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

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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.