Regulation of the labor market ranges from how employers contract for the services of labor to the nature of the exchange – including the rights and responsibilities of the parties, the terms and conditions of work, and the resolution of disputes. Perhaps more than any other series of exchanges involving capital, the functioning of the labor market has a direct impact on the welfare of workers and their families. For this reason, combined with the scope of cultural, institutional, legal, and political aspects involved, this area of regulation represents an important, visible, and often controversial aspect of public policy.
The relatively recent dramatic increase in international trade and use of global supply chains by multinational corporations has generated widespread concern over working conditions and regulatory capacity in developing countries. This site provides information on domestic public policy, international standards, and private sector initiatives related to regulating the labor market.
Related Employment Policy Primer Papers  Mandated Benefits, Employment, and Inequality in a Dual Economy (590kb pdf)
Social Protection Discussion Paper No. 0823
Rita Almeida and Pedro Carneiro
August 2008
The authors study the effect of enforcement of labor regulation in Brazil, an economy with a large informal sector and strict labor law. Enforcement affects mainly the degree of compliance with mandated benefits (severance pay, health and safety) in the formal sector; and the registration of informal workers. The authors find that stricter enforcement leads to higher unemployment but lower income inequality. The authors also show that, at the top of the formal wage distribution, workers bear the cost of mandated benefits by receiving lower wages. This is not true at the bottom, because of downward wage rigidity. As a result, formal sector jobs at the bottom of the wage distribution become more attractive, inducing the low skilled self-employed to search for formal jobs. Enforcement of Labor Regulation and Firm Size (353kb pdf)
Social Protection Discussion Paper No. 0814
Rita Almeida and Pedro Carneiro
May 2008 This paper investigates how enforcement of labor regulation affects firm size and other firm characteristics in Brazil. The authors explore firm level data on employment, capital, and output, city level data for economic city characteristics and new administrative data measuring enforcement of regulation at the city level. Since enforcement may be endogenous, the authors instrument this variable with the distance between the city where the firm is located and surrounding enforcement offices, while controlling for a very rich set of city characteristics (such as past levels of informality in the city). The authors present suggestive evidence of the validity of this instrument. The authors find that stricter enforcement of labor regulation constrains firm size. Are All Labor Regulations Equal? Assessing the Effects of Job Security, Labor Dispute and Contract Labor Laws in India (310kb pdf)
Social Protection Discussion Paper No. 0713
Ahmad Ahsan and Carmen Pagés
June 2007 This paper studies the economic effects of legal amendments on different types of labor laws. The authors examine the effects of amendments to labor dispute laws, and amendments to job security legislation. The authors also identify the effects of legal amendments related to the most contentious regulation of all: Chapter Vb of the Industrial Disputes Act, which stipulates that firms with 100 or more employees cannot retrench workers without government authorization. The authors find that laws that increase job security or increase the cost of labor disputes substantially reduce registered sector employment and output but do not increase the labor share. Labor-intensive industries, such as textiles, are the hardest hit by laws that increase job security while capital-intensive industries are most affected by higher labor dispute resolution costs. The authors also find that the widespread and increasing use of contract labor may have brought some output and employment gains but did not make up for the adverse effects of job security and dispute resolution laws. Labor Market Regulation: International Experience in Promoting Employment and Social Protection (207KB PDF)
Social Protection Discussion Paper No. 0128
Gordon Betcherman, Amy Luinstra, and Makoto Ogawa
December 2001
Reviews international experience and empirical evidence on topics such as hiring and contracting, dismissals, wage determination, enforcement, and dispute resolution. Costs and Benefits of Collective Bargaining: A Survey (139KB PDF)
Social Protection Discussion Paper No. 0120
Toke Aidt and Zafiris Tzannatos
September 2001
This paper provides a systematic review of the relevant literature with a specific focus on the role that collective bargaining plays in shaping macroeconomic performance. We focus on comparative studies of labor market institutions in the OECD area that try to disentangle the impact of different institutional approaches to collective bargaining from other determinants of macroeconomic performance.
Related Employment Policy Primer Note "Employment Protection Regulations and Rules for Hiring and Terminations"
Available in English (42KB PDF), French (151KB PDF) and Spanish (157KB PDF)
Employment Policy Primer Note No. 1, December 2002
Other Related Resources Job Creation, Core Labor Standards & Poverty Reduction in Africa
The objective of this German Trust Fund Project is to provide the analytical foundation upon which to base future pro-poor labor market policies and interventions in low-income countries. Core Labor Standards Toolkit
General information on the ILO's four fundamental principles and rights at work. Resources for staff completing CAS diagnostic of core labor standards.
"Unions and Collective Bargaining: Economic Effects in a Global Environment"
A new comprehensive reference book on the macro- and micro-economics of trade unions and collective bargaining. Available for purchase. Top |
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