Unions good for economy and equity, 
says World Bank

WASHINGTON, D.C. – In a move that has surprised many union leaders and activists, the notoriously conservative World Bank released a report in February saying that labour unions are good for the economy.

Based on more than a thousand studies of the effects of labour unions and collective bargaining on the performance of national economies, the Bank report found that workers who belong to trade unions earn higher wages, work fewer hours, receive more training, and have longer job tenure on average than their non-unionized counterparts.

High rates of unionization also lead to lower inequality of earnings, especially for women and minority groups, says the report, entitled ‘Unions and Collective Bargaining: Economic Effects in a Global Environment.’

But unionization is not just good for individual workers – the study also found that countries fare better economically if large numbers of workers belong to trade unions.

More specifically, the study shows that high unionization rates are associated with lower unemployment and inflation, higher productivity, and speedier adjustments to economic shocks.

"Good industrial relations between labour and business can lead to a more stable and productive economy," says Mamphela Ramphele, the World Bank’s managing director, who unveiled the report at the Bank’s headquarters in Washington, D.C.

"Coordination among social partners can promote better investment climates while also fostering a fairer distribution of output."

The report, which resulted in part from a dialogue over recent years between the International Labour Organization (ILO) in Geneva, the Brussels-based International Confederation of Free Trade Unions (ICFTU) and the Bank, comes amid ongoing debate about the impact of globalization, or the increasing integration of national economies around the world, on social welfare and solidarity.

"Labour standards are now a prominent item on the international agenda and are likely to stay there for a long time to come," said Zafiris Tzannatos, the report’s lead author. "[They] can no longer be the concern of just individual governments but also of the entire international community."

Globalization skeptics have expressed concern that countries that adopt lower labour standards and ban independent labour unions gain unfair advantage in attracting foreign investment over those with higher standards and strong unions. Some have charged that the Bank itself, in urging reforms in poor countries that are designed to attract foreign investment, has actually contributed to this process and weakened union activities in many countries.

The report also found that countries with highly-coordinated collective bargaining tend to be associated with lower and less persistent unemployment, lower earning inequality, and fewer and shorter strikes than uncoordinated ones. In contrast, fragmented unionism and many different union confederations within a national economy or sector are often associated with higher inflation and jobless rates.

Such positive assessments were greeted with enthusiasm by ICFTU’s General Secretary Guy Ryder who called on the Bank "to translate these important findings into policy, which may involve a significant shift in...organizational culture."

"In contrast to the worker-friendly statements at the global level," he said, "country-level Bank staff still routinely advise governments to, in effect, violate the core labour standards by making access to unionization and collective bargaining more difficult."