World Bank states the obvious - unions outraged

An interesting little tale here. The World Bank states the blindingly obvious and unions, as a result, are outraged. The point being made is that minimum wages, protections for labour, can be "too high." Too here meaning high enough to damage both employment prospects and the economy in general. Therefore such wages and protections should be lower to the benefit of all. It's really not an outrageous thing to say at all:

A working draft of the bank’s flagship World Development Report – which will urge policy action from governments when it comes out in the autumn – says less “burdensome” regulations are needed so that firms can hire workers at lower cost. The controversial recommendations, which are aimed mainly at developing countries, have alarmed groups representing labour, which say they have so far been frozen out of the Bank’s consultation process.


The WDR draft says: “High minimum wages, undue restrictions on hiring and firing, strict contract forms, all make workers more expensive vis-à-vis technology.”

That second is obviously true, there's a "too high" level. But the important part of all of this is the bit "developing countries." Take the examples of India or Bangladesh (as one of us did just recently) where as much as 85% of the labour force is outside that formal economy. Where, this meaning the same thing, that 85% of the labour force have no protections at all from such legislation. Indeed, they're locked out of that formal economy by the costs of hiring labour into it.

It would be better if the protections, the costs, were lower so that more of the population could enjoy them, no?

The unions are outraged, of course they are, because they work for their members. Which, in those developing countries, means only those in that formal sector. So what about the nation as a whole, so what about the workers, it's our workers and ours only that we care about. Which is fine, of course it is, but we do need to remember that they do work only for their own members.

It is possible for the protections on offer to formal labour to be too high. A useful method of working out when that is being that the vast majority of the working population can't get hired into formal labour because of the costs of doing so. Thus, and ineluctably, things would be better if the protections were reduced. As the World Bank is saying and as the unions, those representatives of formal, and only formal, labour are complaining about.