Labour and Labour-Related Laws in Micro and Small Enterprises: Innovative Regulatory Approaches

Abstract

MSEs are an increasingly important source of employment creation in many States.• Job quality in MSEs is generally very poor.• Poor job quality is due in part to the fact that many MSEs are unstable, short-lived and operate in a state of semi-formality. This has repercussions for job quality and for broader economic growth and development.• The formalization of MSEs is critical for the creation of Decent Work: MSEs that operate within the scope of the regulatory framework are more likely to create productive, remunerative jobs in which workers have rights at work, security, and equality.• States must devise a policy environment that balances the need to protect workers, with acknowledgement of the extent to which MSEs genuinely require special regulatory measures in light of their ability to meet the costs of the regulatory framework.• A key challenge for the ILO and for its member States is how to devise a legal and regulatory environment that promotes Decent Work in MSEs and facilitates economic growth.• Labour and labour related laws can be an important means of improving job quality.• This study suggests that there is significant scope for States to take regulatory action to address these challenges. CHAPTER 3 LABOUR LAW, JOB QUALITY AND FORMALIZATION OF MSEsChapter summary• Job quality for workers in MSEs falls far below the level necessary to promote or achieve Decent Work.• There is little evidence to suggest that excluding MSEs from labour laws, or failing to apply them in practice, has major positive effects on MSE growth and economic development.• There are substantial benefits that can be gained from compliance with labour laws.• Surveys across seven countries have found that MSE owners do not regard the costs of complying with labour laws as a major constraint on MSE growth.• Evidence suggests MSE owners make strategic choices about which elements of their regulatory environment they will comply with. This suggests that they will respond to innovative regulatory approaches targeted specifically at MSEs.

The Impact of Labour Regulations: Measuring the Effectiveness of Legal Norms in a Developing Country

“…In other words, the "constraints" on business summarized in these indicators tend to suffer from over-estimation. Finally, the finding that this enforcement gap may be narrowed to some degree by awareness-raising supports the view that, at least in developing countries, the debate should not be between "regulation" and "de-regulation" but rather on how these countries can best promote labour laws and policies or "how to regulate" (Lee, McCann, and Torm 2008;Fenwick et al 2007). In this way, countries can avoid the wasteful process of continuous labour law reform carried out in the absence of any opportunity to evaluate the impacts of these reforms; an approach that has overwhelmed the governments of many Asian and African countries under pressure from the international financial organizations.…”

“…One is the evolving search, often animated by recourse to Sen's capability theory, for a rationale for labour market regulation that can support both social and economic development (see, for example, Deakin 2001; Lee and McCann 2006;Langille 2007). A nascent interdisciplinary literature is also rejecting conventional assumptions about the role of regulation in developing countries and instead endeavouring to elicit the details of law's operation in these settings and to suggest techniques for more effective regulation (Fenwick et al 2007;Berg and Kucera 2008). These literatures are now sufficiently evolved to support investigations of the role and intersection of regulatory forms in low-income settings that can parallel the level of detail and contextual awareness that characterizes analyses of advanced industrialised economies.…”

“…In such novel regulatory designs, statutory standards are aligned with the array of other techniques suggested to constitute 'innovative' regulatory frameworks (financial incentives, training, information campaigns etc.) (Arup 2001;Fenwick et al 2007). As Fenwick et al suggest in their study of laws on micro and small enterprises:…”

“…Further, the significance of awareness-raising to improving working conditions in developing countries has attracted the attention of Fenwick et al (2007) in a study of micro and small enterprises that represents one of few attempts to consider the extent of legal awareness and its potential impact on actual working conditions in low-income economies.…”

Labour Law on the Plateau : Towards Regulatory Policy for Endogenous Norms

“…The potential of the minimum wage as a site of experimentation with external dynamism was outlined in Section 3.2. Yet, the regulatory plateau model would also benefit from absorbing formalisation strategies of the kind advocated by Fenwick et al 161 and, more recently, in McCann and Murray's investigation of domestic work as an entry-point for legal regulation of informal working relations.…”