This article has been written by Nehal Misra, a student at Nirma University, Ahmedabad. In this article, she discusses the insights related to the application of Labor Standards in Developing Countries.
Table of Contents
Introduction
International labour standards are mainly tools for governments seeking to formulate and enforce labour law and social policy in compliance with generally agreed principles, in consultation with employers and employees. This process begins with a decision for many countries to consider the ratification of an ILO Convention. Countries often go through a period of review and, if necessary, revise their legislation and policies to ensure that the instrument they wish to ratify is complied with. Therefore, international labour standards serve as benchmarks for harmonizing national law and practice in a specific area; actual adoption can go further down the path of the standard ‘s implementation. Many countries agree not to ratify a Convention but to conform their legislation to it anyway; these countries use ILO guidelines as templates for drafting their laws and policies. Others ratify ILO Conventions fairly quickly and then work after ratification to bring their national laws and practices into line.
Background
In several nations, foreign treaties that have been ratified also apply at the national level. Their courts are also able to use international labor standards to determine cases in which national legislation is insufficient or ambiguous, or to use terms set out in principles such as ‘forced labor’ or ‘discrimination.’ Alongside voluntary measures and non-statutory laws, the legal framework is one of the ways of disseminating universal norms. The application of these standards by some countries’ highest courts, as observed by the ILO for more than a decade, bears witness to their increasing acceptance and use at the national level. In this way, national and international labor regulatory systems are a source of mutual inspiration.
International labor standards seem to be a common reference point for an increasing number of actors at the international level, thus improving international labor law, which is becoming an important tool in denouncing inequality in the workplace and governing labor relations, conditions, and conflicts, as expressed in more widespread respect for the situation. For some considerable time now, there has been a vibrant policy debate in the International Labor Organization (ILO), the World Trade Organization (WTO), the Copenhagen Social Summit in 1995, and elsewhere as to whether the rules governing international trade should include social provisions covering several core international labor standards. Introducing labor rights criteria into the field of trade would encourage the use of industrial arms when developed nations were considered to fail to meet core labor standards. Accession to such a “financial clause” would gradually become a condition for inclusion in the multilateral trading system.
Role of WTO
The WTO initiative needs to be seen in the light of broader measures embodied in the WTO Uruguay Round Agreements which have the effect of curbing developing countries’ competitive ability or circumscribing their option as to the policy instruments they may adopt to achieve growth, all within the framework. Efforts to enact restrictive steps to try to lift core labor standards worldwide have rightly received a firm rebuttal from the majority of developing countries, and have not found support among most developed industrial nations. Nonetheless, the problem is by no means dead. Developing countries oppose a connection between labor standards and trade because it would be a protectionist.
Labor standards
In the ILO’s terms, “The bottom line is that this mechanism of free trade and better living and working conditions can only expect to grow if there is ‘absolute respect for basic human rights in the workplace.'” Public discussion is very widespread because there is no consensus about what labor standards are at stake, nor is there much clarity about the existence of social rights. The manufacture and export of labor-intensive goods was essentially the strategy proposed by the World Bank and others who advocated a move away from the strategies for import substitution and focus on domestic market growth. This is focused on the understanding that developed countries should draw on their competitive advantage in producing some goods with relatively cheap labor.
The ILO Conference of 1998 adopted a Statement on Basic Values and Freedoms at Work. This conceptual and terminological shift has specific consequences for developing countries. Although the ILO has stated that it is not intended that the same standards and approaches should be applied to all countries and peoples regardless of development levels and types of economic structure, the pronouncements of the protagonists of labor standards are often such as to suggest that this was the immediate aim. As it is not feasible for developed countries to do more than implement substantive and efficient labor standards corresponding to their level of growth, almost by definition those opposed to attempts to use trade leverage to gain conformity with labor standards will be considered to be opposed to upholding human rights and will thus be punished as morally retrograde or robbed. Due to the ongoing pressures for a labor standards/trade connection, the scientific, philosophical, and functional aspects of the topic need to be carefully studied.
ILO
The International Labor Organization (ILO) has been producing conventions, recommendations, declarations, and protocols since its inception in 1919. Those are the expectations of its work.
1 The ILO ‘s priority is to ‘promote opportunities for decent work for women and men.’
2 The decent work agenda sets four strategic priorities (job creation, human rights, social security, and social dialogue, with a cross-cutting focus on gender equality).
Furthermore, as a constituent of the United Nations (UN), the ILO aims to promote the Sustainable Development Goals of the United Nations which include promoting decent employment. The objectives: ‘to promote sustainable economic growth by achieving higher productivity levels and technological innovation to achieve full and productive employment and decent work for all men and women by 2030.’ While there is an annual World Day for Decent Work, and most people generally agree with the idea, its implementation is subject to international controversy. Decent work can be seen as laudable in promoting the dignity of workers, advancing human rights in the workplace, and helping to eradicate poverty, but it may only seem to be supported by some governments rather than enforced. Such inaction reflects the assumption that if their country offers low labor costs, limits labor law coverage, and ignores other ILO labor standards, it will attract foreign direct investment ( FDI) and thus create jobs and strengthen the national economy.
Conventions and Recommendations
International labor standards are legal instruments drawn up by constituents of the ILO (governments, employers and employees) and laying down fundamental principles and rights at work. They are either conventions (or protocols), which are legally binding international treaties that member states may ratify or recommendations that serve as non-binding guidelines. In many cases, a Convention sets out the basic principles to be implemented through the ratification of countries, while a related Recommendation supplements the Convention by providing more detailed guidance on how to apply it. Recommendations may also be independent, i.e. not related to a Convention.
Conventions and Recommendations are drawn up and adopted at the annual International Labor Conference by representatives of governments, employers, and workers. Once a standard is adopted, Member States are required to submit it to their competent authority (normally Parliament) within twelve months for consideration under Article 19(6) of the ILO Constitution. This means consideration for ratification, in the case of Conventions. When ratified, a Convention for that nation usually enters into force one year after the date of ratification. Countries ratifying undertake to apply the Convention in national law and practice, and to report regularly on its application. The ILO offers technical assistance, where applicable. Also, proceedings for representation and complaint may be initiated against countries for breaches of a Convention they have ratified.
Global Labor Standards
Fundamental Conventions
The governing body of the ILO has identified eight “fundamental” conventions, covering subjects deemed to be fundamental principles and rights at work: freedom of association and the effective recognition of the right to collective bargaining; elimination of all forms of forced or compulsory labor; the effective abolition of child labor; and elimination of discrimination in respect of child labor; The ILO Declaration on Democratic Values and Freedoms at Work (1998) also includes these values. The eight fundamental Conventions are:
- Freedom of Association
- Protection of the Right to Organise Convention, 1948 (No. 87)
- Right to Organise and Collective Bargaining Convention, 1949 (No. 98)
- Forced Labour Convention, 1930 (No. 29) (and its 2014 Protocol )
- Abolition of Forced Labour Convention, 1957 (No. 105)
- Minimum Age Convention, 1973 (No. 138)
- Worst Forms of Child Labour Convention, 1999 (No. 182)(Employment and Occupation) Convention, 1958 (No. 111)
- Equal Remuneration Convention, 1951
Governance (priority) Conventions
Another four Conventions have also been designated by the ILO Governing Body as governance (or priority) instruments, thus encouraging the Member States to ratify them because of their importance for the functioning of the international labor standards system. In its follow-up, the ILO Declaration on Social Justice for a Fair Globalization illustrates the importance of these Conventions from a governance perspective.
The four governance Conventions are:
- Labour Inspection Convention, 1947 (No. 81)
2. Employment Policy Convention, 1964 (No. 122)
3. Labour Inspection (Agriculture) Convention, 1969 (No. 129)
4. Tripartite Consultation (International Labour Standards) Convention, 1976 (No. 144)
The international community widely agrees on the need to meet labor standards, and the agreement does not apply to what such standards are meant to be. Forced labor and slavery are considered repugnant almost universally, but other labor guarantees though crucial in the richest countries of the world, are not commonly practiced elsewhere. The International Labor Organization, created after World War I by the Treaty of Versailles, has published labor standards in dozens of areas but has identified eight key core standards, most of which relate to fundamental human rights.
The main global institution today that enforces labor standards is the ILO, which regularly reports on the steps each nation takes to implement the standards it has ratified. If complaints are lodged, the alleged violation is investigated by the ILO and its findings are made public. Even if the conventions on freedom of association have not been ratified by a member country, the ILO may investigate alleged breaches of those conventions. However, the ILO can not allow retaliatory trade or sanctions measures. Instead, it provides member countries with technical assistance to put their labor laws and enforcement procedures into line. While the ILO ‘s work has been honored with a Nobel Peace Prize, many labor sympathizers are doubtful that it will protect employees using its current compliance mechanisms, since they impose little punishment in addition to bad publicity.
Labor advocates favor enforcement through expanding the role of the World Trade Organization or through the use of bilateral trade agreements. The WTO rules do not apply to labor standards; they regulate the treatment by representatives of the other Member States of the products, services, and intellectual property. The WTO has developed elaborate dispute resolution procedures to investigate complaints in those areas. If a WTO panel finds that a member country has breached WTO rules, it may allow retaliation on the complaining country. At the ministerial meeting of the WTO in 1996, developed countries strongly resisted attempts to allow the WTO to implement labor standards, and the meeting concluded by affirming the role of the ILO in deciding and tackling labor standards. Similarly, at the 1999 WTO ministerial meeting in Seattle, when President Clinton and some EU leaders sought to put workers ‘ rights into the next round of multilateral trade negotiations, developing countries opposed this proposal.
Labour law and worker protection in developing countries
The labor standards that may be protected by a trade agreement fall into a continuum from those that focus on basic human rights to those that prioritize working and job conditions. The argument for the former is generally more convincing. To demand that other nations honor the right to free association with workers is a reflection of our moral opinion that this right is essential to human dignity. Workers can also have a “right” to a clean and healthy workplace but efficient productivity comes at some cost.
Citizens in developing countries are less confident of their laws and enforcement procedures whether they will meet the tests implied by the ILO conventions, especially as construed by observers from affluent countries. Two of the most troublesome ILO standards involve child labor. Developed countries—very sensibly—restrict children’s participation in the job market so that youngsters can attend school and prepare to become workers. But in poor countries, where children’s earnings are a crucial family resource and schooling may be unavailable, the restrictions may not be appropriate. Children in poor countries also deserve protection and education, but in a wealthy country, the resources available for schooling will be well below those. The correct level of security in rich countries will impose undue burdens on poor ones. Third-world leaders believe, rightly, that their countries will be subjected to endless threats in the WTO, including enforceable labor standards in trade treaties—and that the rules would be used primarily to shield jobs and companies in industrialized countries from third-world workers’ rivalry.
The standards of the ILO are designed to protect workers’ interests in low- and high-income countries. The WTO actively protects the rights of intellectual property ( IP) and enforces trade restrictions when developed countries infringe those rights. A country found to have a legitimate commercial complaint can retaliate against the offending country by withdrawing a trade benefit that is essentially equal to the benefit denied by the offender as a result of a violation of WTO rules. It’s not clear how to calculate the penalty when a labor standard is involved in the violation. There the injury has been suffered by workers in the offending country, and residents of the complaining country may have enjoyed a net benefit.
In developing countries, the weak bargaining status of workers makes it unlikely that their agreements with employers can secure fair wages and healthy working conditions. Yet their poor negotiation position is tied to their low competitiveness and skill. The change is closely associated with the improved skills and efficiency of the workers. Particularly in developed countries, the better-off countries are more likely to comply with ILO labor standards than the poorest ones. As productivity improves, so too will industrial workers’ bargaining position and salaries. If history is any guide it will also improve national labor standards. If we insist that developing countries immediately meet the labor standards achieved only gradually by the richest countries, we will keep some of them off the best markets in the world. Occasionally, poor countries that agree to abide by ILO standards will be challenged — sometimes rich-country representatives more willing to protect their workers from “unfair” overseas competition than many third-world workers will improve. Although the moral argument for demanding respect for human rights from our trading partners is persuasive, the argument for eliminating trade barriers that restrict the commodity markets and incomes of the world’s poorest workers is just as strong.
Why in some cases, do more labor inspections have positive consequences but negative impacts on others? The literature provides two kinds of interpretation. The first view, generally held by economists, stresses the (or not) existence of market failures. Finding that further checks minimize productivity is interpreted as evidence that the neoclassical model is an accurate work market definition. On the other hand, finding that more efficiency-enhancing inspections are interpreted as evidence of significant labor market failures (such as monopsony, that is, excessive employer power). The second interpretation, usually held by other social scientists, underscores differences in styles of inspection. This school of thought assumes that many firms are not well informed about labor regulations in the developing world, and do not maximize profits in some cases. In these cases following a strict punitive enforcement style can lead to resentment and reluctance to cooperate.
Labor law non-compliance incurs substantial social costs. Employer failure to comply with labor legislation erodes the likelihood of employees fulfilling their responsibilities as citizens. For policymakers, that result is significant. Either gaining de facto (instead of de jure) labor market stability by turning a blind eye to non-compliance by the employer or enacting regulations on job security, but instead refusing to commit adequate resources to regulation, causes more social costs than previously envisaged. The large gap between the law’s written intent and actual labor practices which are so widespread in less developed countries contributes to the erosion of civic responsibility.
Across the developing world, the vast majority of workers (whether formal or informal, working or unemployed) demonstrate their support for protective job regulations. Also, democratically elected governments have usually enacted protective labor codes. Increased compliance is therefore important to respect the wishes of people and regulation is a key instrument for achieving this aim. Usually, labor economists base their policy recommendations on theoretical insights and empirical estimates of the analyzed policy’s economic effects. The theory is that once the true labor market conditions are calculated through thorough empirical research, then policymakers might devise welfare-enhancing employment policies. In most cases, when it comes to labor policy, the advice is to minimize or maintain strict job security regulations as they are. It could be argued that, given a great deal of effort, this method has only achieved modest success, primarily because of difficulties solving the endogeneity problems that pervade non-experimental studies. An alternate solution is to ask electors specifically what labor laws they prefer. This approach may have some major shortcomings of its own, but it is nonetheless informative and can complement the more traditional literature on economics.
Contrary to the insider-outsider model’s predictions that protective labor regulations hurt so-called outsiders (i.e. unemployed and informal workers), the vast majority of developing world workers, including outsiders, support protective labor codes. One potential, and very speculative explanation, is that inspection costs occur in the short term (e.g., salaries of inspectors and informal job destruction) while the benefits take longer to materialize (e.g. better working conditions and rule of law). Since the executive branch controls inspection agencies in the developed world, they have short-term horizons (e.g. the next election) and appear to underinvest in compliance. This is very speculative though. Labor enforcement political economy is a field with lots of questions and few answers. One point that seems clear though is that the low levels of enforcement in the developing world can not be explained solely by resource constraints; the optimal strategy for a politician can be to withhold sanctions.
Conclusion
The analysis concludes that the proposal for labor standards/trade link is intentionally protective and would not guarantee a significant improvement in labor standards in developing countries. A measure like that can be counterproductive. Also, the overall conclusion of this analysis is that if the goal is to achieve a significant improvement in labor standards in developing countries and to protect labor standards, then a completely different policy approach is needed. This would involve changes in the current paradigm of “globalization,” which would involve different international game rules to promote growth, employment, and development.
It would also involve developing a new framework to condition the behavior of multinational corporations, whose mobility has a significant impact on key labor norms. Such a change in strategy would bring economic benefits for economies, and reduce opposition to developed countries’ increased inclusion in the global economy. The policymakers assess the magnitude of the imperfections in the labor market being studied. They will consider employees ‘and business owners’ interests while recognizing main actors and veto players as well. They will find the characteristics of local law enforcement agencies. Since there is no “one-size-fits-all” formula for successful labor regulation, policymakers need to go beyond theoretical literature and consider local characteristics to devise feasible welfare enhancement policies.
References
- https://www.brookings.edu/articles/workers-rights-labor-standards-and-global-trade/
- https://www.odi.org/sites/odi.org.uk/files/odi-assets/publications-opinion-files/6702.pdf
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