Labour law, development and poverty alleviation in low and middle-income countries

The research will examine the contribution of labour law reform to poverty alleviation in low and middle-income countries. Since the early 1990s, the World Bank and other international financial institutions have argued that labour laws in developing countries should be made more flexible, with a view to promoting a more 'business friendly' environment in those countries. In some cases, deregulatory labour law reforms have been inititated as a condition of countries receiving financial aid from the World Bank. Recent research suggests that the World Bank's approach understates the role that protective labour laws can play in stimulating economic growth by encouraging investment in human capital and technological upgrading by firms. In addition, labour law institutions such as collective bargaining and social insurance can play a direct role in addressing poverty by redistributing wealth and protecting the least well off in society against workplace hazards and social risks associated with unemployment, sickness and old age. At the same time, this emerging body of evidence suggests that, in order to be effective, labour law rules must be appropriate for developing country contexts. Labour laws which are transplanted from industrialised countries may be inappropriate for emerging and developing labour markets in which only a small part of the labour force has access to regular, waged employment, or where private sector enterprises have limited capacity to comply with labour standards or to adapt to regulatory requirements by increasing their investment in new skills and technologies. Labour laws which do not bed down in a given environment may have the counter-productive effect of increasing informality and casualisation of employment. Thus it is important to have an understanding of the preconditions for the effectiveness of labour laws in practice in developing and emerging markets. The present project proposes to develop a new analytical framework for studying the nature of the 'fit' between labour law institutions and the economic and political context of low and middle income countries. The research will take the form of a series of case studies, based on paired comparisons of countries at roughly equivalent stages of development, but with different institutional, economic and political characteristics: Burkina Faso and Cambodia (which have different experiences of the role of financial conditionality in labour law reform); Chile and South Africa (where the political cycle has taken different forms in the recent past); and India and China (which offer contrasting cases of relative stasis in labour law versus recent reform of labour law institutions, taking place, in both cases, alongside rapid economic growth). The experiences of these countries will be studied using a mix of quantitative and qualitative research techniques, which will allow for a more systematic assessment of the nature of the labour law reform process in the different contexts being studied. The end result of the project will be an analytical template for the evaluation of labour law rules which can be used more widely to assess their contribution to poverty alleviation in low and middle income countries. The template will be developed by the research team in collaboration with officials from the ILO and with the active involvement of users of the research in government, the social partners, global NGOs, and civil society organisations in the case study countries. The project will also make a fundamental contribution to understanding the role that formal, quantitative measures and more qualitative indicators of law and development can play in evaluating policy and reform initiatives in relation to poverty alleviation.

The beneficiaries of the research will include officials of the International Labour Office (ILO) charged with the responsibility for giving technical advice on labour law-related matters to national governments and other parties concerned with the application and operation of labour standards; officials of international financial institutions, in particular the World Bank, who have an interest in the implications of labour law regulation for the nature of the business environment in developing countries; to government officials, particularly in developing economies, interested in the conditions for the effective application of labour law rules; officers of trade unions and employers' organisations, at national, regional and global level, with an interest in the operation of labour law systems; managers in firms concerned with the interaction of labour law rules with other institutional and economic factors in shaping the business environment of developing countries; investors with an interest in understanding the legal, economic and political dimensions of countries in which they are considering making an investment; members of civil society organisations and NGOs involved in poverty alleviation; and the poor in low and middle-income countries, who will be in a position to benefit directly from the more effective implementation of labour law rules aimed at poverty alleviation and wealth redistribution.

In the immediate term, impact will take the form of dissemination of research findings through user workshops in the case study countries and a user conference planned for the summer of 2015, and of the diffusion through ILO and CBR working papers and national and international media outlets. In the medium term, the research has the potential to inform the work of ILO officials who give technical advice on the implementation of labour standards to the governments of ILO member states. The provision of technical advice has been one of the major functions of the ILO since the inter-war period (Bronstein, 2005). In recent years a substantial body of technical advice has been provided to countries at various stages of development, and in particular to low-income countries where difficulties of the transplantation and diffusion of labour law norms are often at their most acute (Fenwick and Vargha, 2011). The ILO recognises the principle that programmes of labour law reform need to be tailored to local country and industry conditions and should be based on a dialogue involving government and the social partners. The development of a robust analytical framework for identifying the conditions under which labour law rules can be made effective and thereby contribute to poverty alleviation will accordingly be of direct interest to the ILO. The ILO commissioned the research by Marshall (2010) and Deakin (2010a) which led to the formulation of the analytical template that will be developed further in the course of the current project. ILO officials have been centrally involved in developing the current project application and will play a major part in the conduct of the research. It is anticipated that the development of the refined template will contribute to operational change in the ILO, in particular in the way that it provides technical advice on labour law reform.

In the longer term, the research has the potential to address interests of wider concern in the debate over the relationship between labour standards, international trade, and economic and human development. A robust and empirically grounded account of the conditions under which labour laws can be effective in meeting their explicit goals of extending social protection and addressing the needs of some of the poorest and most vulnerable members of society will be of interest to a range of policy makers and government officials, and of practical value to the poor in low and middle income countries.