ITUC welcomes World Bank’s suspension of “Doing Business” labour indicator

Published by rudy Date posted on April 28, 2009

Brussels, (ITUC OnLine): The ITUC welcomed the decision of the World Bank to instruct its staff to stop using the “Employing Workers Indicator” (EWI) of its highest-circulation publication, “Doing Business”.  The ITUC has long criticized the EWI because it gives the best ratings to countries with the lowest level of workers’ protection and has been used by the World Bank and IMF to pressure developing countries to undertake labour market deregulation.

“In the context of the current global economic crisis, where 50 million more workers could become unemployed this year and pressures to decrease wages and workers’ living standards are intensifying every day,” said ITUC General Secretary Guy Ryder, “it is significant that an important development institution like the World Bank is turning the page on a one-sided deregulatory view on labour issues and proposing to adopt a more balanced approach where adequate regulation, improved social protection and respect for workers’ rights will be given a higher profile.” 

In a note on revisions to “Doing Business” made public today, World Bank management informed its staff that “the EWI does not represent World Bank policy and should not be used as a basis for policy advice or in any country program documents that outline or evaluate the development strategy or assistance program for a recipient country”.  The Bank will furthermore remove the EWI from its Country Policy and Institutional Assessments (CPIA), which the Bank uses to establish countries’ overall level of eligibility for loans and grants allocated by the Bank’s concessionary lending arm, the IDA.

Ryder offered the Bank the ITUC’s full cooperation in developing an alternative approach that promotes the creation of decent work.  He emphasized that the World Bank Group has already made considerable strides concerning respect for the ILO’s core labour standards (CLS), starting with the requirement three years ago by the IFC, the Bank’s private-sector lending arm, that all of its projects conform to the CLS.  More recently, the World Bank incorporated a CLS requirement into its master procurement documents and led a process to include CLS clauses in the harmonized standard bidding documents used by all multilateral development banks.

The ITUC pointed out that the IMF took a similar step concerning the “Doing Business” labour indicator in August 2008, when IMF management instructed staff that mission teams should refrain from using the EWI in any of the Fund’s public documents because of various methodological problems associated with the index.

The ITUC initially wrote the World Bank about its concerns with the “Doing Business” labour indicator in October 2003, a few weeks after the Bank published the first edition of the report, and the union body subsequently raised the matter in detailed analyses where it called attention to the indicator’s use in pressuring numerous developing-country governments to weaken labour regulations.

The ILO and some governments and legislative bodies also expressed criticism of the “Doing Business” labour indicator in the past three years.  The Financial Services Committee of the US House of Representatives, chaired by Rep. Barney Frank, held hearings on the topic in October 2007 at which the ITUC testified.  During the hearings Frank said: “Excessive inequality can become politically dysfunctional, and to the extent that it begins to depress consumption, depress savings rates, it can become economically dysfunctional. … It troubles me to see the ‘Doing Business’ report of the World Bank reinforcing those tendencies.”

In its note on the “Doing Business” labour indicator issued today, the World Bank states that it proposes to give appropriate weight to “issues as diverse as political stability, social safety nets to shield vulnerable parts of society from intolerable levels of risk and protection of rights for workers and households as well as for firms”. 

“The Bank’s decision to pay greater attention to issues such as these is consistent with the commitment of G20 leaders at their London summit to ‘build a fair and friendly labour market for both women and men’,” said Ryder.  “We invite the Bank to work closely with the ILO on this theme,” he added, noting that the G20 statement called upon the ILO to assess appropriate employment and labour market policies.

The actions taken by the World Bank regarding the Employing Workers Indicator of the “Doing Business” report are described in a note posted today on the Bank’s “Doing Business” web site:

The ITUC represents 170 million workers in 312 affiliated national organisations from 157 countries and territories.

For more information please contact the ITUC Press Department on: +32 2 224 0204 or +32 476 621 018

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