Should the U.S. Impose its Labor Standards on the Rest of the World?
Strict, top-down labor standards on Indo-Pacific economies may not be such a great idea, either now or next year.
This week the Indo-Pacific trade pact failed in part because the U.S. called for “strong and enforceable” labor standards onto the less developed world. It’s not surprising—these other countries would have had to implement labor laws that may not be in their best economic interest and may even set their own workers back. In fact, much of what the US is calling for is not even necessarily in the best interests of American workers.
Asking countries to recognize basic human rights and ban forced labor is one thing. But it’s not always a good idea to force less-developed countries to have the same labor laws as those in advanced industrial economies.
One labor economics study pointed out how the U.S. only started adopting labor regulations when it reached a certain level of wealth and economic development. The authors found that for every International Labour Organization (ILO) proposed labor standard is highly premature for the developing countries of SubSaharan Africa. Countries there are between 100 and 300 years from reaching this threshold.
For example, the U.S. introduced occupational safety and health (creation of OSHA) in 1970 when per capita GDP in the U.S. was $15, 030, As a way of comparison to the member countries of the Indo-Pacific Economic Framework: Vietnam’s GDP per capita is only $3,564 today; Indonesia’s is $4,322; Thailand is at $7,066 GDP per capita. These countries may have to go through a certain level of economic development and growth–just like the U.S. did–before they can “afford” to adopt more costly labor standards.
In my Forbes column this week I explain why micromanaging other countries’ labor laws is less productive than you might think. For instance, consider child labor bans. Obviously, we should not encourage child labor—but should we discourage trade with countries that use it? Child labor often exists in poor countries where the alternative may be even worse. When countries are offered more trade opportunities that can boost economic growth and household incomes, child employment declines and school enrollment increases. That’s exactly what one study published by the National Bureau of Economic Research found.
Or, consider calls to ban “gig workers” from key sectors of the economy. Big unions tend to disfavor the presence of gig economy workers claiming they “lower labor standards for all working people.” Also, gig economy workers don’t pay dues and don’t engage in collective bargaining.
But here again it’s not that simple. As BLS data show, the majority (79 percent) of independent contractors prefer their arrangements over traditional employment. People like the flexibility. To the extent they want the financial security, then let’s look for solutions to that problem instead of top-down restrictions. One solution, as Palagashvili has noted, would be to promote portable benefits. Portable benefits, both in the U.S. and internationally, would “allow independent workers to maintain their nontraditional work arrangements and improve their access to flexible benefits.” Some states have adopted or are eyeing this innovative approach.
Instead of the U.S. imposing strict, top-down labor standards on others, policymakers should let countries design their own labor laws and find ways towards a flexible, innovative and resilient workforce for all workers in IPEF nations.