World Bank sparks row over ‘too strict’ labour rules

The World Bank has published a long-awaited report into the challenges posed by the changing labour market, but its comments on overly tight workplace regulation have sparked anger among NGOs.

  • By Phil Thornton
  • 13 Oct 2018
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The World Bank has been accused of supporting the dismantling of work regulations and of ignoring inequality in its analysis of the changing nature of work, published at the Bank’s annual meetings.

The report looks at the challenges workers face from technological innovations such as robots, as well as the rise of the so-called “gig economy” that has meant fewer workers have the stability of a job for life.

In the foreword to the World Development Report 2019, bank president Jim Yong Kim said developing countries would need to take rapid action to ensure they can compete in the economy of the future.

“They will have to invest in their people with a fierce sense of urgency, especially in health and education, which are the building blocks of human capital, to harness the benefits of technology and to blunt its worst disruptions,” he said. “But right now too many countries are not making these critical investments.”

He said the report challenged governments to take better care of their citizens and called for a universal, guaranteed minimum level of social protection. It could be done with the right reforms, such as ending unhelpful subsidies; improving labour market regulations; and, globally, overhauling taxation policies, he said.

However, the report itself says that while regulations address labour market imperfections, they often reduce dynamism in the economy. “When regulations are too strict and exclude many workers, especially young and low-skill people, firms find it difficult to adjust the composition of their workforces,” it said.

Countries with strict labour regulations and specifically those with “burdensome dismissal procedures” tended to have smaller technology-intensive sectors. “More stringent regulations are also associated with lower entry and exit of firms — especially small firms — in industries in which labour moves more frequently between jobs,” it said.

“When the rules applied to firms’ hiring and dismissal decisions are too onerous, they create structural rigidities that carry higher social costs in the face of disruption.”

But Nadia Daar, head of Oxfam International’s Washington office, said: “It is irresponsible for the World Bank to promote the deregulation of labour and the dismantling of the rights that workers have long fought for. The report downplays the severity of inequality and contradicts internationally agreed labour standards.”

The report said data showed that inequality in most emerging economies had declined or remained unchanged over the last decade.

  • By Phil Thornton
  • 13 Oct 2018

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