve health and safety
  standards and ratify ILO conventions
• February 2005 King seizes absolute power,
  suspends civil rights, outlaws assemblies,
  imprisons unionists and suspends tripartite
  labour law reform process
• March-May 2005 Unions/CSOs urge WB to pressure
  king to re-establish democratic rule, not impose
  unilateral labour reform
• Mid-2005 WB encourages king to decree labour
  reform that reduces protection against dismissal,
  curtails scope of collective bargaining and
  restricts trade union action

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12. WB and labour market reform in Nepal (ii)

• January 2006 WBs Nepal country director writes
  letter saying that rapid adoption of labour law
  reform will determine HMGNs ability to access
  budget support from the World Bank
• March 2006 King decrees labour ordinance
  designed by WB
• March 2006 Nepalese unions join mass
  demonstrations to overthrow kings absolute rule
  and restore democracy
• April 2006 After hundreds of additional
  detentions and several deaths, king gives up
  dictatorial rule, restores parliamentary rule
• May 2006 New government withdraws kings labour
  ordinance, proposes restoration of tripartite
  reform process
• March 2007 Tripartite agreement in principle on
  labour law reform package accompanied by improved
  social protection

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13. Recommendations concerning IFIs involvement
in labour issues

• WB should take labour regulations out of the
  mandate of the Doing Business team
• WB/IMF should support processes for reform of
  national labour regulations through tripartite
  dialogue, with input from the ILO
• Proposed changes to employment regulations must
  not be assessed only on impact for business
  investment, but also costs in terms of immediate
  job losses, increased poverty among unemployed
  and certain vulnerable groups, etc.
• Changes to statutory employment regulations must
  only be considered jointly with improvements to
  social protection regimes and promotion of
  collective bargaining agreements
• WB should ensure that CLS are fully applied in
  project lending and also observed in activities
  financed through policy loans, e.g. ensure that
  workers in restructured sectors have freedom of
  association and right to collective bargaining