Typical street scene in Santa Ana, El Salvador. (Photo: iStock)
IMF Survey: IMF and Labor Unions Step Up Dialogue
March 5, 2008
- With globalization of labor, IMF and trade unions are meeting more frequently
- Both IMF and unions share goal of reducing poverty, inequality
- IMF to brief unions on global market developments in March 2008
With the increasing globalization of labor—and the growing perception that workers' wages and job security may be adversely affected as a result—labor organizations have stepped up their dialogue with the IMF and other international financial institutions over the past five years.
Workers on the march: members of the Bolivian Workers Union take part in a protest in La Paz, Bolivia (photo: Aizar Raldes/AFP/Getty Images).
Globalization of labor
Following a December 2007 workshop with representatives of the International Trade Union Confederation (ITUC), the IMF, and the World Bank, the ITUC will return to Washington on March 18 to continue talks with the IMF.
In the upcoming meeting, IMF staff and trade union representatives will discuss the IMF's assessment of the global outlook and the growing influence of new investment instruments such as hedge funds and sovereign wealth funds.
Part of a longstanding dialogue between the international labor union movement and the Bretton Woods institutions, these meetings offer advantages to both sides. They give trade unions the opportunity to engage in policy dialogue, while the IMF and World Bank learn more about the broader social context of the countries they advise, which often proves an important supplement to the official data.
"Trade unions often give us insights that help us refine our policy advice to countries," said Richard Harmsen, Deputy Division Chief in the IMF's Policy Development and Review Department.
Why labor markets matter
In many ways, this dialogue is natural, since the IMF's work touches upon areas of significance for trade unions. The IMF's main role is to promote macroeconomic stability and sustainable growth, and this includes promoting high levels of employment in its member countries. The IMF also monitors labor market characteristics and developments because these factors can have a significant impact on a country's macroeconomic performance. When labor markets are more flexible and competitive, the economy will generally react better to shocks. And when labor unit costs in a country are too high, the country may suffer a loss of competitiveness, since higher labor costs often result in higher prices.
Trade unions' positions on issues can also have an important impact on macroeconomic developments in a country. "Interest rate policy in the euro area, for instance, may be affected by the wage demands of trade unions," said Harmsen. "That's a clear example of how what the trade unions say affects the IMF's advice on monetary policy."
While trade unions and the IMF share many of the same goals—job creation, rising levels of productivity, rapid growth, and poverty reduction—the two sides sometimes disagree.
"We feel that the policies quite frequently give too much scope to financial market liberalization and other forms of market liberalization that could have a negative impact on workers," said Peter Bakvis, Director of the ITUC's Washington office. "We're keen for the IMF to see our point of view."
Bakvis added that he was encouraged by IMF Managing Director Dominique Strauss-Kahn's recent expression of support for economic stimulus programs to counteract the effects of the economic slowdown—a policy stance that unions have long advocated.
Assessing the results
The IMF interacts with labor unions in three main ways—through mission team contacts with country-level labor unions, resident representative contacts with country-level labor unions, and management and staff contacts with the trade unions at the international level.
In November 2007, the IMF, World Bank, and ITUC surveyed trade union representatives in Bulgaria and Zambia as case studies to assess how productive these contacts have been in those countries. The survey showed that unions in both countries would like to see an increase in the frequency in their meetings with the international financial institutions—and they would also like their views taken more fully into account when policy is formulated.
Another survey conducted by the IMF in late 2007 showed that its surveillance mission teams currently conduct regular meetings with unions in most IMF member countries. The proportion of IMF country teams meeting with trade unions on missions increased to 67 percent in 2007 from 63 percent in 2006, when a similar survey was done. For over one-third of the countries where such meetings took place, IMF staff felt that these exchanges helped shape their views in many areas, such as monetary policy, wage policy, pensions, and education.
While the dialogue between the international financial institutions and trade unions continues, differences in views persist—the ITUC has called for greater involvement of local unions in the elaboration of poverty reduction strategies in low-income countries. It has also pointed out that, despite strong growth in many parts of the developing world, most low-income countries will not meet all Millennium Development Goals. More recently, the ITUC has called for greater regulation, transparency, and accountability of sovereign wealth funds, hedge funds, and private equity, noting that the opaque and complex investment practices of these entities could adversely affect workers.
Intensified engagement
Trade unions bring an added dimension to the IMF and World Bank's work and, in recent years, these institutions' engagement with them has intensified. Since initiating a biennial series of high-level meetings in 2002, the ITUC, the World Bank, and the IMF have held three such meetings, as well as five smaller technical workshops on privatization, labor market reform, social security reform, and other topics.
A small number of ITUC staff have been seconded to the World Bank for brief stints with various units such as the Social Protection Unit and the Civil Society Team. Later in 2008, the IMF, the World Bank, and the ITUC plan to hold meetings on pension reform and on gender issues, in addition to the upcoming IMF-sponsored meeting on global economic and financial issues.
Comments on this article should be sent to imfsurvey@imf.org.