#10_How do labour standards pay – and for whom?

For some this question may be a provocation already: Why and how could one think about quantifying human rights? And what sense does it make to measure the avoidance of severe violations of these rights in numbers? Even more so, if one thinks global capitalism’s tendency to permeate and subjugate all spheres of social life puts a price tag on everything, including the most intimate expressions and sacred values of human life (Zelizer, 2011). And, of course, this tendency to calculate everything in a utilitarian fashion is suspicious of bringing about sooner or later exactly those forms of irresponsibility encountered in the violation of labour standards.

From a realist stance on the issue, one may emphasize that in any type of society what is held in high value culturally should be valued in numbers, too, and if it would be just for facilitating how societal expectations can be transformed into a practice of accountability. Also, many policymakers and bureaucratic authorities seem to believe in measurement these days (see for example SDG labour market indicators, ILO 2018), and hence, they may be more convinced to put more resources into upholding labour standards if their benefits to individuals, societies and economies would be demonstrated beyond any doubt. The latter, however, is a difficult task as there is neither a general agreement on the criteria to be used for that end nor on the units or dimensions to look at for establishing the benefits of labour standards unequivocally. What should count more: an individual’s quality of life, the development of an inclusive society, an economy’s overall welfare or corporations’ cost-benefit calculations?

Unsurprisingly, there is not just one big overall formula for calculating the net benefits of an adherence to labour standards and workers’ rights in all their variety. Rather, there is a giant mosaic picture of various results from various disciplines looking into very different areas for assessment: From occupational health specialists checking for the impacts of single workplace practices such as shift work, physical working conditions or contractual arrangements on health outcomes like life expectancy, injuries, accidents, and illnesses (e.g. EU-OSHA, 2017), to broad brushed macro-economic assessments of the influence of labour standards on the economic development of whole countries or world regions (e.g. Kucera & Sarna, 2006). Somewhere located in between are those calculations that want to establish (or deny) a business case for responsible business conduct (for example by examining stock market performance of public corporations, Vogel, 2005) or indexing rights performances of single countries ( e.g. Kucera & Sari 2019, Center for Global Workers’ Rights, the “Labour Rights Indicators”). Other studies try to assess the effectiveness as well as the costs and benefits of single policies and management practices in various areas from labour inspection (e.g. Li & Singleton, 2019) to quality management systems (Lim & Prakash, 2017).

Although the regular data collections do not allow for a routine assessment of the direct and indirect benefits of labour standards in a single figure or even just a handful of indicators, several recent advancements have been made to estimate the overall work-related health impacts, which is at least an indirect indication for the potential benefits of increasing labour standards’ coverage. A first rough indication can be derived from the recent estimates as reported by the European Health agency in collaboration with the ILO. Globally, for 2015 the economic costs of work-related injuries and deaths have been estimated to amount to 2,600 billion Euros or about 4 percent of global GDP (EU-OSHA, 2017). For the European Union, this figure stands at 476 billion Euros (EU-28), roughly 3 percent of GDP. For this comparative assessment, a figure called DALYs is used which is estimated Disability Adjusted Life Years (DALYs) monetarized by an average nominal product in Euro. This is compared with the ideal scenario, in which a country or a region would lose no DALYs at all, either through work absences, fatal accidents or various illnesses. Fatal work-related injuries show a lower number in the EU28-area compared to other world regions such as South-East Asia or in Africa, whereas fatal illnesses are much more widespread in the European Union and other high-income countries. The authors account for the fact that this is just a rough estimate of work-related impacts on health costs as some sorts of illnesses (especially mental health issues) are not included and the cost estimate is based on an indirect assessment of productivity loss by life years lost. Also, various forms of informal and precarious work are omitted as are the more indirect effects of certain working conditions like presenteeism or high work stress levels; for example, the negative health impacts of long working time are a rather well-established fact (see for a detailed longitudinal study of Finnish managers von Bonsdorff et al 2017, for a recent study on the German labour market, Müller, Tisch, & Wöhrmann, 2018). Overall, all these omissions combine into a likely underestimation of the true costs of work-related health impacts.

Using a workplace-related approach which compares a zero-treatment situation with the additional costs of various negative health influences of workplace management practices, Goh, Pfeffer & Zenios (2016) provide a similar assessment for the United States. In this study, the workplace-related stressors identified are, for example, shift work, long working hours, low organizational fairness or whether an employee has a health insurance or not. For the outcomes, the authors distinguish between health outcomes as such and their associated costs. The data sources for the calculations are drawn from various sources, because a single data set containing various workplace stressors and individual health outcomes as well as their direct monetary valuation does not exist. For deriving the health impacts the authors control for the joint exposure to a workplace treatment, the relative risk to show a health condition, the overall prevalence of a health condition in the populations as well as the incremental cost associated with each illness. Based on these calculations the authors report an estimated lower bound of 120,000 additional deaths each year due to work-place related stressors and the additional costs of these amount to between 5 and 8 percent of total U.S. healthcare expenditures or $117 billion in 2008 (Goh, Pfeffer & Zenios, 2016: 620). It may be interesting to note that no indirect effects on the cost burden of workplace stressors are included in this calculation. Such indirect effects contain labour productivity issues as well as effects on an individuals’ relatives and friends. Studying one example for these indirect effects of management practice, Lim and Prakash (2017) have shown that countries with a higher number of firm accreditations with the ISO9001 quality standard also have statistically significantly reduced rates of fatal and non-fatal injuries. Nevertheless, like Covid 19, the violation of labour standards is a disease which is more deadly than the common flue (if you wish to compare you could check the regular update of Coronavirus deaths in the U.S. issued by John-Hopkins University).

Located on a different scale, and more developed in theory rather than tested empirically, are the potential positive effects of a compliance with workers’ rights for economic development. One attempt to specify several mechanisms that may contribute to a positive economic impact of labour standard compliance has been given by Sengenberger (2002, s. also Scherrer 2017 for a more recent overview). For Sengenberger, minimum labour standards have a couple of positive effects on the dynamic efficiency of single economies, especially if labour standards are combined in their effects. Sengenberger (2002) argues in the light of the critical case, i.e. low-income countries, and against the backdrop of conventional economic wisdom that sees (and must see given the assumptions) any sort of labour market standards as a hindrance to static competitiveness. Within this context, one argument for a positive effect of minimum labour standards on economic development is that these standards alter firms’ competitive strategies towards more technological and organizational innovation, because these standards set a lower bound on wage and social dumping. This may force firms to strive for productivity increases which also may spill-over to a better market positioning. Also, workers’ rights may prevent monopsonist local labour market situations leading to welfare reducing exploitation. Obvious examples are the prohibition of forced and child labour. Next, standards of workers’ social protection bear the potential to set free additional productivity gains within the workplace, a point not to be overestimated in countries where people are exposed to the severe personal life risks of large informal labour markets. Furthermore, worker participation may lead to positive economic outcomes in local firms through productivity enhancing voice effects, worker motivation as well as reduced costs for conflict handling in wage-fixing where there is collective bargaining. In addition, standards contributing to education and skill formation may contribute positively to the long-run economic performance of an economy. The best examples are those standards that prohibit discrimination and demand equal treatment of employees which has also direct positive effects by contributing to using the full range of available human capacities and by avoiding the under-utilization of talent and skills. For a country’s development, these positive effects of workers’ rights combine into a reduction in the risk of a downward spiral driven by poverty wages and the informality of labour. Also indirectly, labour standards may become economically beneficial because of their positive societal and political effects (“positive externalities”) reducing the level of conflict in societies, combating informality and criminal business activities, and increasing societal integration as well as providing a building ground for democracy.

However, as Scherer (2017) points out, even if complying with labour standards may be beneficial in economic terms for the long-run development of a given country, a government may act against enforcing these standards, because short-term incentives may be detrimental to this end, especially where integration in the world market and competition from other low-income countries are high. Therefore, labour standards are also subject to a tragic situation in which especially poor countries become the prisoners of the global marketplace regardless of any positive effects of labour standard compliance for their long-run development (Scherer, 2017). Furthermore, inasmuch as the political and economic spheres are not independent from each other, and nothing in the current era of globalization actually justifies this assumption, the influential players in the modern world economy, be it multinational corporations and their global production networks or authoritarian development regimes, may benefit from the low labour standards in a given country, undermining either directly or indirectly effective strategies to lift these up (see Yeung & Coe, 2015; Lüthje & Butollo, 2017, for example).

In conclusion, there is no general agreement on how labour standards’ benefits should be assessed and calculated best, also despite recent advances in the respective literature. And, any technique of assessment depends on the precise question one wants to answer. But even if agreement was reached one day and compliance with labour standards’ positive effects had been demonstrated universally in a waterproof fashion, this wouldn’t be sufficient for actual change to happen. This is because just proving that something would be superior in outcome is usually not sufficient for its realization in practice, given the ideological cleavages, interest conflicts and power relations enshrined in the current complexities of economic and political structures. Nevertheless, if read with the necessary precautions for method, measurement, and ideational context, the results of assessing the impacts of labour standards and workers’ rights in various areas may deliver helpful support for those aiming at improving the current state of affairs around labour standard violations.

Reference
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Goh, J., Pfeffer, J. & Zenios, S.A. (2016). The relationship between workplace stressors and mortality and health costs in the United States. Management Science, 62(2): 608-628.
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Müller, G., Tisch, A. & Wöhrmann, A.M. (2018). The impact of long working hours on the health of German employees, German Journal of Human Resource Management, 32(3-4): 217-235.
Scherrer, C. (2017). The development rationale for international labour rights. Indian Journal for Labour Economics, 60: 81-91.
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Zelizer, V. A. (2011). Economic lives. How culture shapes the economy. Princeton University Press: Princeton.