As the nature of the global workforce continues to evolve, in order to ensure the hiring of human workforce, the minimum wages have to be reduced. This is among the many recommendations that are in the working draft of the World Bank’s flagship World Development Report.
In 2017, the United Nations reported that more than 200 million people are out of work around the world. According to the UN Labor Agency, this was an increase of 3.4 million since 2016. Thus, the organization at the time called for policies that could recharge “sluggish” growth of small and medium-sized businesses. At the time, Deborah Greenfield, ILO Deputy Director-General for Policy said, “To reverse the trend of employment stagnation in [small and medium enterprises], we need policies to better promote SMEs and a better business environment for all firms, including access to finance for the younger ones.”
The ILO research shows that full-time female permanent employees in the formal sector are more likely to be found in small and medium enterprises than in large firms. On average, and across all regions, around 30% of full-time permanent employees in these businesses are women, compared with 27% in large enterprises. Another major problem when it comes to the global market is that wages have not grown significantly since the 2008 financial crisis. Wage growth in much of the world has been subdued, even as the global economy has continued to recover and grow in recent years. In the U.S., where unemployment has fallen to its lowest levels in 10 years, (4.4%), workers aren’t much better off in terms of wages.
The United Nations 2030 Agenda for Sustainable Development identified decent work for all women and men, and lower inequality, as among the key objectives of a new universal policy agenda.
Established in 1944, the World Bank was initially set up to help rebuild Europe after World War II. Today, the World Bank functions as an international organization that fights poverty by offering developmental assistance to middle-income and low-income countries. The World Bank aims to eliminate poverty, empowering these nations. This is done by giving loans and offering advice and training in both the private and public sectors. Under the World Bank Group, there are complementary institutions that aid in its goals to provide assistance.
In a bid to address the changing nature of work, the World Bank will be proposing a series of measures. These measures include a proposal to lower minimum wages. The World Bank has also recommended greater hiring and firing powers for employers as part of a wide-ranging deregulation of labour markets.
These are some of the changes that are part of a working draft of the bank’s World Development Report. Through this report, the World Bank will urge governments to implement policies that will be less “burdensome” for firms to hire new workers at lowered costs. “Burdensome regulations also make it more expensive for firms to rearrange their workforce to accommodate changing technologies. Rapid changes to the nature of work put a premium on flexibility for firms to adjust their workforce, but also for those workers who benefit from more dynamic labor markets,” the draft says.
The WDR draft says: “High minimum wages, undue restrictions on hiring and firing, strict contract forms, all make workers more expensive vis-à-vis technology.” One of the reasons for the proposals from the World Bank is automation. Experts have noted that automation will eventually affect a large proportion of the human workforce and might also work out to be cheaper for companies. This concern has been debated across the world.
A World Bank spokesman said: “To stimulate debate and draw attention to critical issues, the report will present a range of ideas for how governments can create the conditions for workers to benefit from huge shifts in technology, demographics, urbanisation and other factors. To end poverty and boost shared prosperity, it’s vital that we consider new initiatives to meet the disruption that will surely come from these structural changes. We encourage and look forward to comments and an evidence-driven discussion on this important topic.”
However, there are some experts who believe these recommendations will end up hurting those in the workforce. Peter Bakvis, who is part of the International Trade Union Confederation, has noted that these proposals were out of sync with the prosperity agenda that was put forth by World Bank President Jim Yong Kim. 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 ILO has also expressed concerns regarding the report.
Our assessment is that as automation continues to expand, the trend towards decreased reliance on manual labour will also continue to grow. We believe that a transition towards automation will result in a loss of jobs, similar to the crisis that resulted from the mechanisation of factory jobs. Jobs related to service and repetitive actions such as data entry in particular may be in danger. As other corporations follow this trend, governments will have to work to cope.