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World Bank U-turn on unions

Washington, Feb. 12 (Reuters): A country’s economy may fare better if a large number of its workers belong to trade unions, the World Bank said in a study that marked a departure from the institution’s traditional frosty approach to organised labour.

The report, released on Wednesday, found that high unionisation rates can lead to lower unemployment and inflation rates, higher productivity and faster adjustment to economic shocks. “The bank in the past has perhaps been hostile to trade unions, and the thing with this book is that it wants to have a very open and nuanced approach, different from the past,” Robert Holzmann, the bank’s director of social protection, told Reuters. “So no blank cheque to trade unions but a major offer to work with them because they’re crucial.” The report said union members in rich and poor countries alike get significantly higher average wages than workers who are not affiliated with a trade union.

In the United States, wages can be 15 per cent higher for union members while in other industrialised countries, they are between 5 and 10 per cent higher. The benefits of union membership can vary in middle-income and developing countries. The study also found that union participation can reduce wage gaps between skilled and unskilled workers and also between men and women.

But unions can also create problems if they are not open and transparent.

“Trade unions can be important agents of change if it is done in a good manner,” said Holzmann. “It does not mean they cannot have detrimental effects if the opposite takes place.”

Holzmann commissioned the study on ‘Unions and Collective Bargaining: Economic Effects in a Global Environment’ to provide policymakers, unions and employers in developing countries with data on the impact of unions on the economy.

The rapid growth of international trade has stimulated an interest in different labour standards around the world.

There is growing concern that countries that adopt lower labor standards will have unfair advantages in producing internationally traded goods than those with higher standards.

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