World Bank on jobs: “a race to the bottom”?

6 December 2012

Two October World Bank reports reveal a contradictory message for developing countries’ labour markets. The new World Development Report (WDR) asserts that “jobs are a cornerstone of development”. In contrast, the new Doing Business Report (DBR) has drawn heavy criticism, prompting an independent review.

In a significant departure from previous Bank approaches, the WDR 2013: Jobs promotes macroeconomic stability that takes account of human capital as well as labour practices which allow job creation and social protection for the most vulnerable. It calls for pro-development job creation strategies which complement “the specific country context”. Bank president Jim Yong Kim recognised in the foreword that most poor people in developing countries “are not earning enough to secure a better future for themselves; and at times they are working in unsafe conditions and without the protection of the law.”

“Good jobs”, not decent work

Brendan Martin of UK NGO Public World said there was plenty to criticise in the report but welcomed its core messages. “It focusses on the need to create jobs, and recognises that growth, market forces and private sector development are not enough,”. Owen Tudor from the UK Trades Union Congress (TUC) detected a “distinctly anti-public sector bias” in the report; whilst the International Trade Union Confederation (ITUC) raised concerns about its neglect of the International Labour Organisation’s (ILO) decent work agenda, instead focusing on “good jobs”.

In October a policy directions document, Creating jobs good for development, was endorsed by the Development Committee, the direction setting body of finance ministers for the World Bank. Written by Bank staff it emphasised the need to address the ‘plateau’ effect of labour regulations on employment and highlighted that the “public sector has an important role” in catalysing job markets. It placed the emphasis on governments to “prioritis[e] policies supporting the jobs making the biggest contributions to living standards, productivity and social cohesion”. The document avoided any reference to the Bank’s own investments and portfolio and fell short of recommending Bank policy changes.

Business for growth?

In contrast to the WDR’s emphasis on how “some jobs do more for development than others”, critics point to the uniformity behind the Doing Business cross-country rankings, which compare the business climate based on 10 topics, including ease of obtaining credit, and paying taxes (see Update 81, 78). The Bank published the 2013 edition of the DBR report in early October. According to Christina Chang of UK NGO CAFOD, the rankings “skew vital resources away from the small and micro-enterprises which account for the vast majority of jobs and are critical in reducing poverty”.

At a debate during the Bank’s October annual meetings, Geoffrey Chongo from the Jesuit Centre for Theological Reflection in Zambia commented that “the Zambian government has been obsessed with getting a top 50 ranking and was prepared to starve small and medium enterprise development in favour of multinationals to get it”. Zambia is ranked sixth for credit provision this year, however, more than 90 per cent of small businesses lack access to credit with interest rates above 25 per cent.

Workers’ rights sidelined

The DBR 2013’s return to what the TUC calls the ”elimination of workers’ protection rules” is also a major concern. In Morocco, this year’s “most improved country” in the rankings, over 100 violations of trade union rights were recorded by the ITUC in 2012. The employing workers’ indicator (see Update 78) remains suspended from this year’s rankings, pending ongoing discussions between the Bank and the ILO about its replacement. However the report singles out the “very restrictive approach” of some Sub- Saharan African countries to labour practices, such as severance payments, contrasting Eastern Europe and Central Asian economies which have “focused on easing restrictions relating to redundancy dismissals.”

In Brazil, one of the world’s fastest growing economies though only ranked 130 in DBR, the rankings have received heavy criticism from business and the media. According to Adhemar Mineiro from Brazilian NGO networks REBRIP and DIEESE, in Brazil Doing Business “is not taken seriously as a ranking”. Instead, “investments [are determined by] market size, market growth rate, and access to natural resources.”

In response to heavy criticism of the rankings, reflected in an acrimonious board meeting to approve the 2013 edition of DBR, Kim has ordered a “thorough review” of lessons learned and commissioned a review panel to be chaired by Trevor Manuel, planning minister in South Africa. It is due to give its preliminary report to the Bank by the end of March 2013 and the final report by May 2013.

Rudi Dicks from South African think tank National Labour and Economic Development Institute argued: “they should simply scrap the rankings. It’s simply a race to the bottom and fails to recognise the social, economic and political context of each country. Doing Business undermines policy space, a decent work programme and development.”