From the TUC

The IMF supports workers’ rights – but only in theory…

10 Oct 2012, By

Peter Bakvis is the Washington DC officer of Global Unions. Here he reports on the IMF’s approach – in theory good, but in practice poor – to union rights and labour standards.

Last month the IMF posted a six-page “Factsheet: The IMF’s Advice on Labor Market Issues”, which tries to present a rationale for the Fund’s extensive involvement in labour market reforms in many countries. The factsheet explains that in response to the sharp rise in unemployment at the beginning of the 2008-2009 crisis, “the IMF supported policies to boost demand — and thus employment — through fiscal stimulus and easing of policy interest rates”.

However “in the longer run”, the Fund has decided it must take on “a broader set of policies and institutions [that] influences the functioning of labor markets…. Often, changes in these policies and institutions are needed to boost growth and job creation…. It may, for instance, be necessary to lower labor costs [so as] to restore competitiveness”.

The factsheet states that labour “is not a core area of IMF expertise”, which is why the Fund “has an active partnership with the International Labor Organization (ILO), with whom we have been pooling expertise to better understand the impact of macroeconomic policies on job creation”. It also mentions work on labour market issues with the World Bank and the European Commission, claims that 80 per cent of IMF missions meet with national trade unions and speaks of “extensive policy consultations” with the ITUC.

The factsheet presents what on the surface appears to be an endorsement of the positive role of labour market regulations and institutions: “The IMF’s advice on labor market institutions and policies is aimed at keeping unemployment rates low and growth as inclusive as possible. Employment protection legislation [EPL] helps to achieve these goals, just as minimum wages and collective bargaining institutions are necessary to help level the playing field in terms of bargaining between firms and workers.”

But it adds the following important caveat: “Too high a level of protection, however, can lead to labor market distortions where some groups, such as the young, end up with very high unemployment rates.”

It then provides tables and web links to 29 country reports on IMF interventions concerning labour issues where not a single one involves defending EPL, minimum wages or collective bargaining institutions. On the contrary, all the examples of IMF interventions in these policy areas, most of which are in European borrowing countries, involve the Fund insisting on decreased protection: reduced minimum wages, relaxed dismissal rules and restrictions on collective bargaining. It also gives examples of Fund involvement in pension reforms, none of which, needless to say, consist of recommending improved benefits, and several for limiting unemployment benefits .

Despite the publication’s recognition in theory that EPL and collective bargaining are important for achieving inclusive growth and a “level playing field”, not a single case presented consists of the Fund proposing improved protection or better enforcement. If one is to take the “Factsheet” as an accurate representation of current IMF policy and practice, it is clear that labour market reform for the Fund is a one-way street: reduced protection for workers.