If we believe in standards of decency, we should deplore atrocious
working conditions and the absence of worker rights and security, whether
in Bangladesh, China, or the United States, in a Nike plant or a shantytown
repair shack. But what should count as standards? And whose
standards should be the yardstick?
The ILO was established to set standards, and has produced a huge body
of conventions and recommendations. Unlike many countries, the United
States has hardly ratified any of them. Some might suggest this is not
a very good example, especially given the rhetoric devoted to the subject
in the United States. Recently, the ILO passed a Declaration of Fundamental
Principles and Rights, which established seven core standards to which
member countries must subscribe. Some of us inside the ILO worry whether
this will set a floor or a ceiling. But such instruments raise numerous
questions about commitment, implementation, attainment, progress, and
the definition of "best practices." Of course, analysts and activists
give their own answers to such questions, and one can be confident that
the authors of "Realizing Labor Standards" have theirs. Still, they
must be given, because there is no easy consensus.
Let me declare an interest. Over the past twenty years, I have conducted
surveys of labor practices covering thousands of firms in over twenty
countries, including developing countries such as Malaysia, Chile, and
the Philippines, and crashing ex-communist countries such as Russia
and Ukraine. To convince someone like me, proposals such as Ratcheting
Labor Standards must satisfy a realism test based on recollections
of visits to factories, estates, and mines.
I recall visiting a US multinational in a Malaysian export-processing
zone. It was exposing thousands of teenage women to conditions that
the manager readily admitted were causing long-term ill health. They
were legal. The firm operated where independent unions were banned.
Apologists say that conditions and pay in such firms are better than
in the surrounding kampongs. But what could stop such practices?
Nearby, in a back street of Kuala Lumpur, I talked to a Chinese furniture
maker. Men, women, and children scurried in and out of the sprawling
building. On one definition, he had fifty people working for him; he
told me, truthfully, that he had just two doing so.
The US firm had better pay and conditions, but was unnecessarily opportunistic.
The Chinese businessman would have melted into the city had inspectors
come after him. In both cases, what was lacking was the voice of the
workers, which was needed to pressure managers to make feasible changes
and to give them knowledge of what to do.
Another lesson from our surveys is that distinctions between "formal"
and "informal" sectors make no sense. Informalization has spread everywhere,
including within so-called formal enterprises.1
This means that formalistic monitoring can only relate to a small part
of the economy. Contrary to what is suggested in "Realizing Labor Standards,"
there is little evidence that stable relationships between "producers"
and "suppliers" are the norm. With flexible practices, statutory regulations
and monitoring procedures are harder to operate than with mass production
or when production is less dispersed. A heavy-handed strategy to ratchet
up standards would be ineffectual. We must avoid a mixed image in our
minds—sickening labor practices in a well-regulated economy. Go
to the favelas of Sao Paulo or the lanes in the slums of Ahamedebad,
where labor relations are harder to monitor than implied by the authors.
Fung, O'Rourke, and Sabel might retort that they are concerned with
firms linked to global production, and that a strategy to curb some
practices would be better than nothing. They must answer two standard
objections. First, the effect could be subject to the law of unintended
consequences—that is, it could make matters worse, perhaps
by driving practices underground. Second, the cost could be excessive
relative to the effect; for example, funds could do more good if just
given to vulnerable workers so that they could bargain better, or opt
out. Proponents of Ratcheting Labor Standards (RLS) should answer these
RLS is vague on principles, although "sanctions" and "transparency"
are called principles. Surely, the basic principles of RLS should be
equity, equality, democracy, and accountability. The biggest difficulty
is defining what are good practices, and then "best" practices. For
example, there is no law in the United States to allow workers a toilet
break when needed. This is rarely on any list of bad practices.
Labor standards are normative, and are a package or nothing. In developing
a strategy, you need to identify a core of standards that are a floor
of human decency; then practices that accord with a country's capacities
and a firm's size and structure; and then standards that are reasonable
aspirations. The principles have to be spelled out before any system
of monitoring can be assessed, and in "Realizing Labor Standards" this
is left vague.
RLS puts heavy emphasis on regulations, monitoring, and sanctions.
There is a smell of the big stick, with firms "required to adopt a code
of conduct and to participate in a social monitoring program." There
are "certifying agencies," "regulatory agencies," and "umpire organizations,"
as well as "compliance monitoring agreements" and "third-party social
auditing." The language is at best paternalistic. We are told the RLS
would use "public power," and that "firms that fail to disclose their
labor outcomes or monitoring methods should be presumed to have something
to hide, and be punished." This is out of step with the time, where
incentives to good practice are more likely to elicit support.
There is also a moral hazard in the proposals. We are told,
"A firm would select a monitor from among NGOs or auditing companies
who provide this service." How cozy. One reads of consultancy firms
offering themselves as "social inspectors." Do they have a track record
of being advocates of labor standards? It is not their business; they
are privileged corporations. The authors do not address how to make
NGOs and auditors accountable. Who appoints these social auditors?
Unless you are a paternalist, democracy should be uppermost—workers'
voice should be at the forefront. It should bring a wry smile to read
that firms "would seek out the most credible monitoring organizations
to verify their accomplishments." I bet they would, and pay them well.
This leads back to basics. What is a good firm? Through our surveys
at the ILO, data exist with which to develop company-level indexes of
good labor standards in the spheres of skill development, social equity,
work security, economic equity, and economic democracy. These are combined
into a Human Development Enterprise Index (HDE), ranked on a scale of
zero to 25. There are measures of principles (preferences of management,
etc.), processes (existence of mechanisms to give effect to principles),
The composite index has been measured for thousands of firms in several
countries, and the results show that firms with high scores on what
amount to good standards do better economically than those with low
scores. There are reasons why this does not lead to all firms adopting
good HDE practices. However, if firms were examined to determine whether
or not they are pursuing practices associated with high HDE scores,
a strategy could be devised to give HDE awards for exemplary firms.
This would entitle firms to label their products, advertise as good
performers, and receive preference in government contracts.
One reason for an incentive-based, awards scheme rather than a sanctions-based
campaign is that firms want to identify themselves as good employers,
whereas they will try to disguise themselves—or go for gestures
and fancy ads, as have the oil companies—if identified as bad.
Consumers are unlikely to know about bad firms when they go to shops,
whereas the good firms could have a label, which they would wish to
Here's another trick. Representatives of developing countries claim
that linking labor standards to trade amounts to protectionism by rich
countries. Yet, if advocates really want global standards they must
prevent the erosion of standards in affluent countries. There
is no race to the bottom, but one to something like the middle. Attention
should be given to the need to retain labor standards, and strong sanctions
should be reserved for countries and firms cutting them. Which is worse,
a firm or country not raising standards or one that lowers them? Under
Pinochet, Chile cut standards, persecuted labor leaders, and then, once
workers' organizations were enfeebled, allowed modified freedom of association.
The crime came with the cut in standards. The fear is that zealous monitors
would concentrate on the final liberalization.
The same applies to the nonsense about labor "deregulation." There
has been no labor deregulation (a contradiction in terms), merely a
shift from pro-collective to pro-individualistic regulations, and a
rolling back of protections so as to reduce "labor costs." When RLS
proponents focus on developing countries, and matters such as child
labor, they should also look at reforms in affluent countries that lower
standards, and of companies that roll back practices that had benefited
workers. Perhaps, we should be seeking ways of preventing the ratcheting
down of standards.
Other dilemmas raised by RLS include the sanguine expectation that
the World Bank should play a leading role. Many Bank publications oppose
minimum wages in developing countries, and are hostile to unions. Some
NGOs depend on Bank contracts, and cease to be independent. The RLS
authors reach out to the Bank. But it should remain a bank, and not
become embroiled in matters for which it has neither mandate nor competence.2
It should not be a standards-setter or monitor.
Another worry is that many of us remember feeling lonely when US organizations
were silent on these issues, and wonder whether current interest in
improving standards is primarily a result of fears about jobs and production
shifting to developing countries. Also, to what extent should companies
be held accountable for the practices of suppliers, purchasers, and
sub-contractors? If "monitors" do not like a given law, should a firm
be expected to abide by it or to some "higher" standard?
While subscribing to the objectives of the authors of RLS, I have become
convinced that incentives to improved practices, combined with public
advocacy, have more prospect of success than complex monitoring and
sanctions. Above all, though, strengthening the voice of working communities—not
putting faith in social auditors—is the most effective way to
make substantial progress. •
Guy Standing is director of the socioeconomic security program
for the International Labor Organization. This paper is written in a
personal capacity; views expressed here should not be attributed to
the International Labor Organization.
Read all eight
responses to "Realizing Labor Standards," by Archon Fung, Dara
O'Rourke, and Charles Sabel.
1 For more information see Guy Standing, Global Labour Flexibility:
Seeking Distributive Justice (London: Macmillan, 1999).
2 See my article, "Brave New Words? A Critique of a World
Bank Rethink," Development and Change (September 2000).