IFIs admit failure to put jobs at the centre

21 November 2011

While the International Labour Organization (ILO) warns of social unrest due to record unemployment, the IMF and World Bank are being criticised for hindering workers’ rights and not putting jobs at the centre of recovery.

In an October publication the ILO said that the world has reached record levels of unemployment and warned of more social unrest. Recent months have seen increasing fears that austerity measures and a lack of leadership and coordination at the international level are driving the global economy to a new recession. Late that month, Sharan Burrow, general secretary of the International Trade Union Confederation (ITUC) expressed fears that “governments are dancing to the tune of the discredited orthodoxies of IMF labour and fiscal conditionality.”

An August joint World Bank-IMF discussion note mentions concerns about a jobless recovery in advanced economies, and workers’ vulnerability to shocks in developing countries. At the same time, it admits that their support to countries “is not structured with that centrality of jobs in mind”, and that in their macroeconomic work they “tend to assume that employment will be created if growth materialises.”

dancing to the tune of the discredited orthodoxies of IMF labour and fiscal conditionality

The IFI’s gradual acknowledgment of employment priorities was also anticipated at the ILO’s 100th International Labour Conference held in Geneva last June. According to a conference summary, Min Zhu, now a deputy managing director at the IMF, said active labour market policies, combined with fiscal policies and a new thinking on job creation, were needed in order to meet long-term employment objectives. Min Zhu explained that the IMF had already started to combine growth and employment targets in various pilot countries, where it had intervened post crisis together with the ILO and ITUC.

Although the IFIs’ discussion note suggests a shift in their mentality in relation to jobs, this is not always translated into change on the ground (see Update 72). Trade unions continue to denounce prescriptive IMF policies, arguing they deliver hardship for workers. An ITUC October communiqué criticised IMF-inspired changes to Romania’s labour laws. The government enacted the reform in April, weakening employment protection, without first checking whether it violated the European Union (EU) or ILO core labour standards. The new laws exclude some workers from the right to union membership and introduce obstacles to collective bargaining. In mid October, Burrow, said that “the IMF prescription in Romania contradicts the positive signals about workers’ rights from its Washington headquarters.” and noted that the country’s government had “ignored the advice of the ILO despite promising to respect international labour standards.”

Concerned about the current attacks on wages and collective bargaining structures, Global Unions, an organisation of international trade unions, issued a statement for the G20 meetings calling for “leaders to reemphasise employment as a key objective of economic policy.” The statement argues that G20 leaders should support an increasing role for the ILO in programmes for crisis-hit countries. It also urges the Bank, which is devoting its next World Development Report to the theme of jobs, to begin to introduce a stronger employment focus into the development strategies it supports.

Bank Doing Business as usual

In October, the Bank released the latest of their controversial Doing Business reports (see Update 73, 67, 66). The report ranks countries according to how easy the Bank judges it is for companies to operate. Singapore topped the rankings for the sixth successive year and Morocco was the country that “improved its business regulation the most compared to other global economies.” NGOs and trade unions have long criticised the report’s tendency to exalt countries that reduce corporate taxes and labour market regulations.

Peter Bakvis from the ITUC said the new report confirms that “the Bank has not yet taken any action to correct the ‘Paying taxes indicator’”, thus “encouraging countries to become tax havens, provide insufficient social protection and government services, or place an unfair tax burden on workers and consumers.” Although having dropped the controversial ‘employing workers indicator’ the data which was previously used to calculate it is still included in an annex of the DBR. The Bank is in discussions with the ILO to develop a “Worker protection indicator” which would give better marks to countries that respect workers’ rights and provide adequate social and worker protections.

Using data from the report, a November article from US magazine Time observes that “a number of lower-ranked nations – including South Africa, China and Brazil – have had much faster-growing economies than the U.S. in the past five years” and concludes that “nations with more rules grow faster.” Bakvis argues that the results of the Time article “are the exact opposite of what the Bank has claimed without a shred of evidence over the eight years that it has published Doing Business, namely that the most deregulated countries have the highest rates of growth.”

Bank progress and pitfalls

A November report by the ITUC reviews the evolution of the Bank’s approach to the ILO core labour standards (CLS). Hesitant at first, the Bank has recognised CLS formally since 2002, and “practically since 2006 when the IFC [the International Finance Corporation, the Bank’s private sector arm] developed the ‘performance standards’” (see Update 77), which requires that companies borrowing from the Bank ensure that their operations are in compliance with CLS.

The report welcomes the Bank’s endorsement of CLS over the last decade but laments that “the inconsistent adoption and application of the standards among the different divisions of the World Bank Group has created ambiguities and administrative complications.” The enforcement of CLS within the wider World Bank Group is likely to be a key issue during the Bank’s next safeguard review (see Update 77). The ITUC report also points out that unions have detected 27 cases of non-compliance by firms in which the IFC has invested, including “refusal to respect freedom of association and to bargain collectively, gender discrimination and child labour.” It stresses that while some of the unions’ complaints to the IFC “were responded to quickly and corrective actions were taken expeditiously, in other cases the response time was very lengthy and no effective corrective action was taken.”

Bank angers trade unions

The Bank is currently drafting its 2012-2022 social protection and labour strategy. It recently published the results of the first phase of consultations on a concept note (see Update 74). Although throughout the document the Bank emphasises that “more than 1,700 individuals and organisations provided their views”, and the terms of reference for the strategy say that an advisory group will include CSOs, the ITUC complained that there was no union or any other civil society representative included in the group. Francesca Ricciardone, from the ITUC, also expressed their surprise at the fact that “the Bank saw fit to appoint to this advisory group the Bahraini minister of social development, whose portfolio includes human rights, as the Bahraini government was detaining doctors for administering medical care to peaceful protestors and firing workers for participating in protests.”

Although not invited to the advisory group, ITUC submitted written comments and several affiliates participated in phase I consultations. Ricciardone explained that the report on first phase consultations ignores practically all the recommendations made by them, “notably the failure to provide an analysis of the global jobs crisis and put forward solutions, failure to address growing income inequality, no mention of the role of unions and workers’ rights and no support for a social protection floor.” Phase two of the consultations is planned for November and December this year, and the Bank hopes to launch the new strategy in early 2012. Though the consultations are now open, the Bank is late in preparing a draft of the strategy which is only expected to be released midway through this consultation period.