ITUC OnLine – September 26, 2007

Once again, World Bank gives excellent “Employing Workers” scores to countries that violate workers’rights

Brussels 26 September (ITUC): Doing Business, the World Bank’s highest-circulation annual publication released this week, has once again come under fire from trade unions for its baseless assertion that elimination of workers’ protection rules creates higher economic growth and job creation. In a new study released today by the ITUC and Global Unions, the international trade union movement criticizes Doing Business 2008’s section on “Employing Workers”, which insists that removing limits on work time, reducing minimum wages, abolishing workers’ recourse against unjust dismissal and eliminating requirement of advance notice for mass dismissals are the best path for economic growth, and ranks countries in accordance with their performance on these criteria.

“Doing Business 2008 gives better marks for ‘Employing Workers’ to Afghanistan, Georgia, Haiti, Mongolia and Papua New Guinea simply because they have deregulated labour markets, than it does to prosperous low-unemployment economies such as Finland, Korea, Netherlands, Sweden and Taiwan” said ITUC General Secretary Guy Ryder. “This makes a mockery of Doing Business’s claim that its ‘Employing Workers’ scores are the recipe for high-quality job creation. The World Bank has never produced any evidence to show such a link.”

Doing Business’ routinely awards best rankings to countries with the lowest level of regulation. Previous editions ranked the tiny Pacific island states of Marshall Islands and Palau as the world’s “best performers” for employing workers, although neither was a member of the International Labour Organization and they had only skeletal labour laws. This year, Doing Business 2008 presents the ex-Soviet republic of Georgia as the model to follow because its new labour law permits workers to be dismissed without any reason and gives employers the unilateral right to establish a number of working conditions previously subject to collective bargaining. Georgian trade unions have been effectively marginalized and can be prohibited altogether if they are thought to contribute to “social conflict”.

Though Doing Business espouses its support for the ILO’s core labour standards, a number of countries known for repeated violations of workers’ rights scored well again this year. “Colombia, where murders of trade unionists occur every year and are rarely punished; China, where workers are banned from joining any union but the official state-controlled organization; and Saudi Arabia, where women are banned from numerous professions and trade unions are entirely prohibited, all rank better than do most countries in Western Europe,” Ryder said. “Doing Business promotes a very dangerous model of labour market reform.”

The ITUC study condemns Doing Business for insisting that labour market regulations have costs but not benefits, and for ignoring the economic and social rationale that leads countries to limit working hours or set minimum wages. The study points out that if most sub-Saharan African countries were to adhere to the Doing Business criterion, they would be forced to set minimum wages at less than a dollar per day—the threshold for extreme poverty recognized by the World Bank itself as well as by many other international institutions.

Most worrisome to trade unions is that the deregulation ideology of Doing Business has bled into World Bank and International Monetary Fund policy advice and lending conditions for countries. The trade union study documents 16 recent cases of World Bank and IMF country strategies that use Doing Business rankings to compel countries to deregulate their labour markets. The study also observes that the World Bank uses Doing Business labour market “rigidity” scores to help determine how much total aid to allot to poor countries.

Ryder argues that a few token changes made in Doing Business 2008 do not make it any more acceptable. “The Doing Business section on labour market regulation is inherently flawed because it is based on a misguided notion that less protection for workers automatically leads to better economic outcomes. The World Bank would do best to scrap Doing Business’ section on ‘Employing Workers’ in its entirety,” he said.

Read the full ITUC/Global Unions report on Doing Business 2008.