SECOND ITEM ON THE AGENDA
1. In accordance with the provisions adopted by the Governing Body at its 254th Session (November 1992),(1) it is proposed that the 87th Session (1999) of the International Labour Conference should open on Tuesday, 1 June 1999.
2. It is proposed that the session be held in Geneva.
3. The Conference will have before it the following standing items:
4. The agenda of the 86th Session (1998) of the Conference, as determined by the Governing Body at its 265th Session (March 1996), includes two standard-setting items for second discussion (general conditions to stimulate job creation in small and medium-sized enterprises, and contract labour) as well as a standard-setting item for first discussion (child labour).
5. The Programme and Budget proposals for the 1998-99 biennium are, for budgetary purposes and without pre-judging the Governing Body's decision, based on the assumption that a total of three technical items may be placed on the Conference agenda in 1999. As a second discussion is scheduled to take place in 1999 with a view to the adoption of new standards on child labour, the Governing Body would at its present session only have to choose two standards-related items to complete the agenda of the 87th Session (1999) of the Conference. However, it will be recalled that no item has been selected for general discussion at the 1998 session of the Conference. If the Governing Body wishes to compensate for the decisions it took for 1998, it could decide on a general discussion for 1999 to replace one of the standards-related items.
6. At its 267th Session (November 1996) the Governing Body held an initial examination of items for the Conference agenda in 1999. It decided to request detailed reports at its present session on the seven following subjects:
Proposals for new standards
Proposals for the revision of existing standards
Proposals for a general discussion
7. Items I to VI were the subject of proposals submitted to the Governing Body at its 267th Session (November 1996). At the request of the Employers' group, a new set of proposals have been prepared on the theme of investment and employment (item VII). In addition, it will be recalled that the Governing Body requested that the question of the settlement of labour disputes should no longer be proposed for the adoption of new standards, but for general discussion. The proposals on this issue have hence be revised accordingly. The proposals on item I have also been modified so as to take account of recent developments in this area.
8. The format of the present paper differs from previous years: the proposals on items II to V below, which have not changed since November 1996, are not reproduced. It will be recalled that, as agreed in 1993 by the Governing Body,(2) only the additional items proposed by the Governing Body at its first discussion in November are to be covered by the document submitted the following March, while the document submitted in November contains contributions on all the items proposed by the Director-General. In order to avoid reproducing the same contributions twice, and for reasons of economy, only the additional items and those that have been modified following the first discussion are covered in the present paper. Document GB.267/2, concerning proposals for the agenda of the 87th Session (1999) of the Conference, submitted in November 1996, is available to members of the Governing Body wishing to consult it.
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9. The ILO's standard-setting activities in the field of occupational safety and health have focused on various aspects of the prevention of accidents and diseases at work. Previous Conventions and Recommendations have included general provisions for the reporting of occupational injuries. However, they have dealt only to a very limited extent with the effective recording and notification of occupational accidents and diseases as a tool for preventive action. National definitions of occupational injuries frequently differ from the international standard definition recommended by the resolution concerning statistics of occupational injuries, adopted by the 13th International Conference of Labour Statisticians (Geneva, 1982). In addition, there are national variations in the collection and notification procedures and in the coverage and sources of statistics. Coverage, for example, may be limited to certain types of workers, certain types of economic activity, enterprises employing more than a certain number of workers, or injuries giving rise to a specific minimum duration of incapacity. Compulsory occupational accident and disease reporting systems and compensation schemes are, in general, the two main sources of statistics. The application of different definitions as well as differences in collection and notification procedures lead to diverse situations in member States, and it is impossible to say with any degree of certainty whether the information that is available represents a true picture of the actual situation. International comparisons concerning measures of success in compliance, enforcement and preventive action are not possible unless harmonization is achieved.
10. A Conference agenda item on the recording and notification of occupational accidents and diseases was initially proposed for consideration by the Governing Body at its session in November 1989, but was not selected as an item for the 1991 Conference agenda.(3) Since then, several member States have introduced new occupational injury statistical systems or have modified existing ones. Participants in the Latin American Regional Tripartite Seminar on the Organization of Occupational Health Services and the Recording and Analysis of Occupational Accidents and Diseases (Mexico, 23-27 October 1989) highlighted the importance of reliable occupational injury data and emphasized the need for harmonizing recording and notification systems. In the European Community proposals have already been made for the harmonization of statistics on occupational accidents and diseases in Member States. The Working Group on the Harmonization of European Statistics on Accidents at Work (ESAW) and the Working Group on Statistics of Occupational Diseases have been established. Following a detailed investigation of current practices in Member States of the European Union, methodologies have been developed to provide for harmonized statistics on occupational accidents and for comparable statistics on occupational diseases. The 24th General Assembly of the International Social Security Association (ISSA) adopted a report in 1992 which also calls for a harmonized international system for the notification and compilation of accident statistics.
11. An item on the recording and notification of occupational accidents and diseases was again proposed for consideration by the Governing Body at its session in March 1994 for the 1996 Conference agenda.(4) Before placing this item on the agenda of a future session of the Conference, the Governing Body decided to await the outcome of the Meeting of Experts held in October 1994 to which a draft Code of Practice on the recording and notification of occupational accidents and diseases was submitted for examination and adoption (see below, paragraph 18). Although such a Code of Practice is not a legally binding document, it provides guidelines on uniform criteria to assist member States in establishing, in the light of international experience, systems that would have the advantage of collecting comparable information. It is intended to recommend, guide and promote national efforts towards harmonization and may help define the possible content of future international standards.
12. An item on the recording and notification of occupational accidents and diseases was again proposed to the Governing Body at its session in March-April 1995, but was not selected as an item for the 1997 Conference agenda.(5) Recognizing the international needs and recent trends and the availability of the printed Code of Practice in 1996, a proposal on the recording and notification of occupational accidents and diseases is now submitted again for consideration as an item for the 1999 agenda of the International Labour Conference. It is obvious that international standards could help to improve and harmonize both the terminology and the procedures with a view to compiling consistent and comparable national data on the occurrence of occupational accidents and diseases. This information should be the basis for coherent national, sectoral and enterprise-level policies and action for prevention.
13. Despite significant advances in dealing with many of the challenges to the safety, health and well-being of workers, some 200,000 work-related deaths still occur each year. In addition, each year approximately 120 million workers worldwide are injured or fall ill due to work-related accidents and diseases. A major obstacle to preventing loss of life and injury on this scale is the absence of reliable information on the causes of these accidents and diseases. Without adequate information, effective control measures cannot be achieved. For the collection of such information, there must be both recording at the level of the enterprise and notification to the appropriate authorities.
14. Employers need to investigate and record information about accidents and diseases that arise in their enterprise. A record should be made of some essential facts about the affected person, including how the person was injured or became ill. Use of a standard format for such information makes it possible to analyse the recorded data in order to study how accidents and diseases occur, to identify causes and to devise measures for their prevention and control. In addition, when this information is made available to workers' representatives, it enables them to contribute to the improvement of working conditions.
15. It is not sufficient for information about occupational accidents and diseases to be recorded and kept at the enterprise. Such information must also be notified to the appropriate authorities, which are mainly the social security institutions or the authorities responsible for enforcing occupational safety and health legislation. The social security institutions may be government bodies, independent insurance organizations or a combination of both, which require information in order to compensate injured persons and their dependants. The enforcement authorities need to have information or details of accidents notified to them so that they can investigate individual cases and, through the use of accumulated statistics, devise enforcement strategies and guidance for effective prevention programmes. Some social security institutions have the double function of administering compensation schemes and contributing to the prevention of accidents and diseases. It is important that notification be in a standard format so that the information received by these national bodies can be used effectively for the purposes for which they have been collected, in particular for the identification of recurring accidents and diseases and the establishment and implementation of policies to combat them.
16. The quality of information available at both enterprise and national levels for the purpose of prevention varies widely between countries on account of differences in the scope of legislation on social security benefits and on occupational safety and health protection or, quite simply, because some countries have not yet introduced arrangements for data collection. Existing national standards do not very often include adequate guidance on methods of recording and notification.
17. Existing ILO standards in the field of occupational safety and health deal only to a very limited extent with the recording and notification of occupational accidents and diseases as a tool for preventive action, and do not include sufficient guidance. The Labour Statistics Convention, 1985 (No. 160), and its corresponding Recommendation (No. 170), as well as the resolution concerning statistics of occupational injuries adopted by the 13th International Conference of Labour Statisticians (1982), encourage the compilation of statistics of occupational injuries and diseases.
18. The Occupational Safety and Health Convention, 1981 (No. 155), provides in Article 11 for the competent authority or authorities to ensure that procedures will be progressively established and applied for the notification of occupational accidents and diseases by employers and, when appropriate, insurance institutions and others directly concerned, and for the production of annual statistics. Under the terms of Paragraph 15 of the Occupational Safety and Health Recommendation, 1981 (No. 164), employers should be required to keep such records relevant to occupational safety and health and the working environment as are considered necessary by the competent authority or authorities; these might include records of all notifiable occupational accidents and injuries to health. The Employment Injury Benefits Convention, 1964 (No. 121) requests that legislation concerning employment injury benefits shall protect all employees. Each Member shall prescribe a definition of "industrial accident" and a list of diseases which shall be regarded as occupational diseases under prescribed conditions. National legislation should include a general definition of occupational diseases broad enough to cover at least the diseases enumerated in Schedule I to the Convention. According to the Protection of Workers' Health Recommendation, 1953 (No. 97), national laws or regulations should require the notification of cases and suspected cases of occupational diseases. Similar general provisions are made in numerous ILO Conventions and Recommendations. In practice, however, these international labour standards do not cover methods of recording and notification and do not specify appropriate national procedures or systems.
19. In October 1994, a Code of Practice on the recording and notification of occupational accidents and diseases was drawn up at a Meeting of Experts, intended to serve as a useful instrument to competent authorities in developing systems for the recording and notification of occupational accidents and diseases while providing valuable guidance for joint action by employers and workers aimed at the overall prevention of occupational injuries. The experts stressed that the collection, recording and notification of data concerning occupational accidents and diseases were instrumental to the prevention of occupational injuries, and that it was important to identify and study the causes of accidents and diseases in order to develop preventive measures. The experts agreed that it was the task of the competent authority to establish and implement a national system for the recording, notification and investigation of occupational accidents, occupational diseases, commuting accidents, dangerous occurrences and incidents; that implementation of this national system should be carried out by the employer in consultation with workers and their representatives; and that the relevant concepts and terminology for reporting, recording and notification systems should be determined by the competent authority in consultation with the most representative organizations of workers and employers and be consistent with this Code and with international agreements and recommendations. The text of the Code was approved for publication(6) by the Governing Body at its 261st Session (November 1994) and the Code has been available since November 1996. An extract from the report of the Meeting of Experts(7) which adequately reflects the outcome of the deliberations forms part of the Code and gives guidance for its use.
20. The objectives of the Code of Practice are --
In addition, provisions are included concerning equivalent requirements for the recording and notification of dangerous occurrences, incidents and commuting accidents.
21. The Meeting of Experts acknowledged the value of and the need for guidance by lists of occupational diseases, particularly in countries which were at different stages of development and where such lists did not exist. Consequently, the Code of Practice provides for the competent authority to prescribe a list of diseases, comprising at least the diseases listed in the most recent version of Schedule I to Convention No. 121, which should be regarded as occupational diseases under prescribed conditions, or to include in its legislation a general definition of occupational diseases broad enough to cover at least the diseases listed in Schedule I, and to review the prescribed list periodically and extend it progressively. The current version of Schedule I as amended in 1980 is given in Annex A to the Code. The Meeting of Experts acknowledged the difficulties inherent in the recognition of occupational diseases and in the reference to a list established 15 years ago, and recommended that Schedule I to the above-mentioned Convention be updated. In 1991, an informal consultation on the revision of Schedule I, convened by the ILO, prepared a revised list. As this revised list has not been approved officially, it was included as Annex B in the Code of Practice as an example of proposed occupational diseases for consideration in national lists being reviewed and extended. An item on the revision of the list of occupational diseases appended to Convention No. 121 was proposed to the Governing Body at its session in November l992, but was not selected as an item for the l994 Conference agenda.(8) Such a list could serve as an essential tool for the implementation of the proposed new international standards.
22. It would therefore be appropriate at the same time for the Conference to consider the updating of the ILO list of occupational diseases together with the international instrument(s) that might be adopted on the recording and notification of occupational accidents and diseases. The proposed list of occupational diseases which would be submitted to the 1999 Conference has two purposes: (i) it would become the revised Schedule I to the Employment Injury Benefits Convention, 1964 (No. 121), i.e. it would be a list for compensation purposes; (ii) it would also be a list of occupational diseases for the new instrument(s), i.e. for the purpose of recording and notification. In this connection, it is worth noting that a Meeting of Experts is due to be held in 1998 to examine questions related to occupational injury statistics, in particular the compilation of data and the revision of the existing 1962 classification systems of occupational accidents referred to in the Code of Practice. On the basis of that meeting's conclusions, the 16th International Conference of Labour Statisticians, proposed for late 1998, will adopt new recommendations in this field. The updated list of occupational diseases and the revised classification systems of occupational accidents would provide an essential tool for the implementation of the international instrument(s) that might be adopted on the recording and notification of occupational accidents and diseases.
Recording and notification of occupational accidents
23. Measures at the level of the enterprise for the recording of accidents differ greatly. While large enterprises tend to make detailed records of accidents and their causes, smaller enterprises are less likely to do so. Some enterprises have introduced their own reporting systems, sometimes to compare figures in different factories within the same company, particularly in multinational enterprises. Such practices, while serving an immediate purpose, are of no assistance to national authorities seeking to decide on the direction which their preventive efforts should take. Many countries lack any legislative provision whatsoever for the recording of accidents and diseases at the enterprise level.
24. The notification of occupational accidents and diseases is generally linked either to a national compensation scheme or to a statutory requirement of reporting to the competent authority. In a number of countries, occupational accident reports are received and primarily collected in both the social security organization and the enforcement authority or its equivalent.
25. In general, only compensated accidents or those meeting certain criteria are covered by the national notification schemes, while many minor accidents, knowledge of which would be even more important for the development of preventive policy, are not registered. As a result, the relative incidence of notified accidents could differ widely between countries and often between different sectors of the economy of one country. Furthermore, changes in the organizational set-up of insurance systems or in the criteria of compensation or reporting may have direct consequences for the reported number of occupational accidents.
26. An important problem in comparing occupational accident figures from different countries are the differences in the main categories of notifiable non-fatal accidents in each country, which may range from accidents causing incapacity for work for a specified number of days to any accident irrespective of interruption of work. In addition, differences exist in the information to be provided for notification. Most of the countries require information on the time, day and place, the type and primary cause of the accident as well as the nature of the injury and the part of body injured. Some call for information about what the injured person was doing at the time of the accident. Only a few require information about the occupation, qualification and training of the injured person and the length of time he/she has been employed in that capacity or about required safety devices or personal protective equipment. The criteria for notification are different for accidents that occur on the way to and from work (commuting accidents) or traffic accidents which occur while at work.
27. Considerable discrepancies also occur in the notification of accidents in specific sectors of the economy. In particular, agricultural, construction, marine and mining workers are subject to diverging notification criteria, which may result in incoherent information in a number of countries. Coverage is often low in the tertiary sector. In addition, self-employed, part-time and casual workers or trainees/apprentices may be omitted by not having recourse to public insurance schemes.
28. To a large extent, data on accidents resulting in fatal injuries are more reliable than those on non-fatal accidents, as fatal cases are almost invariably notified. Even then, differences may occur in interpreting the term "fatal" for notification purposes.
Recording and notification of occupational diseases
29. The recording and notification of occupational diseases is even more complicated. Most countries have a legal definition of occupational disease in the form of a prescribed list of occupational diseases. In many cases the prescribed list is linked with compensation criteria. However, there are differences between the chosen methods of definition. Some countries have a list of specified diseases which may be similar to, but not necessarily the same as, Schedule I to Convention No. 121, as amended in 1980. Other member States operate a so-called mixed system (prescribed diseases and other diseases). As a result, national statistics on occupational diseases differ with respect to the diseases covered, their definitions, the criteria for the recognition of such diseases and the coverage of working populations. A particular difficulty arises for diseases due to multiple causes and those with long latent periods.
30. Procedures for notifying occupational diseases differ considerably from those for occupational accidents, as regards both the persons responsible for making the reports and those receiving them. Either the employer or the physician is responsible for notification to the labour inspectorate or its equivalent or the report is to be received first by the insurance body. In some countries a number of optional information channels exist. While such reports invariably go to the insurance organization responsible for paying compensation, the enforcement agency may not be notified of cases of occupational disease. In general, the number of cases of occupational disease that remain unreported is impossible to quantify, and there is little doubt from research conducted in many countries that there is under-reporting on a vast scale. It should be noted that a fairly large number of developing countries are not in a position to collect and publish national data on occupational diseases. In these countries, diseases resulting from occupational exposure may often be diagnosed as non-occupational diseases due to a lack of national expertise or facilities for differential diagnosis, or both.
Content of the envisaged international instrument(s)
31. A national system of reporting, recording, notifying and evaluating occupational accidents and diseases is essential for the collection of consistent and comparable data, for international comparisons, and for the economical and meaningful use of scarce resources all over the world for the protection of the working population. International standards would provide for coherent policy and principles at the national level and at the level of the enterprise and for the harmonized collection of data on occupational accidents and diseases. This would facilitate comparative analysis and implementation of national policy and programmes for preventive action and promotional measures. The ILO Code of Practice on the recording and notification of occupational accidents and diseases, published in 1996, while more detailed than the proposed instrument(s), could be used as a point of departure for drawing them up. A Convention containing basic principles, supplemented by a Recommendation, is envisaged.
32. The instruments envisaged should aim at reinforcing and incorporating various activities into consistent systems of collecting information on occupational accidents and diseases in member States. Such systems should cover methods of reporting and recording within an enterprise and notification to the national authority. A good recording system at the level of the enterprise would facilitate the investigation and analysis of the recorded results that would promote the review of the safety and health policy within the enterprise, in particular for the purposes of planning coherent and effective prevention programmes.
33. The following aspects of the recording and notification of occupational accidents and diseases might be covered.
(a) General provisions
34. The provisions might specify that the competent authority should formulate, implement and periodically review a coherent national policy and principles on the recording and notification of occupational accidents and diseases, and establish and progressively implement national procedures and the necessary legal, institutional and administrative arrangements. Provisions for notification at the national level might cover fatal occupational accidents, all occupational accidents causing incapacity for work for a period to be established by the competent authority, and all occupational diseases included in a national list or covered by the definition of such diseases prescribed by the competent authority and diagnosed in a specified period. Provisions for recording at the level of the enterprise might be extended to include also accidents and diseases not covered by the notification requirements.
(b) Action at the level of the enterprise
(i) Measures for recording
35. These measures would relate to setting up adequate procedures and allocating responsibilities within the enterprise for reporting by the worker and recording by the employer of occupational accidents and diseases. The provisions might specify the content and format of records, the period of time in which employers should have the records available, the cooperation of workers and their training in adequate reporting and recording. The information to be recorded should include at least the information needed to be notified to the relevant enforcement body, the appropriate compensation organization or other designated bodies. Specifications might be made for additional or for progressively more detailed information to be recorded.
(ii) Use of recorded information
36. Accurate information concerning common causes of occupational accidents and diseases and the extent of injury will help in setting priorities for necessary preventive measures. It will also facilitate assessment of the effectiveness of legislative and other measures. Provisions might thus specify measures to promote the uniform identification and the assessment of causes of occupational accidents and diseases at each enterprise and, consequently, at all branches of economic activity and at the national level by the use of the information recorded.
(c) Notification at the national level
(i) General provisions
37. These would specify how member States should prescribe and implement uniform procedures for notifying occupational accidents and diseases, including the determination of bodies to which notification should be made, and would specify the responsibilities of employers and workers for compliance with the prescribed procedures. The instruments might also deal with enforcement measures.
(ii) Requirements for notification
38. The provisions would specify the types and extent of information to be notified to the relevant enforcement body, the appropriate compensation organization or other designated bodies, the timing for the notification depending on the type of injury and the notification arrangements to be set up within the enterprise. The notification of occupational accidents might include information on the enterprise where the accident occurred and its employer, the injured person, the extent, nature and location of the resulting injuries, the accident and its sequence, the investigation and action taken to prevent a recurrence of the accident. The notification of occupational diseases might include information on the enterprise and employer, the person affected, the occupational disease and its attribution to harmful agents and process and length of exposure. Specifications might be made for progressively more detailed information to be notified.
(iii) Procedures for the use of the notified information
39. The instruments might also suggest the means of promoting the use of the notified information at the national level, including the creation of national databases and the production of reliable statistics on occupational accidents and diseases as a basis for setting priorities and elaborating national policy and preventive action programmes. The instruments might take into account the role of social security and sectoral institutions according to national law or practice.
Revision of the list of occupational diseases
40. On the basis of a review of the diseases which might appropriately be included in a revised Schedule I to the Employment Injury Benefits Convention, 1964 (No. 121), and of current practice and trends in the diagnosis and evaluation of occupational disease for compensation purposes, the proposed new list of occupational diseases might cover the following additional items --
41. The inclusion of the above diseases in the ILO list would have an important impact on prevention because these diseases can be avoided under well-controlled conditions. Since the revised list will be for purposes both of compensation, and of recording and notification of occupational diseases (see above, paragraph 21), this will be conducive to an improved flow of information on the incidence of work-related diseases with a view to their prevention. This list will also offer useful guidance on the health surveillance of workers exposed to specific occupational hazards. A harmonized list will have the advantage of promoting close cooperation between insurance organizations and enforcement agencies (paragraph 29). Because of the double purpose of the new list of occupational diseases, which may be in two parts, the elaboration of the list and the preparation of the new instruments on recording and notification should be pursued simultaneously. For the purpose of recording and notification, the list should not only include the diseases where a direct link with work has been established, but also cases where such a link is suspected.
42. The Governing Body's attention is called to the conclusions adopted by the Meeting of Experts on Workers' Privacy that was held in October 1996.(9) The participants at the Meeting of Experts could not agree on the advisability of international standards in this field, and consequently no recommendation to that effect was adopted. Taking this into account, the contribution on this item submitted to the Governing Body at its November Session 1996(10) remains unchanged.
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43. The Governing Body is referred to document GB.267/2 (section IV) of November 1996.
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44. It will be recalled that the proposals by the Working Party on Policy regarding the Revision of Standards to revise Conventions Nos. 3 and 103 were approved by the Governing Body at its 267th Session (November 1996). The Working Party recommended specifically that the Maternity Protection Convention, 1919 (No. 3) should be taken into consideration in the context of the revision of the instruments on maternity protection.(11) Taking this into account, the contribution on this item submitted to the Governing Body in November 1996 remains unchanged.
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45. The Governing Body is referred to document GB.267/2 (section VII) of November 1996.
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46. The proposals on this subject are substantially the same as those presented to the Governing Body at its 261st, 262nd and 267th Sessions. However, they are here submitted with a view to a general discussion, and not new standards.
47. The prompt and equitable settlement of labour disputes is an important basis for sound labour relations, and it is essential that appropriate dispute settlement machinery should exist to facilitate such settlement.
48. There are numerous models of procedures for settling labour disputes which can be set in motion at various stages of a dispute. Different countries have opted for different models and established various systems of dispute settlement, specifying the procedures to be set in motion at each stage in each of the different types of dispute.
Categories of disputes
49. Most countries have made a distinction between several types of labour disputes, and have established separate procedures for dealing with them. The ways in which a country makes such a distinction reflect the historical development of its labour relations system, and therefore vary widely. Classifying various types of labour disputes from a global viewpoint is therefore a difficult issue.
50. Nevertheless, it is possible to identify certain widely applied distinctions. The two most generally used are distinctions between rights disputes and interest disputes, on the one hand, and between individual and collective disputes on the other. The distinction between disputes over rights (or rights disputes) and disputes over interests (or interest disputes) characterizes the dispute settlement machinery of many countries. Disputes over rights are those arising over the application or interpretation of an existing provision in a contract of employment, a collective agreement or legislation; disputes over interests are those arising over the establishment or modification of rights or obligations, primarily in the context of collective bargaining.
51. With respect to disputes over rights, a distinction is often made between individual and collective disputes, whereas disputes as to interests are generally only collective. An individual dispute typically involves the interpretation of an individual contract of employment or legislation concerning employment. Collective rights disputes include those arising over the interpretation or alleged violation of the procedural provisions of collective agreements (e.g. those providing for peace obligation during the life of a collective agreement) and of legislation (e.g. provisions concerning representative bodies of workers within undertakings).
52. In many countries, the above distinction affects both the applicable settlement procedures and the right to strike and lockout. However, the distinction between these various types of disputes is far from universal, and even where it is made it is often blurred. Thus, for example, the distinction is of very limited relevance in the United Kingdom, where the process of making new rules and that of interpreting existing rules are so intricately intertwined in collective bargaining that a dispute about existing "rights" can easily be turned into a dispute about "interests". Many of the developing countries in Asia and Africa that have inherited from the United Kingdom the broad concept of the "trade dispute" or the "industrial dispute" covering all forms of labour disputes also still rely on dispute procedures that basically cover both interest disputes and rights disputes indistinctly, although some of them have attempted to introduce such a distinction with more or less success (e.g. Bangladesh and Pakistan in 1969) and some others have set up special procedures for dealing with individual disputes over termination of employment (e.g. in Sri Lanka since 1957 and Malaysia since 1969).
53. In some other countries, such as France and French-speaking African countries, the basic distinction for the purpose of different dispute settlement procedures is between individual and collective disputes, the former always being a rights dispute, while the latter is usually an interest dispute but may also be a dispute over rights.
54. In many developing countries, various restrictions imposed on the exercise of the right to strike tend to diminish the significance of a distinction between interest disputes and rights disputes, because the possibility of recourse to industrial action normally constitutes one of the main characteristics of dispute procedures for interest disputes, in contrast with procedures for rights disputes.
55. Apart from the types of labour disputes so far mentioned, there are others that are subject to special procedures for their settlement in a significant number of countries. These include disputes over trade union recognition and disputes over "unfair labour practices", e.g. disputes related to the exercise of trade union rights.
Procedures for the settlement of labour disputes
56. Procedures for the settlement of labour disputes vary widely. The relevant ILO Conventions and Recommendations, referred to below, leave ample room for individual countries to design their own systems of dispute settlement, consisting in different procedures for dealing with different types of disputes.
57. Disputes over interests usually arise as a result of the failure of the parties in collective bargaining to reach agreement on conditions of employment or the relationship between them. The basic principle underlying the procedures for settling this type of dispute is that they are to be resolved by the parties themselves through negotiation, if necessary involving the threat or use of industrial action, and that outsiders should eventually be called upon to intervene only to assist the parties in finding a mutually acceptable solution to their differences. However, this principle has been significantly modified in most developing countries where the governments play an active role in dispute settlement in order to ensure that the outcome of collective bargaining or dispute resolution is compatible with their economic policies, and to reduce the incidence of industrial action which they generally regard as detrimental to economic development and political stability. In times of economic difficulty, the principle has on occasion been similarly modified in some industrialized market-economy countries.
(a) Conciliation and mediation
58. The most widely used procedures for settling disputes over interests are conciliation and mediation. These are procedures whereby a third party provides assistance to the parties in negotiations to help them reach an agreement. In many countries, particularly in Africa, Asia and Latin America, they are mainly provided by government conciliation services, or, more rarely, by labour inspectors. In a number of industrialized countries, on the other hand, bodies largely independent of the government have been established for conciliation and mediation, such as the Advisory, Conciliation and Arbitration Service (ACAS) in the United Kingdom, the Federal Mediation and Conciliation Service (FMCS) in the United States, the Australian Industrial Relations Commission (AIRC), the Conciliation Board in Denmark as well as the Labour Relations Commissions in Japan. In most industrialized market-economy countries, conciliation is the only procedure generally available for the settlement of collective interest disputes, and it has proved to be very effective, resulting in a vast majority of disputes being resolved at this stage.
59. The establishment of independent bodies is usually meant to inspire greater confidence among the social partners in the neutrality of the conciliation machinery. The need to inspire confidence among parties has also influenced the structure of such bodies in many countries. Thus, for example, the Labour Relations Commissions in Japan and the Governing Council of ACAS are composed of equal numbers of employer and trade union representatives and of independent members. Similarly, conciliators in Denmark are, in practice, all nominated jointly by trade unions and employers' organizations.
60. The autonomy of employers and trade unions in conciliation is far-reaching in Germany, where mediation procedures have been set up in most branches of activity by agreements between the parties to collective agreements, and are composed of an equal number of representatives from the employers' association and the trade union concerned, as well as a neutral chairperson. Similar systems of conciliation have also been established for particular branches of industry in Belgium and Switzerland.
61. A number of developing and newly industrializing countries have also set up tripartite bodies with responsibility for conciliation. For example, in many countries in Central and Latin America, such bodies have been in existence for many years (e.g. Brazil, Mexico, Venezuela).
62. Conciliation is voluntary where the parties are free to use or not to use it, and compulsory where they are required to make use of it. For example, in Belgium, France, Hungary, the United States and the United Kingdom, both parties must consent to the use of conciliation. In Australia, Canada, India, Malaysia, Poland and Singapore conciliation is compulsory either because the law provides that disputes must be submitted to conciliation, conciliation officers can initiate proceedings, or the right to strike or lockout is contingent on first attempting to resolve the dispute through conciliation. However, whether conciliation is compulsory or voluntary, it is meant to assist the parties in settling their differences by agreement, without the conciliator being able to impose any solution upon the parties.
63. While in many countries the terms "conciliation" and "mediation" are used interchangeably, in some countries a distinction is made between them according to the degree of initiative taken by the third party. Thus, for example, ACAS in the United Kingdom normally conducts "conciliation" in a quiet and confidential atmosphere and attempts to facilitate negotiations between the parties; it normally refrains from making proposals. However, where "mediation" is considered appropriate and the parties agree to it, ACAS may appoint as mediators independent persons, who in turn make precise recommendations for a possible solution. Other examples are found in Chile and the Dominican Republic, where a distinction between conciliation and mediation is made in the labour legislation. In Chile the term "mediation" also refers to the use of a conciliator empowered to propose terms of a settlement. However, in the Dominican Republic the terms "conciliation" or "mediation" are used depending on the type of dispute at issue, rather than the type of settlement procedure.
64. Arbitration is a procedure whereby a third party, not acting as a court of law, is empowered to take a decision which settles the dispute.
65. Arbitration is "voluntary" when it can be set in motion only on the basis of agreement by the parties, and "compulsory" when either party or the government can set it in motion on its own initiative.
66. Compulsory arbitration of interest disputes is rare in the private sector of industrialized countries, one exception being Canada (at the federal level and in some Provinces) where interest disputes involving an attempt to reach a first collective agreement must go to binding arbitration under certain circumstances, such as where the bargaining has been tainted with anti-union motives. Compulsory arbitration is more widely used in the public service of industrialized countries (for example in Ireland, Norway and the United Kingdom) and sometimes in essential services. It is also widely used in both the public service and the private sector of many developing and newly industrializing countries. As examples, mention can be made of the procedures existing in a number of African and Asian countries such as Kenya, Nigeria and Singapore.
67. Compulsory arbitration of interest disputes has been instituted by a number of governments in developing countries, based on the theory that it will protect the national economy and public life from the disruptive effects of industrial action and facilitate the maintenance of public order (for example Nigeria, Uganda and Zambia). However, in many countries the attempt to suppress industrial action may in practice generate discontent which may give rise to disruptive illegal action.
68. Compulsory arbitration is also sometimes found to be an attractive procedure in countries where the lack of balance between the power of employers and that of trade unions inhibits effective collective bargaining. However, as labour relations systems mature, compulsory arbitration often starts to be looked upon as a hindrance to free collective bargaining, and is gradually taken over by conciliation as the main method of dispute settlement.
69. In order to encourage the parties to assume a growing role in dispute settlement, while maintaining the framework of labour relations free of industrial action, a number of developing countries have sought to promote voluntary arbitration of interest disputes whereby the parties voluntarily refer their dispute to arbitrators of their choice, instead of having it referred by the government to compulsory arbitration. However, in spite of serious efforts made in many countries to promote it, voluntary arbitration of interest disputes is not yet widely practised in developing countries, partly because of the scarcity of arbitrators able to command the confidence of both parties. Another factor undermining the voluntary procedures is the wide availability of compulsory arbitration existing alongside voluntary arbitration in some developing countries.
70. Voluntary arbitration of interest disputes is also rare in industrialized countries. The main reason seems to be that conciliation (and, if necessary, recourse to industrial action) is more in line with the general labour relations philosophy of these countries.
Disputes over rights
71. The basic principle underlying procedures for settling disputes over rights is that these disputes should, unless settled by negotiation, be resolved by courts or arbitrators and not by industrial action, because they involve the determination of existing rights, duties or obligations. In practice, however, the procedures for settling disputes over rights overlap with those for settling interest disputes in many systems of labour relations. The little relevance which the distinction between the two types of procedures has in the traditional labour relations system of the United Kingdom and some of the countries that have inherited it has been mentioned earlier.
72. Another factor blurring the distinction is the role of conciliation. It is used in a large, and probably growing, number of countries not only for the settlement of interest disputes but also for the settlement of rights disputes, at least as a first stage. There are even countries, e.g. Sweden, where disputes between the parties to a collective agreement can be referred to the Labour Court only after negotiations between them. In France, a partial panel of the labour court (conseil de prud'hommes) presides over compulsory conciliation procedures before the case is adjudicated. Independent conciliation services, as discussed above, may also be involved in attempting to settle rights disputes. Such widespread recourse to conciliation as a means of settling rights disputes seems to reflect the wide recognition among social partners of the fact that disputes over rights often arise out of misunderstandings or communication gaps between the parties, which can best be resolved by discussions between them rather than through litigation.
73. The bodies entrusted with the settlement of disputes over rights may be classified into a number of categories, including ordinary courts, specialized labour or industrial courts, quasi-judicial administrative agencies and arbitration.
74. The jurisdiction of the courts competent to deal with disputes over rights varies widely. In a number of countries, e.g. Italy and the Netherlands, all rights disputes, whether individual or collective, are dealt with by the ordinary courts. In the Netherlands serious backlogs in the courts have resulted in lengthy delays in deciding labour matters. However, in Italy labour disputes are dealt with through a more rapid procedure than normal cases and the judges assigned to deal with the disputes have special competence in labour matters.
75. Labour courts are often distinguished from ordinary courts by expertise in labour matters, their tripartite composition, informal proceedings and relative autonomy; however, not all labour courts conform precisely to this model. The problem of excessive legalism and delays has been noted in a number of labour court systems. Labour courts appear to be the most common mechanism used for the settlement of disputes over rights, having a major role in Austria, Finland, France and many African countries influenced by French law, Spain, Turkey, Hungary, Brazil and Uruguay to name only a few examples. Where labour courts exist, the jurisdiction over labour matters is often divided between the labour court and the ordinary courts. While the labour courts in Germany have virtually exclusive jurisdiction over both individual and collective rights disputes, and the industrial courts of a number of Asian and African countries have an even wider jurisdiction encompassing both disputes over rights and those over interests, these cases nevertheless seem to be the exception rather than the rule.
76. The jurisdiction of the labour courts in Denmark and Sweden centres on collective rights disputes between the parties to a collective agreement. In Sweden, for example, a dispute between an employer and an employee who does not belong to a union goes first to the ordinary court with the possibility of an appeal to the Labour Court. In the United Kingdom, rights disputes arising under specific legislation, e.g. those involving equal pay, sex discrimination and unfair dismissal, are within the exclusive jurisdiction of industrial tribunals, whereas rights disputes arising under individual contracts of employment are handled by the ordinary courts.
77. In France, the labour courts (conseils de prud'hommes) are competent to deal only with individual disputes, which however include the interpretation and application of terms of collective agreements as they are frequently incorporated into individual contracts of employment. Alleged breaches of labour legislation, however, are dealt with in the ordinary courts. The labour tribunals in Sri Lanka are competent to deal only with disputes over termination of employment.
78. The labour or industrial courts in a significant number of countries (e.g. Germany, Sweden, Costa Rica, Mexico and Singapore) are tripartite; the French conseils de prud'hommes are basically bipartite bodies. An advantage of such bipartite or tripartite tribunals lies in the expertise in industrial relations possessed by their employer and worker members. The procedures in such tribunals tend to be less legalistic than in ordinary courts, thus facilitating the expeditious and inexpensive solution of disputes, but they may sometimes encourage a political rather than judicial solution of disputes. In other countries, such as Argentina, the Philippines and Venezuela, there is a system of administrative judges, with no specific worker or employer representation.
79. In the tripartite bodies, the role of the workers' and employers' representatives may differ. In some countries they take on an adversarial role, whereas in most systems they are expected to act in an independent capacity (e.g. Germany, Sweden and the United Kingdom). Whether or not the lay members are voting members or only act in an advisory capacity also varies from country to country.
80. The establishment of procedures for arbitration of disputes over rights (commonly called "grievance procedures") by collective agreements is widespread in Canada and the United States. In most collective agreements in the United States, the parties voluntarily include an arbitration requirement, whereas in Canada the inclusion of an arbitration provision in the collective agreement is required pursuant to most provincial labour legislation, and where not expressly included, such inclusion is assumed. Arbitrators are sometimes appointed on an ad hoc basis for each particular dispute, but they may also be named specifically in the collective agreement to deal with all disputes arising during the term of the agreement. In the United States, arbitration will normally be conducted by a single arbitrator, in contrast with the prevailing practice in Canada to submit the cases to tripartite boards. The principal strengths of the grievance arbitration system lie in its largely voluntary nature and flexibility. One of its weaknesses, on the other hand, is that the procedures are available only in bargaining units where there is a certified bargaining agent.
81. In most Western European countries, and in a number of developing countries, trade union recognition does not give rise to serious problems, primarily because employers voluntarily recognize the bargaining authority of unions, or recognition is mandated by law. In the United States and some other countries, unions' claims for recognition have met particularly strong resistance from employers, often resulting in bitter conflicts. For this reason, in the United States and certain other countries, legislation was adopted to place the whole question of trade union recognition under far more detailed regulation than in other countries. The basic principles underlying the United States and Canadian systems of recognition are that the union selected by the majority of the workers in a given bargaining unit shall be the exclusive representative for all the workers in the unit and shall be so recognized by the employer. One of the main aims of this system is to settle recognition questions without industrial strife.
82. This North American system of trade union recognition has influenced the systems of a number of developing countries faced with difficulties arising out of trade union multiplicity, particularly in Asia and the Caribbean region.
Unfair labour practices
83. A number of countries have established special procedures for settling unfair labour practices. The definitions of unfair labour practices vary significantly, but they are mostly related to the exercise of trade union rights. Most frequently, they are disputes arising from alleged acts of anti-union discrimination in respect of employment. In some countries they also cover an employer's refusal to negotiate with a union as well as certain action by unions vis-à-vis employers. The union's failure to represent workers fairly is also defined as an unfair labour practice in some countries.
84. In the United States a special administrative agency, called the National Labor Relations Board, is entrusted with the task of resolving such disputes. In other countries, such as Japan and Canada, these disputes are also dealt with by specialized quasi-judicial bodies.
85. The right to strike is one of the essential means available to workers and their organizations for the promotion and protection of their economic and social interests. It is explicitly recognized in Article 8 of the International Covenant on Economic, Social and Cultural Rights. At the regional level, the European Social Charter was the first text explicitly to recognize this right in the case of a conflict of interests, subject to any commitments under collective agreements in force. Within the ILO, the Committee of Experts on the Application of Conventions and Recommendations and the Governing Body Committee on Freedom of Association have recognized that the right to strike, though not explicitly mentioned in the Freedom of Association and Protection of the Right to Organize Convention, 1948 (No. 87), arises out of the principle of freedom of association and constitutes an essential means available to workers and their organizations for the promotion and protection of their economic and social interests.
86. Strikes often provide workers with a means of counterbalancing the power of the employer through economic leverage. On the other hand, depending on the extent of the industrial conflict, strikes or lockouts can be disruptive to economic life. In most industrialized countries, the latter consideration is not considered sufficient in most cases to outweigh the former so as to lead to extensive restrictions. However, in a number of developing countries, a variety of considerations, including the impact on economic development has led governments to restrict the right to strike much more severely.
87. Laws on strikes and lockouts must be examined with respect to both the extent of the recognition of the rights and the regulation of the exercise of the rights. The extent of the recognition of the right to strike varies widely. At one end of the scale there are countries where the constitution, legislation, court decisions or agreements between the central organizations of employers and workers recognize the right to strike in principle, subject to restrictions that may be introduced with respect to certain categories of workers. Some of these countries (e.g. France, Italy and Portugal) do not provide a corresponding guarantee of the right to lock out on the grounds that workers are less powerful than employers and the right to strike is intended to redress the balance. Others (e.g. Canada, Mexico, Sweden and the United States) explicitly recognize both the right to strike and the right to lock out. In the United Kingdom, while no positive right to strike has been enacted, limited statutory immunities are conferred in relation to strikes which would otherwise give rise to civil or criminal liability.
88. In some countries (e.g. the private sector in France, and Italy) the right to strike is conceived as a right of the individual workers, while in others (e.g. Germany and Sweden), it is a right of the trade union. A practical consequence of this difference is that, while in the former group of countries unofficial or "wildcat" strikes are lawful in principle, they are unlawful in the latter group of countries.
89. Most of the countries that in principle recognize the right of workers to strike exclude certain categories of workers (e.g. military personnel, high-level public servants) from the benefit of this right.
90. At the other end of the scale, there are countries where workers in general do not enjoy the right to strike or where that right may be severely limited. Although only in relatively few countries legislation explicitly prohibits strikes on a permanent basis, there are many countries, particularly in Africa, Asia and Latin America, where the prohibition of strikes results, for all practical purposes, from the cumulative effect of the provisions relating to the established dispute settlement machinery, which provides for compulsory reference of all unresolved disputes to binding arbitration. In many other countries, while it is not obligatory to refer all unresolved disputes to arbitration, the government is empowered to refer disputes to compulsory arbitration at its discretion, thus keeping the power to prohibit or put a rapid end to almost any strike. The ILO supervisory bodies have considered such powers to limit seriously the means at the disposal of trade unions to further and defend the interests of their members and the right to organize their activities and therefore not to be compatible with the principles of freedom of association.
91. Even in countries where the right to strike or lock out is recognized in principle, the ways in which these rights can be exercised are often regulated. Such regulations mainly concern the timing, the purposes and the methods of strikes and lockouts.
92. The regulation of the timing of strikes and lockouts is embodied, in many countries, in the obligation of the parties to a collective agreement not to strike or lock out during the life of the collective agreement. This obligation, commonly referred to as a "peace obligation", may be established by an explicit legislative provision, as in Sweden; by a general agreement between the central organizations of trade unions and employers, as in Denmark; by an explicit clause in the collective agreement between the parties, as in the United States; or as a function of the collective agreement, as determined by the courts, establishing peace between the parties (Austria, Germany and Switzerland).
93. The purposes of lawful strikes are also regulated in many countries. Often, a strike is lawful only if it is for purposes connected with labour relations, or "in contemplation or furtherance of a trade dispute" (as formulated in the British law), although how to define a "trade dispute" or "purposes connected with labour relations" is a complex issue. The lawfulness of purposes is often questioned with respect to political strikes and sympathy strikes. While in certain countries political strikes or sympathy strikes are generally permitted, they are prohibited or restricted in many others.
94. The purpose of a lockout also determines its lawfulness in some countries. For example, in France and Italy, an employer can initiate a lockout only as a defensive measure once an illegal strike is under way, whereas in Chile a lockout can be used in response to any strike affecting over 50 per cent of the workforce. In Spain lockouts are permitted in limited circumstances, including where it is necessary to protect persons or property from violence.
95. One of the commonly accepted principles concerning the methods of strikes and lockouts is that they should be peaceful. Another main principle is that a strike or lockout should be the last resort in labour disputes, so all efforts should be made to settle disputes peacefully. This principle has been made binding by courts in some countries, like Germany and the Netherlands, where it is held that a strike is lawful only if all possibilities for negotiation have been exhausted. There are also many countries where prior notice of strikes and/or the taking of ballots among the union members is required by legislation. However, many others have no such prerequisite. The legal systems vary widely concerning such issues as go-slows, work-to-rule, rotating strikes, picketing, sympathy strikes and the occupation of an enterprise.
96. The regulation of strikes and lockouts in essential services has again become topical in some countries recently. Although restrictions on strikes and lockouts in essential services have existed for many years in many countries, there is now a trend in some other countries, where the right to strike and lock out was traditionally widely recognized, towards the introduction of certain restrictions on the exercise of these rights in essential services, for example in the form of an obligation to provide certain minimum services during a strike or prohibiting lockouts.
97. The ILO supervisory bodies have considered that the prohibition of strikes in essential services, where it exists, should be confined to services whose interruption would endanger the life, personal safety or health of the whole or part of the population, and that appropriate guarantees must be afforded to protect workers who are thus denied one of the essential means of defending their interests, through the provision of adequate, impartial and speedy conciliation and finally -- and only where conciliation fails -- arbitration procedures in which the parties concerned can take part at every stage and in which the awards should in all cases be binding on both parties and rapidly and fully implemented. The ILO supervisory bodies have also taken positions on a number of the other issues discussed above, including political strikes, balloting and notice periods.
International labour standards
98. The existing international labour standards on dispute settlement are of a general nature, reflecting the wide variety of existing systems of dispute settlement. The Voluntary Conciliation and Arbitration Recommendation, 1951 (No. 92), recommends that voluntary conciliation machinery, free of charge and expeditious, be made available to assist in the prevention and settlement of industrial disputes. It also recommends that provision should be made to enable the procedure to be set in motion, either on the initiative of any of the parties to the dispute or ex officio by the voluntary conciliation authority. Where a dispute has been submitted to conciliation or arbitration with the consent of all the parties concerned, they are encouraged to refrain from strikes or lockouts while conciliation or arbitration is in progress. The Recommendation also states that none of its provisions may be interpreted as limiting in any way whatsoever the right to strike.
99. Another indication as to how appropriate dispute settlement machinery should be conceived is given by the Collective Bargaining Convention, 1981 (No. 154), which provides for measures aimed at ensuring that bodies and procedures for the settlement of labour disputes contribute to the promotion of collective bargaining. In the same vein, the Collective Bargaining Recommendation, 1981 (No. 163) advocates the establishment of procedures for the settlement of labour disputes which assist the parties in finding a solution to the dispute themselves.
100. The Examination of Grievances Recommendation, 1967 (No. 130), deals with a particular category of labour disputes, namely grievances of one or several workers against certain measures or situations concerning labour relations or employment conditions, where the worker or workers in good faith consider such measures or situations to be contrary to provisions of an applicable collective agreement or of an individual contract of employment, to works rules, to laws or regulations or to the custom or usage of the occupation, branch of economic activity or country. It recommends that a worker or workers should have the right to submit such grievance or grievances without suffering any prejudice as a result, and to have them examined pursuant to an appropriate procedure for settlement within the undertaking. Where the grievance is not resolved within the undertaking, the Recommendation goes on to state that there should then be a possibility for final settlement through agreed procedures, conciliation, arbitration or judicial decision, etc. The Recommendation makes a distinction between such grievances and collective claims aimed at the modification of terms and conditions of employment, which are excluded from its scope of application.
101. With respect to labour disputes occurring in the public service, the Labour Relations (Public Service) Convention, 1978 (No. 151), provides that the settlement of disputes regarding terms and conditions of employment is to be sought through negotiation between the parties or through independent and impartial machinery, such as mediation, conciliation and arbitration. The Convention goes on to stress that such machinery should be established in such a manner as to ensure the confidence of the parties involved. During the debate leading to the adoption of the instrument, an understanding was reached that this Convention did not deal in one way or the other with the question of the right to strike.
102. Apart from these international labour Conventions and Recommendations, as mentioned above, the Governing Body Committee on Freedom of Association and the ILO Committee of Experts on the Application of Conventions and Recommendations have formulated a number of principles on the right to strike and the limitations that may be imposed on that right. The ILO has relied on these principles as defined by these bodies in advising member States on the drafting of their labour laws. These bodies have developed such principles based on the general principles on freedom of association laid down in the Declaration of Philadelphia and the Freedom of Association and Protection of the Right to Organize Convention, 1948 (No. 87). The Committee of Experts has undertaken a general survey (its sixth) on the application of this Convention and of the Right to Organize and Collective Bargaining Convention, 1949 (No. 98), which the Conference examined at its 81st Session in 1994.
Prospects for a new instrument on disputes settlement
103. The above information shows that the subject of disputes settlement has been covered by only very few international labour standards, even though it is an important subject-area in the field of industrial relations. This is partly because certain issues directly or indirectly linked to the problem of disputes settlement -- particularly strikes and lockouts -- have always been highly controversial. It might be preferable to re-examine the question as a whole, in particular in the light of the recent developments described above, in order to determine whether the ILO should in the near future take initiatives in this field, and if so, what they should be.
104. In the Conclusions adopted by the Conference in June 1996 it was emphasized that investment lies behind many of the ILO's principal concerns. Without sustained and well-selected investment, social policy goals are difficult to reach. It is important to be clear on the nature of investment, the factors that lie behind the decision to invest and the impact it has on employment. The following discusses the impact of investment on output and employment growth; enterprise decisions on investment; the interaction of the public and private sectors; and foreign direct investment. Suggested issues for discussion are also presented.
105. Investment is a crucial element in the process of output growth. As such, it is a precondition for the improvement of both wages and the quality of employment. Poor investment performance can be a very serious obstacle to employment growth, especially in periods of structural adjustment. Indeed the disparity in investment performance between different regions is a major factor in explaining their varying employment levels. Economies in transition are in particular need of investment to modernize their economies. Furthermore, the nature of investment, its location and any possible "skill bias" associated with it, may have consequences on the level of employment.
106. Investment by definition requires savings. A high level of both savings and investments is desirable. Savings which finance investment can come from abroad through various channels, including direct foreign investment, so that a country can invest more than it saves. A large number of countries with slow growth have generated few domestic savings and have relied heavily on foreign borrowing, taking the form of commercial borrowing or concessionary flows. The level of their domestic investment is often too low to ensure sustainable output growth or to raise the quality of employment. In the recent past, however, many countries with fast growth and a good record of employment creation have relied very little on foreign savings and have generated their own resources to finance a high level of domestic investment. In general, larger international flows of capital should increase the overall efficiency of resource allocation as well as of investment.
107. As conventionally measured, investment is a very mixed category, comprising equipment and machinery, residential and non-residential buildings, land improvement and other forms of infrastructure development, such as roads and harbours. Some of these elements are crucial to the growth of output and employment, while others may appear as a result of growth. Similarly, many factors which might rightly be regarded as playing an essential role in a country's development are not regarded as investment. These include, for example, human capital (i.e. the process by which individuals acquire skills). Although this process of skill acquisition fits uneasily within the normal income accounting framework, its parallel role to physical investment must be acknowledged.
108. It has been established that there exists a fairly strong relationship between certain types of investment, such as investment in equipment and machinery, and economic growth. This relationship suggests that efforts should be made to promote this type of investment. A good policy framework is needed, however, to ensure that the efficiency of investment, and hence the returns on investment, are optimal. With a bad policy framework, privileged access to credit and loanable funds for favoured enterprises can result in over-investment in one area and under-investment in another, resulting in labour being starved of capital in certain sectors.
109. The Conference Conclusions singled out the need for an enabling global environment in order to achieve full employment. In the context of promoting investment, the call for economic and financial stability and for open economic and trade policies is crucial. Also of essential importance is the conclusion that the globalization of financial markets should lead to productive investment, and not financial speculation.
The enterprise investment decision
110. Most discussion of what drives investment has been framed in terms of decisions taken by a firm on whether to extend or modify its capital stock. Issues relating to labour market regulation have usually been ignored. Public sector and household sector enterprises have been assumed to behave in broadly the same way as incorporated private-sector enterprises. However, the former are both likely to pursue somewhat different objectives from private enterprises in general, and often face different constraints, especially as regards employment. In the past, discussion on the determinants of investment generally ignored decisions on relocation abroad, since this was rarely considered an option. Clearly, many different considerations have come into play in recent years. The focus on globalization, including the reduction of trade barriers, lower transport costs and the lower costs involved in supervision and quality control, has opened up many more options to investors. In particular, this has given much greater weight to the consideration of relative labour costs and, in many instances, to different degrees of environmental protection and health and safety standards in deciding on the location of production. Many more workers are now integrated into the global market place than before.
111. In the past, there has been no need to address explicitly the issue of labour market regulation in relation to investment decisions in the private sector, especially in industrialized countries. In developing countries, however, the situation has often been different, as labour legislation is more difficult to implement and the extent of poverty has often caused an extremely wide range of wage rates to emerge across the formal, informal and agricultural sectors, a difference greater than would be justified by relative productivity levels. The extent of labour market segmentation, and indeed of the implementation of labour legislation, can then affect the scale and location of investment decisions and the amount and quality of employment generated.
112. It has always been acknowledged that greater investment leads to greater employment in the production process only if the new investment is not labour saving to the same degree. It has often been assumed that if workers are displaced because a new investment is labour saving, they are automatically absorbed elsewhere. Clearly, this process is far from smooth. In addition, the technology incorporated into the investment has often been assumed to reflect research into new processes which take into account only domestic resources and skill availability, and which are therefore "appropriate" for countries' skill levels.
113. In developing countries, it has long been known that some technologies embedded in new investment goods could well be inappropriate in terms of the country's endowment of capital and skills. Investment would then have weak or negative effects on employment. In addition, increasing wage inequality in some industrialized countries also suggests that much new investment in those countries is complementary to more highly skilled labour and disregards the availability of unskilled labour. Less and less unskilled labour is then required in the productive process.
Public and private sector interaction
114. The ways in which public policy in general interacts with private investment decisions relate to the expectations engendered by the government's overall policy framework and the success of these in encouraging investment, especially where one act of investment is a precondition for others. They also concern the wide range of measures that governments must in any case undertake to ensure broad-based private sector investment. Various research studies on the links between government and private investment have been undertaken and have often demonstrated a positive relationship between the two. It is however difficult empirically to isolate the particular types of government investment that seem likely to induce private investment. Some of the useful forms of government expenditure concern investment, mainly in infrastructure, where bottlenecks in ports, roads and power supply can raise costs in the private sector to a prohibitive extent (see below for the role of the private sector in easing such bottlenecks).
115. Government expenditure policy can also discourage private investment. This can happen under two scenarios. On the one hand, where credit to the private sector is limited and very possibly rationed, the small-scale and household sector suffers the most and formal sector enterprises with privileged banking links are favoured. The employment consequences of this are then increased differentiation between the conditions of employment and work in formal and informal enterprises. On the other hand, even when the market sets interest rates the effect can be the same. Public sector savings on current account (including the savings of public sector enterprises to the extent that their debt is guaranteed by the government) may become increasingly insufficient to cover capital payments. The public sector then has to increase its borrowing, which pushes up interest rates to a level that discourages private investment. In addition, once public borrowing reaches a certain level, the likelihood of allowing inflation to reduce the real value of government bonds increases, devaluation becomes inevitable and capital flight is encouraged. A vicious circle of stagnation ensues, with severely negative effects on employment levels.
116. The conclusions of the Conference on the need in industrialized countries to reduce real interest rates, fiscal deficits and public debt in order to boost investment and employment are relevant here. It should in turn be noted that economic growth and lower unemployment could have positive effects that help reduce public deficits.
117. The possible role that the private sector could play in easing bottlenecks in physical infrastructure has been mentioned. Three possibilities of interaction between the private sector and the public sector can be noted: management contracts for public enterprises and utilities; construction and operation of, inter alia, roads and bridges by the private sector; and leasing. The first of these is usually a half-way house on the road to privatization, so that concerns raised in the context of privatization necessarily arise, such as the issue of employment security for the workforce. In this respect the desirability of matching any fall in employment by job creation elsewhere should be recalled, as specifically mentioned in the Conference conclusions for the economies in transition. The second applies particularly to quasi-monopolies, such as power generation, toll roads and tunnels. Such monopolies can have significant effects on costs for the rest of the economy if no obvious competition is feasible: failing such competition, complicated and sensitive issues of regulation arise. The third possibility -- leasing -- has become popular where the government wishes to reduce its borrowing requirement without giving up control over operations. Private companies can then either purchase existing government assets (the purchase price being regarded as negative borrowing by the government) or build up new assets with a view to leasing them to the government. This is likely to involve some private sector management, which may reduce running costs. However, the private investor will generally have to borrow at a higher cost than the government, so that the cost reduction may well be illusory.
118. One area where government policy on investment has a considerable impact on employment, particularly in developing countries, is in the choice of technology. In the past, governments sometimes encouraged the premature mechanization of agricultural activities, with negative effects on rural employment and wages. However, the widespread real currency devaluations of the 1980s largely eliminated that concern. In the course of the decade following the debt crisis, in most developing countries imported equipment became far more expensive in terms of consumer goods and of wages. It was not always possible, however, to build on this improving cost differential in favour of labour, either because the managerial skills required to use a large labour force equipped with more basic equipment were absent, or because the overall small-scale and domestic sector was underdeveloped, underfinanced and unable to bid for government contracts. However, the potential for employment generation through labour intensive methods with local participation remains significant, for example in urban land and building improvement projects, as well as for small-scale public works in rural areas. This point is recognized, for example, in the Employment Policy Recommendation, 1984 (No. 169). It is essential in this context for relevant labour standards on remuneration and working conditions in such activities to be applied.
Foreign direct investment
119. As mentioned earlier, the combined effect of various ongoing processes, lumped together under the heading of "globalization", has been to broaden considerably the possibilities for relocating production between countries and regions in order to serve any particular market. This process has been beneficial to employment, although many problems of adjustment arise. Success in attracting foreign direct investment to a host economy, particularly in order to serve foreign markets, has come to be seen as an accolade given to a country for its choice of economic and labour market policies. It is necessary in this respect to be clear as to the benefits that a host country and its labour force can expect from foreign direct investment (FDI). These benefits will be greater when --
120. Policies for making the most out of FDI have included such features as a minimum level of local equity participation and rules on minimum local content. A minimum level of local equity participation is usually intended as a guarantee that local investors will contribute to the management of the project. Local content rules have an obvious rationale and impact on local employment. However, such regulations need to be accompanied by positive efforts to upgrade local potential input. All this suggests that an industrial policy and active intervention is needed to accompany FDI and not only, as is more usual, fiscal incentives to attract it. This is explicitly recognized in the Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy. With regard particularly to developing countries, the Tripartite Declaration calls on multinational enterprises to take into account governments' employment policies and objectives. In order to do so, they should adapt their technologies to the needs of the host country, develop appropriate technology and promote the processing of local raw materials. They should also participate in official training programmes and broaden the experience of local managers.
121. Finally, considerable discussion has been generated on the factors that determine the location of FDI. In this respect there is every reason to believe that the same background factors that attract private sector investment in general and encourage its expansion will attract FDI as well. These factors include political and social stability, relative price stability and a credible macroeconomic policy framework. More controversy arises over the role of labour market policies and institutions and other features, such as health and safety standards. Labour flexibility, whether in terms of the employer's ability to modify the number of workers employed and hours of work, or in terms of the workers' ability to shift between tasks or their acceptance of fluctuating incomes, is considered to be important as a determinant, over and above that of prevailing unit labour costs. It is necessary, however, to have some notion of the range over which some of these factors operate. Assuming that virtually all other costs are set internationally, the difference in unit labour costs in some industries is so great that the industries disappear from some locations unless effectively a new product is created. But even large differences in unit labour costs can be overridden by other elements of an enterprise's strategy, let alone by direct government action to attract or retain enterprises. Correspondingly, enterprises can relocate, for example, on account of taxation or environmental controls, and not unit labour costs. Slight differences in unit labour costs may be easily offset by considerations arising from economic policy in general and, indeed, by the prospects of working with a responsibly organized labour force. Concern for labour market flexibility is likely to arise principally when other differences are slight, for example in unit labour costs and in general policies. But the scale of these factors, and indeed of factors relating to health and safety and pollution, remains very difficult to assess.
Suggested issues for discussion
122. Should the Governing Body decide to include an item on investment and employment on the agenda of the Conference for a general discussion, the following are some preliminary suggestions for issues that the Conference may wish to address:
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123. In the light of the above proposals and those contained in document GB.267/2 on the following questions, the Governing Body is invited to determine the agenda of the 87th Session (1999) of the International Labour Conference:
Proposals for new standards
(1) Recording and notification of occupational accidents and diseases (including the revision of the list of occupational diseases, Schedule I to the Employment Injury Benefits Convention, 1964 (No. 121));
(2) The protection of workers' personal data ;
(3) The promotion of cooperatives;
Proposals for the revision of existing standards
(4) Revision of the Maternity Protection Convention (Revised), 1952 (No. 103) and Recommendation, 1952 (No. 95);
Proposals for a general discussion
(5) The role of the ILO in technical cooperation;
(6) The settlement of labour disputes;
(7) Investment and employment.
Geneva, 12 February 1997.
Points for decision: Paragraph 1;