Is Additional Legislation Needed to Reform Labour Markets?

Toward the beginning of the previous century, unfolding social policies brought about the creation of "social rights", and the inclusion of many of those "new" rights in new legislation. It was the prevailing conviction that this new "frontier" in social protection needed the force of law to be of any effect. Among these "rights" was the right not to be unfairly dismissed from employment which, hitherto, did not exist. You see, employment contracts are a creature of the common law that sought to, inter alia, protect the worker from wrongful dismissal.

New social policy sought to "improve" the common law by adding protection from unfair dismissal via new legislation. The legislation thus restricted a common law "right to fire" by clear, unequivocal language, "A right to work is hereby established….." This was and still is a classical example of a reform measure in labour markets in many economies.

The argument for social reform in the business environment has been promulgated against the backdrop of wanting improvements in the productivity of factor inputs into the production and supply of goods and services. One only need looking at the IFC Doing Business Report and the WEF Global Competitiveness Index to get an appreciation for the indices which, if reformed, could significantly improve an economy's efficiencies and ways of life for its people.

Historically, employers have not been the social partner to clamour for a climate heavily regulated by legislation. For many, the common law is quite sufficient. And one can understand why this was and still is so in many jurisdictions. While law makers argued legislation as the better instrument to bring about equality, even-out social bumps and introduce affirmative action, enterprise have found these very statutes too rigid, too inflexible, too stubborn to change and largely prohibit risk-taking.

We can take a case in point in the Protection of Employment Act, Chap. 89:02, Laws of Dominica, where the reform sought by this legislation was primarily to prohibit some aspects of the common law in the arena of master-servant relationship.

The statute has been very effective and successful in doing just that but, employers argue, the time for reform to support "employment generation" as against "employment protection" is now. More reliance of employment contracts and the market-wide usage of collective labour agreements to inform and regulate employment relationship, in addition to the rise of atypical employment practices, amount to a clarion call for reform to battle the global scourge of mass unemployment and underemployment. One is therefore tempted to ask the question, "where is the political resolve which hitherto employed social policy to drive legislation to battle labour market challenges at the start of the 20th Century and again during the post-WWII era?"

A bit of history may assist our thesis here. Early 14th Century and medieval wars brought about territorially-fixed boundaries and internal governing structures largely immune and insulated from what took place elsewhere. It would seem that this environment was one of the influences behind Ambrogio Lorenzetti's Allegory of Good and Bad Government [See Allegoria ed effetti del Buono e del Cattivo Governo, 1338]. Unemployment in one economy hardly affected another economy. The 1648 Peace of Westphalia was a logical consequence of this era.

Social upheavals of the 20th Century brought major reform during the 1980s and 1990s which saw the crumbling of the Westphalian Peace Accord, the Fall of the Berlin Wall, the Demise of the USSR and the Warsaw Pact. Glasnost and Perestroika were political vehicles to bring about social reforms including liberalisation of the labour markets to bring about openness, private sector-led employment, foreign investment, and improved productivity of factors.

The 21st Century has witnessed a slowing down of reform measures. This has been noted in the annual Doing Business Reports particularly in emerging, developing and rigid economies. In Dominica's case the reform process was embraced by the business community, and representation for the participation of employers and business support organisations was made repeatedly. Enterprise saw the reform process best approached from two angles: administrative and policy. There already exist provisions in legislation and policies for public sector managers to liberalise restrictions in their spheres of control. We already know that just from this angle, market reforms are just a "taw" away. No additional legislation is required for many administrative reforms