Designing Labor Policies In Emerging Markets
Emerging market economies have enjoyed good growth in recent decades but are still far from closing gaps in living standards with advanced economies. Emerging markets also need growth
to be shared by everyone, particularly by providing their growing population with good jobs and social protection. The design of labor market policies in emerging markets differs significantly
from that in advanced economies.
The few main features are :
1. Only half of the emerging markets have unemployment insurance systems in place, while they
nearly exist in all advanced economies.This means that workers in emerging markets have less
to fall back on in the event that they lose their jobs.
2. In contrast, emerging markets out - rank advanced economies - at least in Law- on one part of
such legislation, Severance pay (what companies must pay if they dismiss them).
3. Collective bargaining agreements cover only 20% of workers in emerging economies and about
half in advanced economies.
4. The ratio of minimum wage to median wages is higher in emerging markets than in advanced
economies. It means that in emerging markets, minimum wage is closer to median wage, which
partly reflects low median wage.
WORKERS PROTECTION
Creating high - paying jobs requires that jobs rendered unproductive are replaced by more productive ones. But the workers needs some basic protections in the face of these job reallocations. This can be done partly through an Unemployment Insurance system, which gives some income income support to workers, while they search new jobs. Though the context in emerging countries is different, the experience of advanced economies suggests that it may be better to protect workers more than Unemployment insurance than through very stringent Employment Protection Legislation. The model in Denmark - Moderate and Predictable Employment Protection combined with high unemployment benefits but with active policies to get the unemployed back to jobs - is a strong example. The risk that policies fail is also greater owing to widespread market and limited administrative capacity.This explains why emerging markets rely more on Employment Protection legislation, which protects only a fraction of workers, risking a dual market of protected formal sector workers and a large unprotected informal sector - and can be one of the obstacles in creating jobs in formal sector.
So, as informality and administrative capacity improves, there becomes a strong ground for emerging markets to gradually expand Unemployment Insurance and move towards less stringent and more predictable employment protection legislation.
WAGE LEVELS
The setting of minimum wage has to balance essential distributional needs against possible adverse impacts on Job creation. One route is to set minimum wages relating to median level wage in the country and to complement them with Cash transfer programs and in Works Tax credits (subject to as allowed by Administrative capacity). For example, China and Brazil have successfully provided income support to Poor. Another route may be to have lower minimum wages for certain groups of workers or in regions where they are particularly high relative to median wage.
COLLECTIVE BARGAINING
Collective bargaining between Workers and their Employers can play useful role in setting decent wage and working conditions. Though difficult, advanced countries like Germany and Netherlands have successfully made bargaining work on a sector-wise basis. Lot depends on specific details of bargaining arrangements.
Getting labor market policy in emerging markets requires more steps like better integrating efficiency and equity considerations, providing more specific advice in each area and accounting for how different policy areas interact. The policy increasingly emphasizes the need for social protection and more inclusive growth.
----------------
to be shared by everyone, particularly by providing their growing population with good jobs and social protection. The design of labor market policies in emerging markets differs significantly
from that in advanced economies.
The few main features are :
1. Only half of the emerging markets have unemployment insurance systems in place, while they
nearly exist in all advanced economies.This means that workers in emerging markets have less
to fall back on in the event that they lose their jobs.
2. In contrast, emerging markets out - rank advanced economies - at least in Law- on one part of
such legislation, Severance pay (what companies must pay if they dismiss them).
3. Collective bargaining agreements cover only 20% of workers in emerging economies and about
half in advanced economies.
4. The ratio of minimum wage to median wages is higher in emerging markets than in advanced
economies. It means that in emerging markets, minimum wage is closer to median wage, which
partly reflects low median wage.
WORKERS PROTECTION
Creating high - paying jobs requires that jobs rendered unproductive are replaced by more productive ones. But the workers needs some basic protections in the face of these job reallocations. This can be done partly through an Unemployment Insurance system, which gives some income income support to workers, while they search new jobs. Though the context in emerging countries is different, the experience of advanced economies suggests that it may be better to protect workers more than Unemployment insurance than through very stringent Employment Protection Legislation. The model in Denmark - Moderate and Predictable Employment Protection combined with high unemployment benefits but with active policies to get the unemployed back to jobs - is a strong example. The risk that policies fail is also greater owing to widespread market and limited administrative capacity.This explains why emerging markets rely more on Employment Protection legislation, which protects only a fraction of workers, risking a dual market of protected formal sector workers and a large unprotected informal sector - and can be one of the obstacles in creating jobs in formal sector.
So, as informality and administrative capacity improves, there becomes a strong ground for emerging markets to gradually expand Unemployment Insurance and move towards less stringent and more predictable employment protection legislation.
WAGE LEVELS
The setting of minimum wage has to balance essential distributional needs against possible adverse impacts on Job creation. One route is to set minimum wages relating to median level wage in the country and to complement them with Cash transfer programs and in Works Tax credits (subject to as allowed by Administrative capacity). For example, China and Brazil have successfully provided income support to Poor. Another route may be to have lower minimum wages for certain groups of workers or in regions where they are particularly high relative to median wage.
COLLECTIVE BARGAINING
Collective bargaining between Workers and their Employers can play useful role in setting decent wage and working conditions. Though difficult, advanced countries like Germany and Netherlands have successfully made bargaining work on a sector-wise basis. Lot depends on specific details of bargaining arrangements.
Getting labor market policy in emerging markets requires more steps like better integrating efficiency and equity considerations, providing more specific advice in each area and accounting for how different policy areas interact. The policy increasingly emphasizes the need for social protection and more inclusive growth.
----------------
Comments