34/57 Report of the Independent Expert on the effects of foreign debt and other related international financial obligations of States on the full enjoyment of all human rights, particularly economic, social and cultural rights
Document Type: Final Report
Date: 2016 Dec
Session: 34th Regular Session (2017 Feb)
Agenda Item: Item3: Promotion and protection of all human rights, civil, political, economic, social and cultural rights, including the right to development
GE.16-22938(E)
Human Rights Council Thirty-fourth session
27 February-24 March 2017
Agenda item 3
Promotion and protection of all human rights, civil,
political, economic, social and cultural rights,
including the right to development
Report of the Independent Expert on the effects of foreign debt and other related international financial obligations of States on the full enjoyment of all human rights, particularly economic, social and cultural rights
Note by the Secretariat
The Secretariat has the honour to transmit to the Human Rights Council the report of
the Independent Expert on the effects of foreign debt and other related international
financial obligations of States on the full enjoyment of all human rights, particularly
economic, social and cultural rights, Juan Pablo Bohoslavsky, prepared pursuant to Council
resolution 25/16. The report focuses on labour rights in the context of economic reform and
austerity measures.
In many countries, austerity-related labour law reforms have been promoted by
international financial institutions on the assumption that they will lead to economic growth
and thus prevent or help overcome debt crises. These reforms have included freezing or
reducing wages and minimum wages, extending working hours, placing workers on
precarious contracts or labour reserve schemes and facilitating dismissals. Of particular
concern are reforms that have targeted collective bargaining systems, for example by
restricting the extension of sector agreements and pushing bargaining down to the
workplace level or permitting bargaining with non-union representatives. In his report, the
Independent Expert argues that these reforms often erode labour rights and result in
retrogression of work-related gender equality. They have frequently contributed to an
increase in inequality and insecure and informal employment; fostered discrimination in the
labour market towards young and older persons and individuals belonging to marginalized
social groups; and resulted in the reduction of job-related social protection. Furthermore, it
is questionable whether eroding labour rights generates economic and social benefits to
other rights holders that would justify encroaching on them. The Independent Expert
concludes with a number of recommendations on how to improve the protection of
individual and collective labour rights in response to financial crises.
United Nations A/HRC/34/57
Report of the Independent Expert on the effects of foreign debt and other related international financial obligations of States on the full enjoyment of all human rights, particularly economic, social and cultural rights
Contents
Page
I. Introduction ................................................................................................................................... 3
II. Overview of debt and labour rights ............................................................................................... 4
A. Financial crises, economic reform and labour standards ...................................................... 4
B. Labour law issues in economic adjustment programmes ...................................................... 5
III. Impact of austerity-related labour law reforms on human rights .................................................. 8
A. Driving States into conflict with their international obligations ........................................... 9
B. Adverse effects of adjustment programmes on labour rights ................................................ 11
C. Impact of labour rights weakening ....................................................................................... 13
IV. Challenging conventional wisdom: economic effects of labour standards .................................... 14
A. Economic effects of labour standards in general .................................................................. 14
B. Economic effects of the deregulation of labour law in the context of economic
adjustment ............................................................................................................................. 17
V. Conclusion .................................................................................................................................... 18
VI. Recommendations ......................................................................................................................... 19
A. Ensure respect for labour rights through human rights impact assessments ......................... 19
B. Cushion adverse effects through a robust social security net................................................ 20
C. Ensure consultation with social partners and civil society .................................................... 20
D. Incorporate labour rights in policies of international, regional and national
financial institutions .............................................................................................................. 21
E. Ensure policy coherence on labour standards within international organizations ................ 21
F. Strengthen national and international mechanisms providing effective remedies
against labour rights violations ............................................................................................. 22
I. Introduction
1. The present report is submitted by the Independent Expert on the effects of foreign
debt on the enjoyment of all human rights, particularly economic, social and cultural rights,
Juan Pablo Bohoslavsky, pursuant to Human Rights Council resolution 25/16. The report
focuses on labour rights in the context of economic reform and austerity measures.
2. In many developed and developing countries, austerity-related labour law reforms
have been promoted by multilateral and regional financial institutions on the assumption
that they will lead to economic growth and thus prevent or help overcome debt crises. They
have often recommended or insisted, as part of their lending conditionality, that the labour
market be made more flexible through deregulation, downsizing the public sector and
freezing or reducing wages and work-related social benefits in an effort to reduce
government expenditure. A number of national governments have thus implemented these
recommendations and reduced or eliminated labour rights — sometimes under substantial
duress — in the hope of overcoming their financial difficulties.
3. In the present report, the Independent Expert intends to answer the following
questions: What are the human rights implications of austerity-driven labour policies? Have
they been effective at all in preventing and overcoming debt and financial crises? What
should stakeholders do to avoid and/or minimize the effects of austerity policies?
4. The findings of this report give rise to some concern. Austerity measures and labour
market reforms have often contravened the international human rights obligations of States,
eroded labour rights and resulted in the retrogression of work-related gender equality. They
have contributed to an increase in inequality and insecure and informal employment;
fostered discrimination in the labour market towards young and older persons and
individuals belonging to marginalized social groups; and resulted in the reduction of
unemployment benefits and other job-related social protection.
5. The mainstream assumption that labour rights are generally detrimental to economic
development has been challenged at theoretical and empirical levels and it has been, shown
more concretely that austerity-related labour market reforms do not usually help economies
to recover after crises. Actually, these reforms have not improved economic performance;
instead they have inflicted substantial harm on working people, which will be felt for many
years.
6. Section II presents the typical contents of austerity-related labour law reforms,
which have frequently been undertaken in the context of financial assistance programmes
of international financial institutions. Section III explains to what extent these measures
have conflicted with international human rights obligations in the field of labour or caused
other adverse social and human rights impacts. Section IV reflects on the economic effects
of labour standards, in general, and the economic effects of austerity-driven labour reforms,
in particular. Finally, section V presents conclusions and recommendations on how to
improve protection of individual and collective labour rights during debt crises and times of
austerity.
7. The Independent Expert thanks the Governments of Armenia, Chile, Egypt, Greece,
Honduras, Kyrgyzstan, Maldives, Mali, Paraguay, Senegal and the Sudan; the national
human rights institutions of Croatia, Ecuador, Honduras, India, the Islamic Republic of
Iran, Mexico, Nepal, Portugal and the United Kingdom of Great Britain and Northern
Ireland; and several civil society organizations for their responses to the questionnaire
circulated in the preparation of the report.1 The responses received confirmed that, over the
past decade, many States implemented reform measures affecting labour rights in order to
stimulate economic growth or support financial consolidation. Some of the submissions
also included an assessment as to whether the reforms had a positive or adverse impact on
the enjoyment of labour rights or other social rights contained in international human rights
treaties.
8. Although the report deals with the labour and human rights implications of austerity,
fiscal consolidation should not be considered as the only available response to economic
crises. Before implementing austerity measures, States and international financial
institutions are obliged to assess whether there are any viable human rights compliant
policy alternatives to fiscal consolidation.
II. Overview of debt and labour rights
A. Financial crises, economic reform and labour standards
9. Financial crises can affect labour rights in a number of ways. Obviously, financial
crises may reduce economic growth and employment and impair the right to work.
However, in addition, governments have often undertaken reform measures that directly —
such as reduction in wages and employment in the public sector aimed at reducing public
expenditure or labour market deregulation in the private sector purportedly to increase
competiveness — or indirectly — by creating economic conditions which increase pressure
on workers, reducing wages or threatening employment, for example through privatization
of public enterprises, trade liberalization or cutting domestic subsidies — affect labour
rights.
10. While the links between debt crises and labour law reform are complex, it is safe to
say that unsustainable public debt levels often play a key role in a government’s decision to
adopt economic adjustment reforms, with various implications for labour rights. In this
regard, the stimulus for reform can come from external actors, notably key creditors of the
State concerned, while, in others cases, the political impulse for reform policies has
stemmed from the Government itself. This includes scenarios where a government is facing
a financial or otherwise economic crisis and perceives a need to implement such policies to
become more competitive to overcome the crisis. Governments may also perceive a
necessity to implement such reforms in order to avoid entering into a debt crisis. A looming
debt crisis may also be used to implement business-friendly policies that would otherwise
be highly unpopular.
11. Financial crises and labour reforms can result in a vicious downward spiral that
depresses labour rights. Increased unemployment and weakened trade unions have the
potential to entrench income inequality and stagnation of workers’ wages in the bottom half
of the labour market and trade unions lose the power to fulfil their traditional role of
contributing to redistribution. Consequently, workers may borrow beyond their means to
maintain their standard of living; weakened individual and collective labour rights may
1 The questionnaire and all the responses received are available from www.ohchr.org/EN/Issues/
Development/IEDebt/Pages/DebtAndLabourRights.aspx. The Independent Expert also thanks Franz
Ebert, research fellow at the Max Planck Institute for Comparative Public Law and International Law,
Heidelberg, Germany, for his research work for the present report.
increase the risk of financial crises which, in turn, may lead to further deregulation of
labour markets.2
12. Labour-related austerity policies have been openly pushed by a number of official
key creditors, including the World Bank and the International Monetary Fund (IMF),
together, more recently, with the European Commission and the European Central Bank —
the so-called Troika. Especially since the late 1980s, labour-related conditionality has
featured prominently in IMF financial assistance programmes. Indeed, around 50 per cent
of all lending programmes have involved one or more labour-related conditions over the
period from 1994 to 2007. Since then, the number of IMF programmes with labour
conditionalities appears to have fallen, but still, between 25 to 40 per cent of IMF
programmes adopted until 2014 contained labour-related conditions relating to the public or
the private sector.3
13. International financial institutions have promoted labour law deregulation not only
through formal conditionality to financial assistance arrangements. For example, a subtle
form of reform pressure was applied in the case of Italy whereby a confidential letter sent to
the Government by the President of the European Central Bank and his incumbent
successor set out a list of required potential reforms.4 IMF has also made use of other
instruments to advocate for deregulatory labour reforms, such as its Article IV consultations
in the context of its bilateral macroeconomic surveillance.5 These involve a certain amount
of pressure and may also affect a country’s capacity to obtain financing elsewhere, given
that potential or actual investors and bilateral lenders often have recourse to these reports.6
B. Labour law issues in economic adjustment programmes
14. Faced with financial and economic crises, governments have tended to scale down
labour rights, although the specific content of the reforms has varied across the countries
concerned, depending, in particular, on the level of protection of the different areas of
labour law.7 This corresponds to the dominant tendency in the approach of international
financial institutions to labour reform, notably IMF. While IMF has occasionally supported
moderate improvements in labour standards,8 its prevalent stance regarding labour law has
been a deregulatory one. Close to one third of the available letters of intent addressed by
2 See Simon Deakin and Aristea Koukiadaki, “The sovereign debt crisis and the evolution of labour law
in Europe”, in Nicola Countouris and Mark Freedland, eds., Resocialising Europe in a Time of Crisis
(Cambridge: Cambridge University Press, 2013), pp. 163-188.
3 Alexander E. Kentikelenis, Thomas H. Stubbs and Lawrence P. King, “IMF conditionality and
development policy space, 1985-2014”, Review of International Political Economy (2016), p. 19.
4 Stefano Sacchi, “Conditionality by other means: EU involvement in Italy’s structural reforms in the
sovereign debt crisis”, Comparative European Politics, vol. 13, No. 1 (2015), pp. 82-83 and 89.
5 Center for Economic and Policy Research, “Macroeconomic policy advice and the Article IV
consultations: a European Union case study” (Washington D.C., 2013), pp. 14-17.
6 See with further references, Franz Christian Ebert, “International financial institutions’ approaches to
labour law: the case of the International Monetary Fund”, in Adelle Blackett and Anne Trebilcock,
eds., Research Handbook on Transnational Labour Law (Cheltenham, Edward Elgar, 2015), pp. 126-
127.
7 Christoph Hermann, “Structural adjustment and neoliberal convergence in labour markets and
welfare: the impact of the crisis and austerity measures on European economic and social models”,
Competition and Change, vol. 18, No. 2 (2014), pp. 123-124.
8 Franz Christian Ebert, “International financial institutions’ approaches to labour law” (note 6 above),
pp. 129-131 with further references.
governments to IMF between 1998 and 2005 contained commitments to be flexible with
labour market regulation.9
15. Early cases can be tracked to the 1950s, such as when IMF required Argentina to
control wage increases. Adjustment measures implemented during the 1980s in the context
of the Mexican debt crisis entailed a considerable reduction in both the number of public
employees and their salaries, among others. The relevant reforms ranged from minor
modifications to comprehensive reform packages with far-reaching amendments to both
collective and individual labour laws. For example, during the 1990s, Côte d’Ivoire
undertook reforms in the context of an IMF/World Bank-supported economic adjustment
programme, which included the deregulation of the rules concerning temporary
employment, dismissal and overtime, and involved the decentralization of the collective
bargaining system. Similarly, the structural adjustment programme carried out in Argentina
during the 1990s entailed individual labour law reforms, involving, for instance, extending
the duration of the probation period and collective labour law reforms, which granted firm-
level agreements priority over sectoral agreements.
16. In recent years, austerity-driven labour law reforms have remained a widespread
trend. No fewer than 89 countries implemented such reforms between 2010 and 2015 and
more than half (49) of them were implemented in developing countries. In addition, 130
countries had reportedly implemented or were contemplating cuts in or caps on public-
sector salaries, more than two thirds (96) of which were developing countries.10
Table 1: Austerity-related labour law reforms between 2010 and 201511
High-
income
countries
Others
East Asia
and Pacific
Eastern
Europe/
Central Asia
Latin
America/
Caribbean
Middle East/
North Africa South Asia
Sub-Saharan
Africa
Number of austerity-related
labour law reforms 40 9 12 11 6 3 8
Number of cuts in or caps
on public sector wages 34 18 17 14 8 7 32
17. In the context of the eurozone crisis, labour law reforms have been particularly far-
reaching. Crisis-stricken eurozone countries have notably adopted legislation to reduce the
economic costs of laying off workers. This was done through measures such as cutting
severance pay, shortening notification periods, lowering the protection against unfair
dismissal and easing the rules on collective redundancies, among others (see table 2 below).
18. Labour law deregulation has also been promoted in the context of international
financial assistance by IMF to Morocco and Tunisia. These cases are interesting as IMF and
the World Bank had changed their discourse towards social inclusion and protection of the
poor and had become more cautious vis-à-vis their earlier austerity-driven approach.
However, in the case of Tunisia, the policies promoted by the international financial
9 Mark S. Anner and Teri L. Caraway, “International institutions and workers’ rights: between labor
standards and flexibility”, Studies in Comparative International Development, vol. 45, No. 2 (2010),
pp. 151, 163-164.
10 Isabel Ortiz and others, “The decade of adjustment: a review of austerity trends 2010-2020 in 187
countries”, Extension of Social Security Working Paper, No. 53 (ILO, Columbia University and The
South Centre, 2015), pp. 12-13. The analysis therein draws on 616 IMF Article IV reports.
11 Table based on Isabel Ortiz and others (note 10 above), pp. 12-13.
institutions continued to favour labour market deregulation and a salary freeze for civil
servants. 12 In the context of a request for financial assistance from Morocco, IMF
emphasized the need for deregulating fixed-term contracts and reducing statutory protection
in the country.13
Table 2: Labour law reforms of selected eurozone countries during the
economic crisis (2008-2012)14
Area of reform
Countries
concerned
Reforms concerning selected aspects of individual labour law
Promotion of non- standard employment
Promotion of fixed-term employment and agency work
EL, PT
Introduction of new employment contracts with less pay and job security
EL, ES
Extension of probation periods EL, ES
Reduction of job security Weakening of employment protection for civil servants
EL, PT
Shortening of notice periods EL, ES
Increasing thresholds and reducing obligations for mass layoffs
EL, ES
Changes in the definition of fair and unfair dismissals
ES, IT
Reduction of severance pay ES, EL, PT
Elimination or weakening of the right to be reinstated after an unfair dismissal or after a mass layoff
ES, IT
Reforms concerning collective labour law
Decentralizing collective bargaining
Elimination or suspension of national collective agreements
IE
Suspension of the favourability principle EL, ES
Approval of exceptions and divergences IT
12 See, for example, Tunisia, “Memorandum of economic and financial policies” attached to the Letter
of Intent addressed to IMF Managing Director, Christine Lagarde, on 28 January 201, paras. 9 and 21.
13 IMF, “Staff report on Morocco relating to a request for an arrangement under the precautionary and
liquidity line and cancellation of the current arrangement”, para. 20. In Article IV reports on Morocco,
the IMF has, for example, highlighted the need for further deregulating the labour market, notably by
“reducing the minimum wage and hiring costs” (see IMF, “Morocco: Staff report for the 2011 Article
IV consultation” (19 September 2011), para. 26.
14 The original content of this table, which has been complemented with additional data, is taken from
Christoph Hermann “Structural adjustment and neoliberal convergence in labour markets and
welfare” (note 7 above), pp. 119 and 121. This is a non-exhaustive list, in the sense that there have
been more labour reform areas that have negatively affected labour and human rights, such as cuts
and changes to pensions, and cuts to wages, especially minimum wages and public sector wages.
Area of reform
Countries
concerned
Weakening of collective bargaining
Suspension or reduction of extension procedures EL, PT
Limitation of the “after effect” of expired collective agreements
EL, ES, PT
Limitation of arbitration EL
Interventions in collective bargaining
Suspension of existing agreements EL, PT
Limitation of the duration of agreements EL
Weakening of trade unions
Facilitating the conditions for non-union employee representatives to conclude collective agreements
EL, ES, PT
Country abbreviations: EL = Greece, ES = Spain, IE = Ireland, IT = Italy, PT = Portugal.
19. Overall, the reforms have involved significant changes — sometimes even a
transformation — in domestic labour law. As a result, the level of protection of labour law
has been substantially reduced, while the possibility of trade unions protecting workers by
negotiating collective agreements has been weakened. This raises the question of the effects
of these reforms on the human rights of workers, which will be addressed in the following
section.
III. Impact of austerity-related labour law reforms on human rights
20. International human rights instruments contain several standards that may be
encroached upon through austerity-related labour law reforms. The International Covenant
on Civil and Political Rights, notably, embodies the rights to freedom from forced labour
and freedom of association, while the International Covenant on Economic, Social and
Cultural Rights protects the rights to work and just working conditions and contains more
detailed protections of workers’ freedom of association, including the right to strike. 15
Those rights are also protected by the fundamental conventions of the International Labour
Organisation (ILO) and the 1998 ILO Declaration of Fundamental Principles and Rights at
Work.16 Regional human rights instruments, including the African Charter on Human and
Peoples’ Rights, the American Convention on Human Rights, the Additional Protocol to the
American Convention on Human Rights in the Area of Economic, Social and Cultural
Rights “Protocol of San Salvador”, the European Convention on Human Rights and the
European Social Charter also contain relevant provisions.
21. These standards have informed the approach of the Committee on Economic, Social
and Cultural Rights in defining the scope of States’ obligations, for example regarding the
15 The Convention on the Rights of the Child (arts. 32 and 34), the Convention on the Elimination of All
Forms of Discrimination against Women (art. 11), the International Convention on the Elimination of
All Forms of Racial Discrimination (art. 5) and the Convention on the Rights of Persons with
Disabilities (art. 27) also contain work-related State obligations.
16 Furthermore, ILO has adopted close to 190 conventions and over 200 recommendations on labour
issues.
right to work. In this regard, the Committee has adopted a holistic reading of the right to
work, which is informed, but not necessarily restricted, by the scope of related ILO
conventions and includes certain obligations that must be implemented immediately, such
as the adoption of an employment policy, and others that are progressive in nature.17
22. States do have some flexibility with regard to responding to financial crises and in
times of economic hardship. When necessary, international human rights law does not rule
out that States may have to take retrogressive measures contrary to their general obligations
in order to realize progressively economic, social and cultural rights. However, States must
always avoid taking deliberately retrogressive measures without carefully considering less
harmful alternatives and providing a justification. When a State seeks to introduce
retrogressive measures, it must demonstrate that such measures are temporary, necessary
and non-discriminatory, and that they respect at least its core obligations.18
23. In other words, labour rights contained in international human rights treaties may be
encroached upon, but only under very strict conditions, and core obligations must always be
respected. For example, in relation to the right to just and favourable conditions of work
and the right to work, the Committee identified as core obligations that States should
establish minimum wages that are non-discriminatory and non-derogable and indexed to the
cost of living so as to ensure a decent living for workers and their families and ensure non-
discrimination and equal protection of employment and the right of access to employment,
especially for disadvantaged and marginalized individuals and groups.19
24. International financial institutions and national development banks must also respect
labour rights when providing loans to States and imposing the condition to implement
certain fiscal and macroeconomic reform policies. The Committee on Economic, Social and
Cultural Rights has explicitly stressed that international financial institutions should pay
greater attention to the protection of the right to work in their lending policies and credit
agreements and that particular efforts should be made to ensure that this right is protected in
all structural adjustment programmes.20
25. If implemented, fiscal consolidation programmes must fully respect human rights
standards as must borrowing States and lenders, including lending international
organizations and States. Both lenders and borrowers have an obligation to carry out a
human rights impact assessment prior to the provision of a loan, in order to ensure that the
conditionalities do not disproportionately affect economic, social and cultural rights nor
lead to discrimination.21
A. Driving States into conflict with their international obligations
26. Austerity measures and economic reform programmes have often conflicted with the
human rights obligations of States. These range from minor interferences with to complete
negation of relevant rights and cover a number of issues.
27. In several instances, the economic adjustment reforms undertaken by States have
created tension with regard to the right to fair remuneration. For example, the Committee
on Economic, Social and Cultural Rights has repeatedly expressed its concern that the
17 See Committee on Economic, Social and Cultural Rights, general comment No. 18 (2005) on the right
to work.
18 See general comment No. 23 (2016) on the right to just and favourable conditions of work, para. 52.
19 Ibid., para 65; and general comment No. 18, para. 31 (a).
20 See general comments No. 18, para. 53; and No. 23, para. 71.
21 See A/HRC/20/23; E/C.12/2016/1, in particular para. 11; and A/HRC/21/39, para. 92.
freezing of and reduction in the minimum wage in crisis-stricken countries made it
impossible to ensure a decent living as set out in article 7 of the International Covenant on
Economic, Social and Cultural Rights.22 For similar reasons, the European Committee of
Social Rights has found violations of article 4 (1) of the European Social Charter. 23 In
particular, the compatibility with international human rights standards of labour reforms
affecting young people has been questioned. Concerning Greece, the Committee on
Economic, Social and Cultural Rights noted that young workers’ salaries were
disproportionally affected, while the European Committee of Social Rights found a
violation of article 4 (1) of the European Social Charter as the minimum wage for workers
younger than 25 years was beneath the poverty line. 24 Furthermore, the European
Committee found that the specific lower minimum wage for young people discriminated
against workers younger than 25 years and that Greece was in breach of article 7 (7) of the
European Social Charter which entitles workers under 18 years to at least three weeks of
paid annual leave.25
28. Labour law reforms facilitating the hiring and layoff of workers have led to tensions
with regard to human rights obligations. Regarding the financial crisis in Argentina in the
1990s, the Committee on Economic, Social and Cultural Rights expressed concern about
the precarity of work relationships exacerbated by labour law reforms backed by IMF,
including through increasing the trial period stipulated in work contracts and the
generalization of contracts of limited duration.26 Regarding protection against dismissal, the
European Committee found that the reforms introduced by Spain breached the right to
reasonable notice of termination of employment, which concerned, among others, statutory
provisions leaving the definition of notice periods to the discretion of the parties to the
employment contract and allowing employers to dismiss employees on probation under
certain contracts without notice.27
29. Trade union-related rights have also freqently been affected by labour law reforms
undertaken in the context of crisis-related economic adjustments. The Special Rapporteur
on the rights to freedom of peaceful assembly and of association recently expressed concern
about the declining respect for collective labour rights, including the right to form and join
trade unions. In this context, he also drew attention to the role of multilateral financial
institutions that may condition loans on measures that weaken labour protections, deny
workers a voice in the process and move employment towards informality.28
30. In 1999, the Committee on Economic, Social and Cultural Rights noted with
concern the collective labour law reforms carried out in Argentina that reduced the legal
work standards and affected the way in which “temporary” workers were treated. 29 In
particular, measures aimed at decentralizing collective bargaining have been noted by the
relevant quasi-judicial bodies. In the cases of Greece and Spain, respectively, ILO
Committee of Freedom of Association underlined that the creation of mechanisms that
22 See E/C.12/GRC/CO/2, para. 19; E/C.12/ESP/CO/5, para. 18; and E/C.12/PRT/CO/4, para. 12.
23 European Committee of Social Rights, Conclusions XX-3 (2014), Greece, art. 4 (1); Conclusions
(2014), Portugal, art. 4 (1); and Conclusions XX-3 (2014), Spain, art. 4 (1).
24 See E/C.12/GRC/CO/2, para. 19; and European Committee of Social Rights, Conclusions XX-3
(2014), Greece, article 4 (1).
25 European Committee of Social Rights, Complaint No. 66/2011, General Federation of employees of
the national electric power corporation (GENOP-DEI) and Confederation of Greek Civil Servants’
Trade Unions (ADEDY) v. Greece, 23 May 2012, paras. 30-32 and 68-69; and Conclusions XX-1
(2012), Greece, art. 1 (1).
26 See E/C.12/1/Add.38, para. 16.
27 See European Committee of Social Rights, Conclusions XX-3 (2014), Spain, art. 4 (4).
28 See A/71/385, para. 85.
29 See E/C.12/1/Add.38, paras. 15 and 16.
favoured decentralized bargaining of exclusionary provisions less favourable than the
provisions at a higher level constituted, in this regard, a weakening of freedom of
association and collective bargaining contrary to the principles of Conventions No. 87 and
No. 98.30
31. The fact that the Government of Spain allowed employers unilaterally not to apply
conditions stipulated in collective agreements was found not to be in conformity with
article 6 (2) of the European Social Charter,31 while the crisis-related unilateral suspension
of a collective agreement, as undertaken by the Government of Greece, was found to be in
breach of ILO Convention No. 98. 32 In this regard, the Committee on Freedom of
Association emphasized that any urgent measure implemented in the context of an
economic crisis that restricted collective bargaining had to be of a temporary nature,
necessary, and accompanied by “adequate safeguards to protect workers’ living
standards”.33
B. Adverse effects of adjustment programmes on labour rights
32. Adjustment reforms undertaken to prevent, mitigate or overcome sovereign debt
crises have affected workers’ human rights on a number of occasions and in various ways.
In a study that examined data on 131 developing countries over the period from 1981 to
2003, it was found that the longer the time span during which a country was subjected to a
structural adjustment programme sponsored by IMF and the World Bank, the lower the
level of protection of labour rights in its territory.34 Another study that analysed data from
123 developing and emerging economies found a significant negative relation between IMF
and World Bank programmes and collective labour rights, notably with regard to workers’
freedom of association and the right to collective bargaining, both in law and in practice.35
This adds to the literature on the impact of currency crises on labour standards, which
found that such crises reduce the aggregate labour share, notably in the manufacturing
sector, and lead to a decline in real wages and higher general and youth unemployment,
among others.36
33. Workers’ wages have very often been affected by economic adjustment reforms. A
study of 110 countries identified a negative effect of IMF financial assistance programmes
on the labour share in the manufacturing sector. 37 IMF and World Bank-sponsored
30 ILO Committee on Freedom of Association, Case No. 2820 (Greece), 365th report, November 2012,
para. 997; also Case No. 2947 (Spain), 371st report, March 2014, para. 453.
31 European Committee of Social Rights, Conclusions XX-3 (2014), Spain, art. 6 (2).
32 See ILO Committee on Freedom of Association, Case No 2820 (Greece), 365th report, November
2012, para. 995.
33 ILO Committee on Freedom of Association, Case No 2918 (Spain), 368th report, June 2013, para.
362.
34 Rodwan Abouharb and David Cingranelli, Human Rights and Structural Adjustment (Cambridge,
Cambridge University Press, 2007), pp. 87 and 200.
35 Blanton R G, Blanton S L and Peksen D, “The impact of IMF and World Bank programs on labor
rights”, Political Research Quarterly (2015) pp. 5 and 9.
36 See, for example, Peter R. Fallon and Robert E.B. Lucas, “The impact of financial crises on labour
markets, household incomes and poverty: a review of evidence”, The World Bank Research Observer,
vol. 17, No. 1 (2002), p. 41; Paul Maarek and Elsa Orgiazzi, “Currency crises and the labour share”,
Economica, vol. 80, No. 319 (2013), p. 583; Misbah Tanveer Choudhry, Enrico Marelli and Marcello
Signorelli, “Youth unemployment rate and impact of financial crises,” International Journal of
Manpower, vol. 33, No. 1 (2012), pp. 87-88.
37 James Raymond Vreeland, “The effect of IMF programs on labor”, World Development, vol. 30, No.
1 (2002), pp. 124 and 130.
adjustment programmes implemented in the 1980s reportedly went along with the drastic
declines in real wages in a number of developing countries.38 Similarly, the labour share in
relation to gross domestic product declined significantly in the course of the economic
adjustment programme recently implemented in several eurozone countries, in particular
Greece.39
34. Trade unions have also been weakened in countries undertaking economic
adjustment. A study using data on 39 least developed countries, carried out during the
second half of the 1990s, showed that the signing of an IMF loan arrangement and debt
service was negatively associated with the level of unionization rates.40 The privatization of
public companies promoted by IMF and World Bank-driven adjustment programmes has,
in several developing countries, such as India, furthered the fragmentation and weakening
of local trade unions.41 Labour market reforms undertaken during the European economic
crisis heavily affected collective bargaining in the countries concerned. For example,
Greece saw a strong decrease in sectoral collective bargaining combined with the spread of
company-level agreements by non-union organizations; in Romania, the 2011 labour law
reforms heavily affected trade unions’ capacity to engage in effective collective bargaining
at the national and sectoral levels;42 and in Portugal, the number of collective agreements
adopted per year dropped dramatically between 2008 and 2012, as did the number of
workers covered by those agreements.43 There is the risk that, even if collective labour
rights should at some point be restored, trade unions will be too weak to engage in
meaningful negotiations with employers. In addition, there has often been a lack of
consultation with social partners about relevant economic adjustment programmes.
35. That development has often been accompanied by a rise in the informal economy
and an overall decrease in formal employment. For example, in Côte d’Ivoire, both
unemployment and the workforce in the informal sector increased drastically under the
structural adjustment programme implemented in the 1980s, while the privatization of the
cocoa industry reportedly led to an increase in child labour in that industry, often under
hazardous conditions. 44 In Malawi, overall formal employment and private-sector
employment fell during the implementation of the structural adjustment programmes
sponsored by the World Bank and IMF. In other countries, the privatization of public-sector
companies also led to the replacement of stable jobs with decent working conditions by
precarious jobs involving sub-contractors, which were not fully subject to the relevant
38 See, for Latin American and African countries, Ajit Kumar Singh, “Social consequences of new
economic policies: with particular reference to levels of living of working class population”,
Economic and Political Weekly, vol. 28, No. 7 (13 February 1993), pp. 281 with further references.
39 Magoulios George, Kydros Dimitrios, Athianos Stergios, “The economic crisis (2008) and effects on
income: the case of Greece”, Procedia Economics and Finance, vol. 19 (2015), pp. 35-36.
40 Nathan D. Martin and David Brady, “Workers of the less developed world unite? A multilevel
analysis of unionization in less developed countries”, American Sociological Review, vol. 72, No. 4
(2007), pp. 568 and 579.
41 See, with regard to India, Sasmita Palo, Nayantara Padhi and Sweta Panigrahi, “Labour standards in
the aftermath of structural adjustment programme: the case of India”, Indian Journal of Industrial
Relations, vol. 35, No. 3 (2000), pp. 389.
42 Aurora Trif, “Surviving frontal assault on collective bargaining institutions in Romania: the case of
manufacturing companies”, European Journal of Industrial Relations, vol. 22, No. 3 (2016), p. 222.
43 Isabel Távora and Pilar González, “Labour market regulation and collective bargaining in Portugal
during the crisis: continuity and change”, European Journal of Industrial Relations, vol. 22, No. 3
(2016), p. 257. 44 International Labor Rights Fund, “The World Bank and IMF policies in Cote d’Ivoire: impact on
child labor in the cocoa industry” (Washington D.C., 2002), p. 4.
labour law provisions.45 In Greece and Portugal, the implementation of the labour law
reforms was concomitant with a steep rise in unemployment and a significant increase in
the number of precarious employment contracts.
C. Impact of labour rights weakening
36. The weakening of labour rights under structural adjustment programmes has entailed
adverse implications for other human rights. For example, in Zimbabwe, substantial layoffs
in the public sector, among other factors, reportedly pushed a number of workers and their
families into poverty and homelessness, affecting their right to food and adequate
housing.46 Austerity-related labour law reforms undertaken in the course of the eurozone
crisis are — together with reforms of pension systems — expected to result in widespread
old-age poverty.47 In Greece, the income loss brought about by the austerity measures,
labour law reforms and the scaling down of the public sector have led to an increase in
poverty, in particular among workers in the private sector, which has been exacerbated by
the lack of a social security system capable of providing for sufficient relief.48
37. In several instances, structural adjustment programmes have aggravated already
existing inequalities in the countries concerned, for example, through the reduction of the
labour share in relation to gross domestic product. Adverse effects entailed by structural
adjustments have often particularly affected the female workforce. For example, during the
implementation of the structural adjustment programme in Mexico, the average wages of
women were found to decrease more sharply than those of the male workforce. 49 The
downsizing and privatization of State-owned companies have often affected female
employment disproportionately.50
38. The increase in female participation in the labour market during economic crises
often concerned mainly the informal sector. 51 Regarding the adjustment programme in
Greece, ILO Committee of Experts on the Application of Conventions and
Recommendations highlighted the risk that the deregulation of the labour market could
affect the salary level of women in a disproportionate manner. 52 Meanwhile, a study
examining the gender gap in Ireland, Italy and Portugal found the tendency of a narrowing
gender gap in terms of unemployment as economic sectors with a predominantly male
workforce, for example the construction sector, tended to be more affected by the economic
crisis. Nonetheless, as the scaling down of the public sector in those countries unfolds,
45 Kamal A. Munir, Natalya Naqvi and Adaner Usmani, “The abject condition of labor in Pakistan”,
International Labor and Working-Class History, No. 87 (2015), p. 179.
46 Saliwe M. Kawewe and Robert Dibie, “The impact of economic structural adjustment programs
[ESAPs] on women and children: implications for social welfare in Zimbabwe”, The Journal of
Sociology & Social Welfare, vol. 27, No. 4 (2000), pp. 94-96.
47 Christoph Hermann, “Structural adjustment and neoliberal convergence in labour markets and
welfare” (note 7 above), p. 127.
48 See A/HRC/31/60/Add.2. 49 See Diana Alarcon-Gonzalez and Terry McKinley, “The adverse effects of structural adjustment on
working women in Mexico”, Latin American Perspectives, vol. 26, No. 3 (1999), p. 115. 50 For India, see Sasmita Palo, Nayantara Padhi and Sweta Panigrahi, “Labour standards in the aftermath
of structural adjustment programme” (note 41 above), p. 390.
51 See Khadija Ali, “Gender exploitation: from structural adjustment policies to poverty reduction
strategies”, Pakistan Development Review, vol. 42, No. 4 (2003), p. 675 with further references. 52 ILO Committee of Experts on the Application of Conventions and Recommendations, Observation
adopted 2012, published 102nd ILC session (2013), Equal Remuneration Convention, 1951 (No. 100),
Greece.
women, who dominate this sector, are likely to be more heavily affected53 and austerity-
driven cuts in childcare and education services may render the participation of women in
the labour market more difficult.54
39. Other adverse effects concern the quality of the public service. Reductions in public
servants’ salaries can affect productivity in the public sector,55 which, in turn, lends itself to
an argument for privatization or additional wage cuts. In Côte d’Ivoire, reductions in
teachers’ salaries, as recommended by IMF and the World Bank, appear to have had a
negative impact on education quality, owing to cross-border brain drain.56
40. Finally, IMF and World Bank-sponsored adjustment programmes have, in some
cases, been associated with violations of civil and political rights. For example, since the
1950s in Argentina, IMF programmes have repeatedly been accompanied by violence
against trade unions opposing labour market-related measures, involving, among others,
crackdown on protests and imprisonment of union leaders.57 In numerous countries, the
effects of austerity policies have led to protests and riots, 58 often accompanied by the
disproportionate use of force by law enforcement officials against demonstrators and
resulting in violations of civil and political rights.59
IV. Challenging conventional wisdom: economic effects of labour standards
41. The above findings are not only problematic from a human rights perspective, but,
as will be shown below, the assumption that labour rights are generally detrimental to
economic development has been vigorously challenged at the theoretical level and refuted
by empirical data. Evidence that austerity-related labour market reforms have contributed to
economic recovery after debt-related economic crises is weak. Sometimes it appears that
debt crises have rather provided a pretext to push through labour market reforms favouring
business interests rather than addressing economic problems. It is therefore not surprising
that debt crises frequently exacerbate economic inequality.60
A. Economic effects of labour standards in general
42. Whether higher protection of workers through labour legislation increases or reduces
economic efficiency has been controversial for some time. According to conventional
53 In Portugal the gender gap regarding unemployment was even found to be reversed, see Tindara
Addabbo and others, “Gender and labour in times of austerity: Ireland, Italy and Portugal in
comparative perspective”, International Labour Review, vol. 154, No. 4 (2015), pp. 458-459.
54 On the adverse impacts of debt and lending policies on women, see also A/67/304.
55 Guy Standing, “Structural adjustment and labour market policies: towards social adjustment?”, in
Guy Standing and Victor Tokman, eds., Towards social Adjustment. Labour market issues in
structural adjustment (Geneva, ILO, 1991), p. 30 with further references.
56 Kato Gogo Kingston, “The impacts of the World Bank and IMF structural adjustment programmes on
Africa: the case study of Cote d’Ivoire, Senegal, Uganda and Zimbabwe”, Sacha Journal of Policy
and Strategic Studies, vol. 1, No. 2 (2011), p. 118.
57 Margaret Conklin and Daphne Davidson, “The I.M.F. and economic and social human rights: a case
study of Argentina, 1958-1985”, Human Rights Quarterly, vol. 8 (1986), pp. 255-257.
58 See John Walton and Charles Ragin, “Global and national sources of political protest: third world
responses to the debt crisis”, American Sociological Review, vol. 55, No. 6 (1990), p. 877.
59 On Argentina, see Margaret Conklin and Daphne Davidson, “The I.M.F. and economic and social
human rights: a case study of Argentina, 1958-1985” (note 57 above), pp. 255-257.
60 See A/HRC/31/60.
wisdom, labour legislation, in particular employment protection legislation, is a main
obstacle to economic growth and employment. In this regard, the Organization for
Economic Cooperation and Development (OECD), IMF and the World Bank have
advocated that high labour protection standards are a driver of unemployment, among
others, and should be scaled down.61
43. Those views have, however, been challenged on a number of fronts. Scholars have
identified a number of functions of labour law that render the economy efficient rather than
encumbering it. Among others, labour laws further economic coordination at both the
company and market levels.62 In addition, laws regarding minimum wages or protection
against dismissal tend to incentivize employers to utilize their workforce in an efficient
manner, invest in technology and strive to improve their organization. Labour standards
also contribute to stabilizing demand during recession. In this regard, the role of labour
legislation in correcting market failures is frequently acknowledged.63
44. Furthermore, a body of empirical literature has emerged that suggest that the effects
of labour standards on the economy are, by far, less problematic than conventional wisdom
would have believe. The only robust finding in the literature on the economic effects of
labour standards appears to be its positive effect on income distribution. By contrast,
“despite considerable effort, researchers have not pinned down the effects, if any, of [labour
market] institutions on other aggregate economic outcomes, such as unemployment and
employment”.64 Notably, in an analysis of data on 20 OECD countries, no association was
found between weaker labour market institutions and reduced unemployment, while
coordinated collective bargaining was found to be related to lower unemployment. 65 A
recent study that analysed data from OECD countries and 10 new market economies in
Central and Eastern Europe, over three decades, arrived at similar conclusions.66 Moreover,
it was found that “employment protection, benefit replacement rates and tax wedge do not
seem to have a significant impact on unemployment”.67 Another study found “no consistent
relationship, either negative or positive, between labour laws in general and unemployment
61 See OECD, “The OECD Jobs Study. Evidence and Explanations. Part I – Labour Market Trends and
Underlying Forces of Changes” (Paris, 1994), p. 69; IMF, World Economic Outlook: Growth and
Institutions (Washington D.C., 2003), pp. 137-138 and 141-142; World Bank, Doing Business
(Washington D.C., 2007), p. 19.
62 Simon Deakin, “Labour law and development in the long run”, in Shelley Marshall and Colin
Fenwick, eds., Labour Regulation and Development. Socio-Legal Perspectives (Cheltenham, Edward
Elgar, forthcoming), p. 41.
63 See for example, Alan Hyde, “What is labour law?”, in Guy Davidov and Brian Langille, eds.,
Boundaries and Frontiers of Labour Law: Goals and Means in the Regulation of Work (Oxford and
Portland, Oregon, Hart Publishing, 2006), pp. 54-60..
64 Richard B. Freeman, “Labor market institutions around the world”, in Paul Blyton and others, eds.,
The SAGE Handbook of Industrial Relations (Los Angeles, SAGE, 2008), p. 652. 65 See Dean Baker and others, “Labor market institutions and unemployment: assessment of the cross-
country evidence”, in David Howell, ed., Fighting Unemployment: The Limits of Free Market
Orthodoxy (Oxford, Oxford University Press, 2005), p. 109. 66 Sabina Avdagic and Paola Salardi, “Tenuous link: labour market institutions and unemployment in
advanced and new market economies”, Socio-Economic Review, vol. 11, No. 4 (2013), p. 765.
67 Lucio Baccaro and Diego Rei, “Institutional determinants of unemployment in OECD countries: does
the deregulatory view hold water?”, International Organization, vol. 61 (2007), pp. 528 and 563.
in developed countries”,68 while working time and workers’ representation laws appeared to
have negative effects on unemployment.69
45. The claim that employment protection legislation harms youth unemployment in
particular has been challenged by recent research. For example, reducing costs to lay off
workers neither increases young people’s chances of finding employment nor decreases the
risk of being unemployed.70
46. Other studies have identified positive effects of labour standards on productivity and
employment. There is a positive long-term relationship of labour legislation, including
regulation protecting workers against dismissal with productivity. 71Also, fewer working
hours per day reportedly correlates with higher productivity per hour.72 There have been
similar findings regarding the impact of certain labour laws on innovation. An analysis of
four OECD countries between 1970 and 2002 found that higher dismissal protection
standards had a positive effect on innovations realized by employees.73
47. With regard to developing countries, evidence of a negative impact of labour
standards on a country’s economic performance appears to be weak. While relevant data on
developing countries is scarce, research on Argentina, for example, suggests that labour
market deregulation seems to have reduced employment elasticities instead of increasing
them. 74 Meanwhile, evidence on Chile shows that “gradual re-regulation of the labour
market was consistent with continued employment growth up to the Asian Financial Crisis”
in the late 1990s.75 A study analysing data on various countries from 1985 to 1994 found
that higher labour standards correlated with lower levels of corruption, among other
positive effects.76 Finally, a study on BRICS — Brazil, Russian Federation, India, China
and South Africa — suggested that relevant strike laws had no significant effects on
unemployment, while more protective employee representation laws were, in part, even
negatively correlated with unemployment.77
68 Ibid., italics by authors.
69 Simon Deakin, Jonas Malmberg and Prabirjit Sarkar, “How do labour laws affect unemployment and
the labour share of national income? The experience of six OECD countries, 1970-2010”,
International Labour Review, vol. 153, No. 1 (2014), p. 17.
70 See Clemens Noelke, “The consequences of employment protection legislation for the youth labour market”, Working Paper No. 144 (Mannheim, Mannheimer Zentrum für Europäische Sozialforschung,
2011), p. 26.
71 Simon Deakin and Prabirjit Sarkar, “Does labour regulation improve income distribution at the cost
of decreased employment and productivity?”, Paper presented at the ILO/IZA Conference, Geneva,
10-11 March 2016.
72 See Lonnie Golden, “The effects of working time on productivity and firm performance: a research
synthesis paper”, Conditions of Work and Employment Series No. 33 (ILO Geneva, 2011), p. 6 with
further references.
73 Viral V. Acharya, Ramin P. Baghai, Krishnamurthy V. Subramanian, “LaborlLaws and innovation”,
Journal of Law & Economics, vol. 56, No. 4 (2013), pp. 998 and 1032.
74 Adriana Marshall, “Labour market policies and regulations in Argentina, Brazil and Mexico:
programmes and impacts”, Employment Strategy Papers No. 2004/13 (ILO, 2004), p. 22.
75 Gerry Rodgers, “Labour market flexibility and decent work”, Department of Economic and Social
Affairs Working Paper No. 47 (July 2007), p. 6 with further references.
76 Thomas I. Palley, “Labour standards, democracy and wages: some cross-country evidence”, Journal of International Development, vol. 17, No. 7 (2005), pp. 885 and 889.
77 Simon Deakin, Colin Fenwick, Prabirjit Sarkar, “Labour law and inclusive development: the
economic effects of industrial relations laws in middle-income countries”, in M. Schmiegelow and H.
Schmiegelow, eds. Institutional Competition between Common Law and Civil Law,
(Berlin/Heidelberg, Springer, 2014), p. 202.
48. Possibly as a reaction to such research findings, OECD has, in recent years, adopted
a less pronounced policy stance on this matter. For instance, in a study carried out in 2006,
OECD researchers found “no significant impact of employment protection legislation on
aggregate unemployment” but some evidence that “highly centralized and/or coordinated
wage bargaining systems” were estimated to be associated with lower unemployment.78 In
addition, a comprehensive review published by the World Bank concluded that labour
market institutions had positive distributional effects, while the effects on economic
efficiency appeared modest, “with most studies showing no effect or small negative effects
but some finding positive effects”.79 Furthermore, IMF research has also become more
nuanced over time, with a recent report finding that labour market regulation had no
“statistically significant effects on total factor productivity”.80
49. Overall, research suggests that the economic implications of labour legislation are
significantly complex, vary across countries and economic sectors and can, more
importantly, even increase economic efficiency, depending on the context. In many cases,
factors other than labour standards seem to play a stronger role in influencing economic
outcomes. The economic case for dismantling labour standards, including in the area of
collective bargaining and dismissal protection, is, hence, weak.
50. This finding is also important from a human rights point of view. If encroaching on
labour rights does not have any justifiable benefits, even for rights holders who are outside
the labour market, and if downsizing labour rights does not lead to enhanced enjoyment of
economic and social rights for all, such retrogressive measures cannot be considered as
permissible and justifiable responses to financial and economic crises.
B. Economic effects of the deregulation of labour law in the context of
economic adjustment
51. Empirical findings overall do not seem supportive of the claim that labour law
deregulation fosters recovery after economic crises. Indeed, the evidence seems to be more
in line with the argument that “pressure towards labour market flexibilization, aimed at
boosting export-led growth, will eventually lead to lower consumption, net exports and
employment” at the global level.81
52. Evidence from Latin America suggests that reforms that deregulated individual and
collective labour law in Argentina, the Plurinational State of Bolivia, Brazil, Chile, Mexico
and Uruguay in the 1980s and 1990s, led neither to less informal employment nor reduced
employment instability, which saw an increase during that period.82 Indeed, in several Latin
American countries, the weakening of employment protection legislation appears to have
78 Andrea Bassanini and Romain Duval “The determinants of unemployment across OECD countries:
reassessing the role of policies and institutions”, OECD Economic Studies, No. 42, 2006/1 (2006),
p. 46.
79 Gordon Betcherman, “Labor market institutions: a review of the literature”, Background paper for the
2013 World Development Report (November 2012), p. 41.
80 IMF, World Economic Outlook: Uneven Growth — Short- and Long-term Factors (April 2015),
p. 105. 81 Jeronim Capaldo and Alex Izurieta, “The imprudence of labour market flexibilization in a fiscally
austere world”, International Labour Review, vol. 152, No.1 (2013), p. 24. 82 Lydia Fraile, “Lessons from Latin America’s neo-liberal experiment: an overview of labour and
social policies since the 1980s”, International Labour Review, vol. 148, No. 3 (September 2009), pp.
220 and 224; Alfredo F. Calcagno, “Ajuste estructural, costo social y modalidades de desarrollo en
América Latina”, in El ajuste estructural en América Latina. Costos sociales y alternativas (Buenos
Aires, Consejo Latinoamericano de Ciencias Sociales, 2001), pp. 80-81; also E/C.12/1/Add.38.
aggravated the precariousness of work with little evidence of improved employment
performance. 83 This is in line with the broader finding that an “increased intensity of
structural adjustment lending” by IMF and the World Bank does not appear to be associated
with increased growth per capita and that repeated adjustment lending has not been related
to a reduction in severe macroeconomic distortions.84
53. The economic effects of the austerity measures taken recently in the context of the
eurozone crisis appear to be similarly weak. Overall, research suggests that the European
Union countries that performed relatively better during the economic crisis of 2007 to 2011
were those that had less flexible labour markets.85 An ILO study found that there was no
clear link between employment protection legislation and employment levels, 86 while
another ILO report suggested that the combination of labour market deregulation and fiscal
austerity was likely to “have affected employment while failing to arrest the deterioration in
fiscal deficits”.87 Labour market reform undertaken in response to the debt crisis in the
eurozone appears to have had “little positive impact on national labour markets”, including
youth unemployment. 88 The reduced income of large parts of the population owing to
deregulatory labour law reforms has rather led to a decline in demand, which can further
exacerbate the crisis.89
54. Overall, there is little evidence that labour market deregulation furthers recovery in
the context of financial and economic crises, while the negative impact on economic and
social rights is substantial. This also highlights the potential relevance of other factors
behind deregulatory reforms that undermine labour standards, such as ideological bias and
non-explicit retrogressive distributional agendas.
V. Conclusion
55. Many States with unsustainable levels of debt or experiencing a financial crisis
have implemented austerity policies and labour market reforms with a strong
deregulatory impetus, either on their own initiative or at the behest of external
83 Adriana Marshall, “Weakening employment protection in Latin America: incentive to employment
creation or to increasing instability?”, International Contributions to Labour Studies, vol. 6, No. 1
(1996), p. 46. 84 William Easterly, “What did structural adjustment adjust? The association of policies and growth with
repeated IMF and World Bank adjustment loans”, Journal of Development Economics, vol. 76, No. 1
(2005), p. 20.
85 Pasquale Tridico, “The impact of the economic crisis on EU labour markets: a comparative
perspective”, International Labour Review, vol.152 No. 2 (2013).
86 See International Institute for Labour Studies (IILS)/ILO, World of Work Report 2012: Better Jobs
for a Better Economy, p. 36. According to this study, “from low levels of employment protection
regulation to an average level of regulation, employment levels tend to be positively associated with
more stringent regulations. Beyond that, badly designed regulations may adversely affect
employment”.
87 IILS/ILO, Eurozone Job Crisis: Trends and Policy Responses, Studies on Growth with Equity
(Geneva, 2012), p. 30.
88 See Jason Heyes and Paul Lewis, “Relied upon for the heavy lifting: can employment protection
legislation reforms lead the EU out of the jobs crisis?”, Industrial Relations Journal, vol. 46, No. 2
(2015), p. 90; on Portugal, see also ILO, Portugal: Tackling the Jobs Crisis in Portugal, Studies on
Growth with Equity (Geneva, 2013), p. 61.
89 Christoph Hermann, “Die Finanzkrise und ihre Auswirkungen auf Sozialstaaten und
Arbeitsbeziehungen“, WISO vol. 36, No. 1 (2013), p. 48; Susan Horton, Ravi Kanbur and Dipak
Mazumdar, Labour markets in an era of adjustment: evidence from 12 developing countries”,
International Labour Review, vol. 130, No. 5-6 (1991), p. 557, focusing on real wage decreases.
creditors, including international or regional financial institutions. Such reforms have
often reduced the legal protection of workers and affected the bargaining power of
trade unions, with important implications for workers’ standard of living, economic
equality and social cohesion, among others. In a number of cases, these reforms have
amounted to violations of human rights obligations and international labour
standards, as documented by, among others, the international bodies monitoring these
rights.
56. The present report challenges the widespread belief that deregulating the
labour market will further growth and employment. An increasing number of studies
have actually pointed to the positive economic effects of labour standards, including
on productivity and innovation. In addition, evidence that downscaling domestic
labour legislation has actually helped to ensure economic and financial recovery is
weak.
57. Financial crises are usually not caused by excessive labour regulation and
labour deregulation does not help to overcome them. In fact, conventional austerity-
related labour reforms implemented during the last years do not seem to have helped
countries recover nor have they resulted in restoring access to employment to pre-
crisis levels. Instead, they have undermined labour and other social rights contained
in international law. It is therefore time to question the conventional wisdom that the
deregulation of labour markets is a suitable and legitimate approach for responding to
financial crises. Rather, the opposite is needed, that is, reform measures guided by the
normative content of labour rights contained in international human rights law that
foster gender equality, enhance employment and provide better access to these rights
for marginalized groups and individuals.
VI. Recommendations
A. Ensure respect for labour rights through human rights impact
assessments
58. It is essential to submit austerity-related reforms to robust human rights
impact assessments before they are carried out. 90 First of all, any such impact
assessment should include an assessment of the impact of such measures on the
population, including whether there are any viable human rights compliant policy
alternatives to austerity reforms, before they are carried out and should recommend
policies that meet the economic needs of the country in a manner that fully protects
human rights. Too often, the measures taken, as in the case of European austerity,
have not improved the economic situation, but have, simultaneously, substantially
worsening the human rights of millions of people.
59. Human rights impact assessments should feed into both the policymaking of the
State considering reforms as well as that of the external actors recommending or
requiring such reforms, such as international financial institutions. Such assessments
should:
(a) Be carried out by an entity possessing sufficient independence from the
relevant decision makers;
(b) Cover both labour market reforms and other austerity-related reforms;
90 See A/71/305, para. 60.
(c) Be based on a solid methodology, involving both quantitative and
qualitative analysis;
(d) Involve a procedure that ensures the independence of the actors
conducting the assessment;
(e) Involve consultation with all stakeholders, in particular trade unions and
employers’ organizations, as well as relevant international organizations with relevant
expertise, such as ILO;
(f) Contain follow-up mechanisms to ensure that the result of the
assessment effectively informs policymaking.
Furthermore, the human rights impact of larger reforms should be monitored
periodically and measures should be reconsidered if they produce adverse effects on
human rights that cannot be adequately prevented or mitigated.
B. Cushion adverse effects through a robust social security net
60. Economic adjustment programmes typically entail negative effects on workers’
economic situation that need to be mitigated through a robust social security net. It is
all the more problematic that the downscaling of employment protection legislation
has often been accompanied by austerity measures that have weakened employment
and the benefits of social security nets. In order to comprehensively address the needs
of workers, including the unemployed, States should adopt a comprehensive social
security policy and, despite fiscal constraints, allocate the necessary budget for this
purpose. There is increasing evidence that such strategies not only have a key role in
terms of protecting workers, but are also conducive to sustainable economic
recovery.91 Some international and regional financial institutions have increasingly
developed programmes to assist States in strengthening their social protection
systems. This should become a more coherent practice, not only for countries
undergoing economic adjustments.
C. Ensure consultation with social partners and civil society
61. Employers and trade union organizations have particular knowledge of the
workplace reality and have a key role to play in realizing human rights at work. In a
number of countries, they play an important role in terms of mitigating the adverse
effects of economic and financial crises by agreeing on flexible and tailor-made
temporary workplace arrangements, while facilitating the protection of workers and
giving a voice to those affected by the measures. The importance of national and
sectoral collective bargaining cannot be understated here. They can often also detect
problems relating to labour market reform proposals, including those that may have
possible adverse impacts on workers’ human rights, in practice. Borrowing States and
lending financial institutions should therefore consult with relevant and
representative trade unions and employers’ organizations about any reforms prior to
their implementation.
62. Governments should respect all collective agreements that have been concluded
and, in particular, avoid derogating from them in a unilateral manner. Also, national
91 See Isabel Ortiz and others, “The decade of adjustment: a review of austerity trends 2010-2020 in 187
ountries”, Extension of Social Security Working Paper, No. 53 (ILO, Columbia University and The
South Centre, 2015), pp. 44-46.
human rights institutions and other civil society organizations representing groups
that may be marginalized and disadvantaged can play a useful role in monitoring the
effects of labour market reforms jointly with trade unions and employer’s
organizations.
63. There is also a need to reflect upon and devise more inclusive negotiation
procedures for dealing with sovereign debt restructuring. In particular, when
sovereign debtors and their creditors negotiate the terms of a debt restructuring or
new lending with financial institutions, unemployed people, workers, their unions and
national human rights institutions should have full access to and be able to participate
in this debate. The outcome of these decisions may imply official or informal
commitments to pass labour law reforms or budgetary restrictions that may affect the
labour market, the functioning of the economy and the public finances in a way that
impairs the employment prospects in the State concerned.
D. Incorporate labour rights in policies of international, regional and
national financial institutions
64. International and regional financial institutions and national development
banks should include in their policy documents an explicit commitment to respect
human rights, including labour rights, in their lending policies and to exercise human
rights due diligence when taking lending decisions.
65. Lending agreements should contain the recognition of labour and trade union
rights, including the freedom of association and effective recognition of the right to
collective bargaining and the right to strike. They should, furthermore, require
consultation with trade unions and employer organizations on matters affecting them.
66. International and regional financial institutions and national development
banks should develop policies to deal effectively with alleged violations of labour
rights in the macroeconomic reform programmes and projects that they finance. The
independent complaints mechanisms of international and regional financial
institutions and national development banks should be able to receive and address
such grievances and complaints in accordance with the Guiding Principles on
Business and Human Rights.92
E. Ensure policy coherence on labour standards within international
organizations
67. A significant lack of coordination persists between key lending institutions,
such as IMF, and the competent international organizations when it comes to labour-
related conditionality. This is problematic not only because IMF has recognized that
structural reforms institutions, such as ILO, “may be better placed to advise”,93 but
also because such lack of coordination entails the risk that adverse effects of policy
proposals are not adequately identified and addressed. States and international
financial institutions considering labour law reforms should systematically, and in a
timely manner, consult with international organizations that have expertise in this
area, notably ILO. ILO can, if necessary, also assist with fostering dialogue and
92 See A/HRC/17/31, annex.
93 IMF, “Jobs and growth: analytical and operational considerations for the Fund” (Washington, 2013),
p. 46. Available at https://www.imf.org/external/np/pp/eng/2013/031413.pdf.
consultation between trade unions, employer organizations and the Government at
country level. Deference should be shown if these organizations voice significant
concerns, in particular regarding States’ international obligations in the area of
human rights and labour standards. These consultations should occur at an early
stage and substantiated objections by the competent organization should lead to the
reconsideration and redesign of the relevant policy proposal.
F. Strengthen national and international mechanisms providing effective
remedies against labour rights violations
68. Political mobilization and strategic litigation can serve as a local corrective to
austerity-related labour market reforms that infringe workers’ rights. Research
suggests that international financial institutions are more receptive to political
pressure by domestic trade unions than is often thought and are likely to make
concessions on labour market issues in the face of significant protest. 94 Similarly,
domestic courts, especially — but not only — constitutional courts, have been
successfully used in several countries to challenge austerity measures. Also, regional
human rights mechanism and courts are important for ensuring that economic reform
programmes remain compatible with labour rights. In the same vein, treaty bodies,
especially those vested with complaint mechanism, can provide an additional
safeguard for labour rights contained in international human rights instruments. A
step in this regard would be for States to ratify the Optional Protocol to the
International Covenant on Economic, Social and Cultural Rights so as to enable
individuals to submit complaints once domestic remedies have been exhausted.
94 See Teri L. Caraway, Stephanie J. Richard and Mark S. Anner, “International negotiations and
domestic politics: the case of IMF labor market conditionality”, International Organization, vol. 66,
No. 1 (2012), pp. 53-54.