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Giving workers employment rights increases productivity and profitability

28 October 2016

The article at a glance

New research findings from two of the UK’s top universities, Cambridge and Manchester, reveals giving workers employment rights increases productivity and profitability. …

New research findings from two of the UK’s top universities, Cambridge and Manchester, reveals giving workers employment rights increases productivity and profitability.2016_cbr_givingworkersempolymentrights_883x432

The Centre for Business Research (CBR) at the University of Cambridge has turned conventional wisdom on its head, and through a series of quantitative research projects over a number of recent years, has constructed a new database that reveals how improvements in labour rights can lead to increased productivity and employment as well as greater equality in society. These datasets are now online for others to access and use.

These statistical studies carried out by the CBR complement qualitative research carried out by the Global Development Institute at the University of Manchester and both were funded by the ESRC (Economic and Social Research Council).

The research teams looked at labour law reforms, labour standards and corporate social responsibility (CSR) practices in Rising Powers, including China, India, South Africa and Brazil and their research is now being made public for the first time.

They are asking international organisations to take note of these findings and they say national governments would do well to consider them. Globalisation, rather than inducing a so called ‘race to the bottom’ as many commentators predicted, is making governments more aware of the need for improved protections for workers, and of the importance of enforcement.

Better informed and discerning consumers who are switched on to the web and social media where they can check the sourcing of the products they buy, along with campaigning civil society groups and NGOs, are helping to enforce these new values.

Simon Deakin, Professor of Law at the University of Cambridge; and Director of the Centre for Business Research said:

“We know there is a lot of interest in these CBR datasets, they are online and people can use them. It is the only dataset of its kind to provide a continuous time series of changes in labour laws across a range of 117 developed and developing countries over 44 years. There may be issues in how to use the datasets, and there maybe disagreement about what weights to attach to particular data and how to combine them, but this is now in the public domain and people can decide what to do with it. We are very happy to advise and there is a code book and paper with a lengthy explanation. It is critical that the wider social science community and international agencies and governments begin to use the data; that is why they were created.”

Deakin says there we need to be realistic but also optimistic about what labour law can achieve:

“In the Rising Powers – which have now risen – as they have become more capitalist, we see tensions in terms of previously protected markets becoming subject to global competition and turbulence particularly in China which has seen amazing rates of growth, and South Africa and India. I would say as the BRICS become more capitalist and more market orientated, they need strong labour laws but they may not always get them. This is a process that went on in the global north a Century ago and there are some similarities. The lesson from this is that the institutions of labour law, labour rights, employment contracts, labour courts, are developing quickly today in China, South Africa and India. This is where much of the action is.

“Many commentators have doubted that worker-protective labour laws can be made effective in developing countries with high levels of informal work and weak states. This has led to interest in alternative modes of regulation including codes of practice and consumer boycotts focused on global supply chains. But this focus neglects important changes on the ground in low- and middle-income countries in Africa and Asia, which over the past decade have been implementing systematic reforms to their labour laws and codes – sometimes after much publicised strikes.

“Admittedly the aims of these reforms are diverse: they include promoting industrial peace, encouraging employers to invest in training, and cushioning the effects of labour migration. Often these interventions have had the effect of encouraging formalisation of work and building state capacity. They have also operated in conjunction with, rather than in opposition to, voluntary measures and soft-law initiatives aimed at improving labour governance in value chains.

“Encouragingly, while there are still many difficulties associated with the operation of labour standards in emerging markets, empirical work is revealing a more complex and differentiated picture than that frequently presented. There is good reason to be optimistic about these trends.”

Khalid Nadvi, Professor of International Development at the School of Environment, Education and Development, University of Manchester; and Research Programme Co-ordinator for the ESRC Rising Powers and Integrated Futures Research Programme said:

“What we have learned is that by bridging across the disciplines of legal studies, law and development, as well as development studies, and by bringing quantitative and qualitative methodologies to the work, we end up with a much richer set of insights on how countries like China, India, South Africa, and Brazil engage with questions around labour regulation and labour standards, and the issues around corporate social responsibilities.

“In the countries where we have done our research; the qualitative research at the University of Manchester or the quantitative research at the University of Cambridge, we are beginning to see that there are improvements taking place – it is slow – in terms of the regulatory framing of labour rights and also the implementation of them. These outcomes will have some impact on workers in these countries. There are still problems, and the worker’s struggle continues, but both studies in Cambridge and Manchester suggest that this is a much more nuanced, much richer and more varied terrain than we had earlier expected.

“In the future we need to look at these countries more specifically and to look at regional variations within these countries. However, I think at the same time the traditional north-south view of the world and the traditional ways in which we were thinking about or fearing that these countries might begin to challenge the consensus that had emerged in the global north around social and environmental standards, that fear is a little bit over emphasised and we need to unpack that a bit better.”

This article was published on

28 October 2016.