Measuring working time laws: texts, observance and effective regulation

1
Measuring working time laws texts, observance
and effective regulation

• Sangheon Lee and Deirdre McCann
• Conditions of Work and Employment Programme
  (TRAVAIL)
• International Labour Office, Geneva

2
Measuring the impact of working time laws

• Work in recent years comparing and measuring the
  impact of working conditions laws, including on
  working time (Botero et al 2004 World Bank 2004,
  2005).
• Shift in the research on the effect of labour
  market institutions from industrialized to
  developing countries
• More extensive indicators being developed,
  incorporating the regulation of working
  conditions
• including working hours.

3
Working time standards as rigid regulation

• Overwhelmingly negative assessment of the impact
  of working time laws.
• This work is being used as the basis for a
  contention that rigid regulation is to a large
  extent responsible for poor labour market
  performance (low productivity, high unemployment,
  high informal employment).
• There is a need to broaden the research towards
• investigating these indicators and the claims
  being made for their policy implications.
• evaluating labour regulations from a perspective
  that takes into account their policy rationales

4
Quality of the existing indicators

• Preliminary attempt to investigate the quality of
  the existing indicators on working conditions
  standards.
• Develop ideas about future research to determine
  the role and influence of working time laws
• in particular in developing countries.
• Raises conceptual and methodological questions of
  broader application.

5
Current indicators on working time regulation

• Botero et al (2004) World Bank (2004 and 2005)
  and Rigidity of Employment Index (Rigidity of
  Hours Index).
• Based on analysis of national legislative texts.
• range of key aspects of regulation
• global geographical coverage
• Both conclude employment regulation is rigid
• and threatens to restrict economic growth.
• Developing countries tend to have more rigid
  regulations on working hours and paid leave than
  many developed countries

6
The World Banks Rigidity of Hours Index (RHI)

• Element of the Rigidity of Employment Index
  (http//www.doingbusiness.org)
• Ranks countries according to the strength of
  their business environment.
• Focus on hiring and firing regulation
• incorporating working time regulation.

7
Five components of the RHI

• Index from 0 to 100. Simple average of five
  indicators
• Whether the workweek can consist of 5.5 days.
• Whether the working day can extend to at least 12
  hours.
• Whether night work is unrestricted.
• Whether weekend work is permitted.
• Whether annual paid leave is a maximum of 21
  days.

8
Outcomes of the RHI

• Information loss from the coding method
• Ignore the rationales for WT regulation
• Overall rankings favour comparatively unregulated
  working time regimes
• e.g. Canada, New Zealand, USA.
• complete working time flexibility

9
Representation of legislative measures

• RHI incorporates misunderstanding of structure of
  working time legislation in some jurisdictions.
• Hours limits normal or maximum?
• e.g. 48 hour limit in Ireland and UK

10
Policy rationales of working time regulation

• Dominant concerns
• long working hours (health and hourly
  productivity)
• preserve community time
• work/family balance.
• When labour market institutions, including
  working conditions laws, are measured so as to
  investigate their effects, it should incorporate
  a careful consideration of the rationales for
  their existence.
• In the research on working time, these benefits
  are not being clearly recognised and a labour
  market with little regulation is assumed to be
  ideal.
• Then, optimal level of regulation would be
  somewhere between 0 and 100 (not zero), but
  exactly where?

11
The RHI and working time laws a comparison
12
Interrelationships in working time regulation
the example of Finland

• 13 hour upper limit on daily hours ( 12 hour
  minimum upper limit).
• 35 hours of weekly rest ( 5.5 day workweek).
• Weekly limit of 40 hours (v 66 hour limit).
• 66 hours every week v some weeks.
• Weekly hours limits functioning as constraints on
  other elements of regulation.

13
Flexibility through regulation

• The RHI diverges from its stated goal of
  encouraging flexibility, by missing the ways in
  which working time regulation can be used to
  promote flexibility.
• Experience of industrialised countries more
  complex than regulation rigidity.
• Averaging of hours limits over a reference period
  
• e.g. WTD 48 hour limit/ 4 month reference
  period.

14
Flexibility through regulation

• Incentive function of working time regulation
  limiting recourse to long hours as an incentive
  to rethink work organisation and bring about
  productivity improvements (Barnard, Deakin and
  Hobbs (2003) Bosch and Lehndorff (2001)).
• Numerical v functional flexibility through
  working time regulation.
• Regulations can reduce incentives to make new
  investments, adjust the organization of work to
  take advantage of new technologies or
  opportunities, or hire more workers. (World
  Bank, Doing Business (2004) at p. 141).

15
Influence of legislation on actual hours

• Even if conceptual and methodological problems
  were to be effectively addressed, there would
  still be limitations on the resulting indicators.
  
• They do not examine the influence of legislation
  on actual hours assumption that
• the standards are comprehensively applied and
• further assumptions about their impacts.
• Measuring the impact of labour laws requires a
  methodology that incorporates not only statutory
  regulation but actual working time arrangements.

16
Comparing working time laws

• Weekly hours limits from 138 countries (ILO
  Database of Working Time Laws).
• Focus on
• statutory regulation
• weekly normal hours limits (number of hours
  permitted before overtime payments required)
• the primary standard (no exceptions,
  derogations).

17
Statutory normal hours by national income level
(total 138 countries)
18
Data on actual hours

• Collaboration with ILO Bureau of Statistics to
  collect data from national statistical offices on
  the distribution of weekly working hours (number
  of employed by number of hours) (2005).
• Data collected from more than 50 countries.
• Permits comparison of statutory standard and
  actual weekly hours and an estimate of the
  proportion of employees working at or below
  statutory normal hours.
• termed observance rate

19
Observance of working time laws

• Broader than enforcement/compliance
• does not require adherence to technicalities of
  national laws (e.g. procedural requirements,
  record-keeping)
• captures observance by firms/sector/workers nor
  formally covered by legislation
• covers adherence to the legislation in sectors in
  which unlikely to be enforced (informal sector)
• including legal norms becoming seeded as a
  cultural norm (Browne, Deakin and Wilkinson,
  2002).

20
Observance of weekly hours limits
21
Effective Regulation Index (ERI)

• Preliminary attempt to establish an indicator
  incorporating statutory standards and actual
  hours.
• Ascribes values to the statutory hours limits and
  observance rates (0-10) (assumed to be of equal
  importance in determining effectiveness of laws).
• ERI minimum value of 1 (weakest regulation)
• maximum of 10 (strongest regulation)
• Scores
• highest Netherlands and Luxembourg.
• lowest Ethiopia, Peru, Tanzania.
• Broad geographical division Europe (including
  transition)/Africa, Asia, Latin America
• Question how is effective regulation associated
  with economic growth?

22
The Effective Regulation Index (ERI)
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Conclusion future research on working time
regulation in developing countries

• Cannot assume widespread lack of compliance with
  weekly hours limits in developing countries due
  to their rigidity.
• Further research required to examine the role and
  impact of working time laws in developing
  countries.
• Goal identify which factors permit certain
  countries at the same level of economic growth to
  maintain (and observe) more decent working time
  standards.

24
Conclusion future research on working time
regulation in developing countries

• Should take into account
• enforcement by government agencies
• permissible deviations from the main statutory
  norms (by sector, collective agreement etc.)
• including their use in practice
• overtime (relationship between working time and
  wages)
• unions/collective agreements

25
Conclusion future research on working time
regulation in developing countries

• Including less commonly considered aspects of
  regulation
• degree of awareness of labour laws
• indirect influence of labour regulation.
• Informal sector (spillover effect of working
  conditions laws).
• Shift from conceptualisation of informal sector
  as
• distinct from formal sector
• unregulated.