Nancy Alexander
Wed Apr 29 2009
In an important shift in the World Bank's approach to development, the World Bank announced the suspension of the controversial "Employing Worker" Indicator (EWI) and a commitment to reexamine and revise both the EWI and the "Paying Taxes" Indicator in its annual country-ranking exercise called Doing Business. The World Bank's highest-circulation annual flagship publication, Doing Business measures the cost to firms of selected business regulations in 181 countries and then ranks each country with a global Doing Business Rank based on each country's ease of doing business.
Frank praises changes to World Bank's "Doing Business" report
For Immediate Release
April 28, 2009
While the Report rates governments on a number of constructive topics, it also includes an "Employing Workers" Indicator (EWI), which gives the best scores to countries that have the least amount of labor regulation in areas such as minimum wage levels, maximum hours per work week, requirements for advanced notice for layoffs, and severance pay. The Report also incorporates a "Social Contributions and Labor Taxes" indicator that actively discourages the provision of social protection programs by rewarding countries with the lowest level of mandatory employer contributions to non-wage benefits such as pension plans, healthcare, unemployment insurance, and maternity leave.
According to an announcement posted on its Doing Business website, Bank Management yesterday sent a memo to Country and Sector Directors informing them that staff are to be notified 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."
Rep. Barney Frank, Chairman of the House Financial Services Committee, who has been a strong critic of the Report responded, "I very much welcome this news, and I believe the leadership of the Bank deserves great credit for recognizing that social aspects of development need much greater attention".
"One of the most positive things to happen in the economic area in the past few years," added Frank, "has been the willingness of people to rethink their commitment to the excessively rigid development framework frequently referred to as the "Washington Consensus".
"The notion that fairness for working men and women is somehow antithetical to good Bank practice makes neither economic nor social sense, and I am pleased that this anti-worker indicator will no longer be promoted by the Bank," said Frank.
Last Congress, Frank held a hearing to examine the approach to worker rights in the "Doing Business" Report, during which the Committee received strongly critical testimony of the report from representatives of the AFL-CIO, the International Trade Union Confederation, and the Carnegie Endowment for International Peace.
In June, Frank's Committee approved legislation authorizing $3.7 billion for the World Bank Group Bank that included a call for reforms to the labor and paying taxes aspects of the Doing Business report.
Frank also spoke directly to IMF Managing Director Strauss-Kahn and World Bank President Zoellick about his concerns with the Report, particularly given its increasing global mandate and scope, and the many channels through which the Doing Business is being given force.
Several months after Frank's meeting with Strauss-Kahn, Frank learned that IMF management had directed staff not to use the EWI labor index as a basis for labor market analysis in staff reports or country documents without independent corroborating research. The IMF Note on Labor referred to the various methodological problems with the labor indicator, many of which had been criticized in a June 2008 report on Doing Business by the World Bank's independent investigation arm.
World Bank Posting: Revisions to the EWI Indicator
Doing Business is one of the World Bank Group's flagship publications, and over the years it has proven to be a powerful tool in the hands of governments determined to improve the climate for business. The business climate is one aspect of development policy, and the WBG emphasizes that other development goals must also be given appropriate weight. These include 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.
In the current global economic crisis, the WBG is looking at the advice, policy instruments, strategies and other tools at our disposal to ensure that we help governments meet this array of development policy challenges. It is important that government actions focus on the needs of the labor force and lower income households as well as those designed to help businesses to survive and grow. During this period of economic crisis, we are also scaling up our work on social safety nets through lending and analytical work. Issues of access to benefits such as unemployment insurance and social security are a key part of this work.
In light of these challenges, unprecedented in their scale, and building on the changes we signaled in last year's Report, both immediate and longer-term actions will be taken with regard to the Employing Workers Indicator (EWI) in Doing Business. In the short-term:
* Adjusting the scoring in the Doing Business 2010 report (to be launched in September 2009) regarding provisions for fixed term workers and standards for severance payment, mandatory days of rest and night work and holidays, and minimum wage levels, in order to accord favorable scores to worker protection policies that comply with the letter and spirit of the relevant ILO Conventions, recognizing that well-designed worker protections are of benefit to the society as a whole.
* Removing the Employing Workers Indicator (EWI) as a guidepost in the Country Policy and Institutional Assessments (CPIA). A guidance note will be issued clarifying 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 note will emphasize the importance of regulatory approaches that facilitate the creation of more formal sector jobs with adequate safeguards for employees' rights and that guard against the shifting of risk from firms to workers and low-income families.
This year's Doing Business 2010 will include a commentary explaining these steps.
In addition, we will convene a working group including representatives from the ILO, as the international standard setting body, trade unions, businesses, academics and legal experts. This group can serve as an important source of advice on revising the EWI and on the establishment of a new worker protection indicator, as well as offering broader ideas on labor market and employment protection issues - with a view to creating regulations that help build robust jobs with adequate protection in the formal sector that can withstand future crises.
The following thoughts provide a basis for more detailed terms of reference for the working group:
* An evaluation of the first round of the revisions to the EWI set out above and discussion of further revisions.
* The development of a new worker protection indicator (WPI). This indicator could cover such matters as how a country is adhering to core labor standards and using law, regulation and other instruments of government to ensure that workers are adequately protected, including in the event of unemployment.
* Broader labor market, employment and social protection issues, including an examination of the Paying Taxes Indicator (PTI). This dialogue and review of a flagship publication in light of these changed circumstances can enable Doing Business to increase its development impact at a time of economic strain for both businesses and employees worldwide.
A memo outlining these actions regarding the Employing Workers Indicator of the Doing Business Report was sent by World Bank Operations Policy and Country Services Management to Country and Sector Directors this week.
-> World Bank Doing Business
-> ITUC welcomes World Bank’s suspension of "Doing Business" labour indicator
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