World Bank recommends that countries eliminate minimum wage

Who knew that the World Bank could produce something sensible? The Guardian reports: Quote:

The?World Bank?is proposing lower minimum wages and greater hiring and firing powers for employers as part of a wide-ranging deregulation of labour markets deemed necessary to prepare countries for the changing nature of work.

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.

Peter Bakvis, Washington representative for the International Trade Union Confederation, said the proposals were harmful, retrograde and out of synch with the shared-prosperity agenda put forward by the bank?s president Jim Yong Kim.

He added that the WDR?s vision of the future world of work would see firms relieved of the burden of contributing to social security, have the flexibility to pay wages as low as they wanted, and to fire at will. Unions would have a diminished role in new arrangements for ?expanding workers? voices?.

The paper ?almost completely ignores workers? rights, asymmetric power in the labour market and phenomena such as declining labour share in national income,? Bakvis said.

The International Labour Organisation has also expressed alarm at the proposals, which include the right for employers to opt out of paying?minimum wages?if they introduce profit-sharing schemes for their workers.

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

Five years ago, the World Bank?s?2013 World Development Report?concluded that labour regulations had little or no impact on employment levels, but the draft for the 2019 WDR says that if workers are expensive to dismiss, fewer will be hired. ?Burdensome regulations also make it more expensive for firms to rearrange their workforce to accommodate changing technologies.?

The report is being prepared amid growing speculation about the impact of artificial intelligence and automation on employment and wages in future decades.


The paper says that labour regulations ?protect the few who hold formal jobs while leaving out most workers? and the sort of social protection schemes that began with the German chancellor Otto von Bismarck in the late 19th century were not appropriate because they covered only a third of developing country populations. End quote.

Excellent news. The unions will, of course, be aghast. But, the reality is that the World Bank is right. If regulations surrounding workers are too restrictive, or workers are priced out of the market, then automation becomes more attractive.

It will be interesting to see what Grant Robertson has to say about this, since he has waxed lyrical about the World Bank in the past. Quote:

Even the IMF and the World Bank are seeing that inequality is a drag on the economy! End quote.

I suppose, like all socialists, he will say he doesn’t agree with the latest report but does agree with the previous reports from them. Poor Robbo… can’t have both.