ILO is a specialized agency of the United Nations

268th Session
Geneva, March 1997


Report of the Committee on Employment
and Social Policy

1. The Committee on Employment and Social Policy met on 17 and 18 March 1997. Ms. Sarmiento (Government, Philippines) was elected Chairperson. Mr. Katz and Mr. Itoh were Employer and Worker Vice-Chairpersons, respectively.

2. The Committee had the following agenda:

  1. The role of enterprise development in employment promotion and social progress: An ILO strategy.
  2. Preliminary report on syntheses of ACC Task Force country employment policy reviews.
  3. World Employment 1996-97: National policies in a global context.
  4. Child labour.

3. Due to lack of time, the second item on the agenda was not discussed by the Committee.

Child labour

4. The representative of the Government of Germany formally proposed that the item on child labour(1) be removed from the agenda of the meeting of the present Committee. At the November 1996 Session of the Governing Body, various delegates had felt that the more appropriate forum for discussing progress under the International Programme for the Elimination of Child Labour (IPEC) was the Committee on Technical Cooperation. Although important aspects connected to child labour and social and employment policy could be dealt with in the present Committee, the question of progress being made in the implementation of the IPEC technical cooperation programme should be entrusted to the Committee on Technical Cooperation.

5. The Employer Vice-Chairperson (Mr. Katz) regretted the words of the German delegate and reminded the Committee that child labour was originally assigned to the present Committee by the Working Party on the Social Dimensions of the Liberalization of Trade. The Committee had a first discussion in 1995 on the basis of an excellent document by the Office. The Employers' group had taken the position that a follow-up paper was needed to see what developments and policy issues had occurred since then. This was an excellent paper by the Office laying out action policies. The Employers' group agreed that IPEC was an operational programme, and as such should be reviewed by the Committee on Technical Cooperation as well as by the IPEC Steering Committee, but the issue of child labour was larger than IPEC itself, and the policy issues involved should be dealt with in a policy forum. If the ESP Committee did not do it, the entire Governing Body should discuss it. If neither discussed it this would suggest that until the new Convention was adopted the ILO would have nothing to do with child labour except the operational activity of IPEC. The Employers had no intention of arrogating oversight of IPEC to the ESP.

6. The Worker Vice-Chairperson (Mr. Itoh) reserved the position of the Workers' group, as although there was some support among them for the position adopted by the Government of Germany, a full debate on the issue had yet to be undertaken. He strongly urged, however, that the paper on child labour be reviewed at the current meeting of the Committee on Employment and Social Policy.

7. The representative of the Government of France stated that the position of the Government of Germany was widely supported, but agreed with the Employer Vice-Chairperson's position to retain child labour as a topic for discussion in the present Committee. He proposed a compromise position which would note the relevance of child labour discussions within the Committee for Technical Cooperation but on the understanding that the present Committee should continue to review the policy aspects.

8. The representative of the Government of the United States concurred with the previous speaker.

9. The Chairperson observed that the mandate of the ESP was complementary to that of the Committee on Technical Cooperation in that the ESP reviewed policies, while the latter reviewed programmes. Their mandates were not mutually exclusive. Referring to the compromise suggested by France, she suggested the Committee continue to discuss child labour.

10. The representative of the Government of Germany agreed that this was a pragmatic proposal, but the document submitted to the Committee gave the mistaken impression of a progress report, which should thus not be reviewed by the present Committee. He suggested that the Committee move away from the structure of the document and focus on the employment and social aspects of child labour.

11. The Director of the Working Conditions and Environment Department (Mr. Bequele) outlined a number of major areas in which progress had been made by the Office since March 1996. The Office had carried out preparatory activities in support of international labour standards as a result of the Governing Body's decision in March 1996 to place child labour on the agenda of the 1998 International Labour Conference, with a view to adopting new international standards on child labour. New policy perspectives had been put forward in the Law and Practice Report entitled Child Labour: Targeting the intolerable and in the accompanying questionnaire which sought to solicit the views of member States. In the past year, a bolder approach to the elimination of child labour had been advocated by the ILO, which called for a time-bound programme of action, the immediate suppression of the most intolerable forms of child labour, and an integrated approach combining prevention, withdrawal and rehabilitation. This approach also called for the consideration of the principle that "a crime committed against a child anywhere is a crime everywhere" and advocated the provision of increased resources at the international level for action against child labour at the national level. ILO-IPEC continued to attract interest and visibility in this field, with a record number of 24 participating countries, 12 of which had joined IPEC in the last year alone (ten of them were in Latin America). Donor countries now totalled 14, with the Government of Germany again taking the lead with another substantial contribution for the period 1996-2001, while Spain remained the principal donor for Latin America. Within IPEC, there was increased emphasis on activities involving employers' and workers' organizations in line with the commitment expressed in both the IOE and the ICFTU Resolutions of June 1996 which had been supported by member federations. He cited examples such as the organization of a high-level conference in May 1997 by the Employers' Federation of Pakistan in collaboration with the ILO, and the Partners' Agreement just signed between the Sialkot Chamber of Commerce in Pakistan, UNICEF and the ILO to bring about an end to child labour in Sialkot. Employers had shown increased interest in the formulation of codes of conduct and had called upon the ILO for information and guidance. The ILO was also preparing a report on labelling which would be released in the coming two months. Noting the commitment of workers' organizations, Mr. Bequele stated that a number of trade secretariats would have child labour on their agenda in 1997. In addition, an agreement had been reached between three trade secretariats and the FIFA concerning labour practices in the manufacture of footballs. On the international scene, he mentioned that the Amsterdam Child Labour Conference had been attended by over 30 governments, employers' and workers' organizations and NGOs. It had lent its support to the proposed new convention on child labour and to the work of IPEC. Furthermore, the Government of the Netherlands had committed US$1 million for the Statistical Information and Monitoring Programme on Child Labour (SIMPOC). Mr. Bequele urged donor countries to come forward to support SIMPOC. In October the ILO would be collaborating with Norway to host another major international conference on child labour, while two similar regional conferences would be held in May with the OAU and with the Government of Colombia. In conclusion, Mr. Bequele noted the cooperative agreement signed between the ILO and UNICEF to collaborate in the area of child labour. He expressed guarded optimism for the future, noting that the ILO's principles and values were receiving positive resonance around the world, that there was now considerable worldwide support for the new convention and renewed interest in the work of IPEC.

12. The Worker Vice-Chairperson indicated that the Office should not overlook the outcome of the Copenhagen Social Summit of 1995, which had warmly praised the work being done by the ILO on child labour. He noted that the Informal Tripartite Meeting at the Ministerial Level on Child Labour, held during the 1996 Conference, also leant support to the child labour issue. Generally there was agreement that child labour should be eliminated, but differences existed between the groups with regard to the specifics. He agreed that there was often a link between child labour and poverty. It was therefore important for structural adjustment programmes imposed by the IMF and the World Bank to be reformed so that they did not exacerbate poverty levels. Specific, concrete messages should be transmitted to the International Labour Conference in 1998 so that these considerations were taken into account in the formulation of the new Convention. As regards comments in the Programme, Financial and Administrative Committee concerning the participation of non-governmental international organizations in ILO meetings and activities, he agreed that NGOs working on child-labour issues often had high-level expertise, but their perspective was often narrow: they might be invited to meetings, but there was no question of their being involved in the decision-making processes of the ILO. He welcomed the ILO document on child labour, and expressed strong support for the new Convention, stressing that it would be complementary to Convention No. 138. The new Convention should focus on the most intolerable forms of child labour, but he expressed reservations with regard to the term "the very young" which classified this age group as being those under 12 years of age, because this could give the impression that the ILO tolerated child labour over the age of 12. In addition, he noted that there was a need for consensus on the terminology to be used in the new Convention. He expressed appreciation of the move by ACTRAV and ACTEMP to have full-time staff members working with IPEC so that the programme could establish a closer link with the activities of trade unions and employers' organizations. He outlined the importance of labour inspection and the promotion of technical cooperation for the training of labour inspectors in the elimination of child labour, and suggested that IPEC might want to follow-up on an initiative expressed in an earlier Governing Body session to hold an international training workshop for labour inspectors. The Worker members considered that in situations where children were removed from the labour force, they should be replaced by adult members of the same family. This would ensure that the total income of the family was not significantly reduced and would consequently reduce the probability that the child would be forced into other forms of work. He queried the composition of the IPEC Steering Committee, which at its last meeting had only two workers' representatives out of 70 members, and stressed that a more tripartite structure should be created.

13. The Employer Vice-Chairperson commended the Office on the paper, but noted that the text of the document could have been supplemented with illustrative cases. Similarly, with regard to recent international conferences, it would have been appropriate to have an appendix indicating the major conclusions of the various conferences and perhaps even some evaluation of what was accomplished. He queried whether, as a policy measure, the Office had devised a strategy for all these international meetings and wondered further whether the only objective for the forthcoming international meetings was to create a favourable public climate for the adoption of a new standard in the Conferences of 1998 and 1999 or whether there was something more that the ILO could achieve in the interim. With reference to the statement made by Mr. Bequele that "a crime against a child anywhere is a crime everywhere", he requested clarification as to what was required to achieve the prosecution of paedophiles who committed crimes against children in foreign jurisdictions and how this was to be addressed. There were important policy issues raised by the IOE as a position on this matter, of which the Organization was aware, but where was the Office heading on this subject? There were important policy issues involved. The Employers believed it was necessary to ensure that such programme initiatives above all did no harm and that the withdrawal of working children was complemented by the provision of alternatives, such as schooling. He drew the Committee's attention to the IOE's General Council resolution of June 1993 on child labour, which was not very different from the ILC resolution on this important part. He shared the Workers' concern with regard to the involvement of NGOs in these initiatives. Although there were many local NGOs which addressed the problem very well at the local level, in certain countries NGOs were in the business of attacking business. Constant evaluation was important, especially in a programme such as IPEC, noting that the paper mentioned three types of evaluations. He questioned whether the evaluations carried out so far had raised any policy issues which should be dealt with by the Committee. With regard to the point in the paper on enhanced communications, the Sialkot programme was well received in the US press and was interesting for the alternatives it put forward. He noted that in Bangladesh the paper reported disastrous results from a labelling scheme, and that the BGMA had a programme providing alternatives on which further information would be welcome. The work of the ILO-IPEC has gained enormous respect within the Congress of the United States and its popularity extended to potential private donors within the country. In this respect, he asked what constraints affected the expansion of the IPEC programme, and encouraged the Office to consider tapping private funds for technical cooperation programmes.

14. The representative of the Government of India congratulated the Office for the report, and ILO-IPEC for the work being done to combat child labour. He expressed support for the adoption of a multimedia package, as outlined in paragraph 10 of the document, as a powerful medium through which international consciousness could be aroused. The document did not spell out what this package should contain, but it should highlight the dangers of the employment of children, be optimistic in its approach, and advocate that the problems of child labour should be dealt with alongside addressing the problems of poverty, illiteracy and unemployment. This notion should also be incorporated into the new Convention. The rehabilitation of child workers should be accorded as much significance as prevention and withdrawal. Working children were different from other children, and were a heterogenous group, and a multidimensional approach was needed to deal with their various needs. At the international level UN agencies should join efforts, which should be mirrored by similar collaboration between various ministries at the national level. The choice of implementing agencies for projects at the field level should be carefully selected. Synergy also needed to be established among the various ongoing projects so that a common long-term objective would emerge. Evaluations should cover not only content, but also processes, and IPEC projects must involve all social groups within the various communities so as to create an appropriate enabling environment, which was a prerequisite for success.

15. The representative of the Government of Germany welcomed the document prepared by the Office. The new Convention was a springboard for reaching the goals of Convention No. 138, and the activities of employers' and workers' groups were very important in this respect. In reference to the role of NGOs, he noted that important political and strategic decisions of the ILO would continue to be adopted by the tripartite structure, but the expertise of NGOs should be used to make these decisions as balanced as possible. He thanked the Government of the Netherlands for organizing the Amsterdam Child Labour Conference, and the ILO for its contribution to the Conference's success. In response to the query raised by the Employer Vice-Chairperson on the legal aspects of prosecuting paedophiles for crimes they committed in foreign countries, the representative of the Government of Germany explained that Germany has amended its law to allow for Germans to be extradited and prosecuted. He expressed full support for labelling, but indicated that this should be on a voluntary basis, i.e. manufacturers should not be forced to label their products, just as the consumer could not be obliged to buy only those products which were labelled. Finally, in terms of the various forms of evaluation, i.e. self-assessment, joint assessment with donors and tripartite forum evaluations, he expressed support for the tripartite reviews and advocated that they be conducted more often.

16. The representative of the Government of Finland commended the ILO on the success of the IPEC and its achievements over the past few years. International commitment to the programme had been very much in evidence at the Amsterdam Conference, but the ultimate objective of the total abolition of child labour should not be forfeited in view of the emphasis on the elimination of the most intolerable forms of child labour. This could be included in the new Convention. He urged the development of a reliable databank of statistics to make the task of monitoring the problem of child exploitation much more transparent and thus easier to tackle. He expressed support for the principle of "a crime committed against a child anywhere is a crime everywhere" and stated that this was an important issue for international cooperation, which could be further advocated within the framework of the new Convention.

17. The representative of the Government of the United Kingdom also congratulated the Office on a concise and comprehensive document. The United Kingdom Government had participated in the Amsterdam Conference and had reaffirmed its strong commitment to international action to stop the exploitation of working children. He affirmed his Government's support for the conclusions of the Conference, and strongly endorsed the role of the ILO through its IPEC in the fight against child labour. He reiterated full support for the new Convention, as had been expressed at the Amsterdam Conference, and urged the ILO to act upon the Conference conclusions, in particular the call for a regular review of the child labour situation and a periodical evaluation of progress being made, as well as the identification of best practices. This would be an extremely useful exercise for identifying priority areas of action for donor governments, and would also reinforce the ILO's strong reputation in the area of child labour.

18. The representative of the Government of Malaysia, while expressing his Government's support for the new Convention, noted that the new instrument on child labour should not have the objective of raising existing standards as this would create problems for member States and would ultimately be counter-productive for ratification. The new standard should focus on improving the mode and the strategy of implementing existing standards by according priority to the most intolerable forms of child labour. He further stated his deep appreciation for the work of IPEC, which had received considerable support among member States. He noted that the role of the ILO in addressing the problem of child labour should be both as service provider and as a standard-setter. He supported the view that the problem of child labour had socio-economic roots which needed to be taken into account, and the long-term approach should encompass both employment generation and poverty alleviation initiatives, and also educational programmes and the promotion of community awareness on child labour. Malaysia had effective legislation in place and a labour inspection system to monitor and control child labour. A special feature of Malaysian legislature made the parent or guardian of the working child equally liable for punishment as the employer. Poverty eradication was given high priority in national development programmes and this had helped to address the root cause of child labour. In conclusion, he stressed that facilitative and promotional approaches to the problem of child labour exploitation would produce better long-term results than regulatory measures.

19. Mr. Mansfield (Worker member), adding to the comments already raised by the Worker Vice-Chairperson, emphasized the importance of economic progress for countries combating child labour because of the strong links between the poverty of families, impoverished countries and child exploitation. It was important to secure higher levels of growth and more equitable distribution of growth in countries. He expressed reservations on structural adjustment programmes put forth by the IMF and World Bank, and cited the opinion of African delegates in the Workers' group which reflected their concern on the relations between structural adjustment programmes and the rise of poverty. He noted the example of Uganda, which had been informed that debt relief from the IMF had again been postponed in spite of expectations that it would be forthcoming this year. He regretted this action and said it contributed to the rising trend of child labour in Africa. He agreed with the comment made by the representative of the Government of India that poverty alone was not the sole cause of the exploitation of children, but rather that it was a lack of will on the part of governments and other institutions which tolerated child labour and exploitative practices. He stressed that poverty should not be accepted as an excuse for child labour, and advocated the adoption of positive programmes that would produce the circumstances to allow child labour to be eliminated. In reference to the document under review, he thanked the donor countries for their continued contributions to the IPEC programme, in particular the Governments of Germany and Spain, but noted that additional funding from governments was needed. In this regard, he made reference to his own country, Australia, and proposed that he and his colleague, Mr. Noakes, from the Employers' group would encourage the Government of Australia to increase its contribution to IPEC. He informed the Committee, in response to the query raised by the Employer Vice-Chairperson, that Australians guilty of child exploitation in foreign countries were subject to criminal proceedings in Australia just as in Germany, and confirmed that a number of such cases had already been tried in Australian courts to eliminate child labour in the production of footballs. He commended the soccer federations and FIFA for their initiatives to eliminate child labour in the production of soccer balls, as this industry was known for its exploitation of child labour, and he expressed his hope that ILO-IPEC would focus attention on this area. He advocated the need for independent monitoring mechanisms to evaluate the effectiveness of codes of conduct, and stated that firm reporting procedures should be put in place. Without proper monitoring, codes of conduct were of little value. The Olympics to be held in the year 2000 in Sydney should be demonstrably free of equipment manufactured by child workers, and this should be an international objective. In response to the Employer Vice-Chairperson's request for information on trade union activities in the field of child labour beyond the activities listed in the document, Mr. Mansfield made reference to a programme to free bonded child brick-making workers in Pakistan. The ICFTU Asia-Pacific organization was raising funds to buy out the bonds and provide children with educational opportunities as an alternative to work. He urged the Office to upgrade research and statistics related to child labour. He also encouraged the ILO to allocate more resources from its regular budget to child labour issues so as not to rely solely on IPEC resources for this. As the programme had universal support among ILO constituents, the ILO budget should reflect this.

20. The representative of the Government of Swaziland welcomed the report prepared by the Office. While agreeing with the approach of IPEC, as well as Employers' and Workers' groups in condemning all forms of child labour, he urged the Committee to take into consideration the diverse social and cultural values of the different regions as, for example in the African context, there was a distinction between child labour and the training of children. Detailed regional studies were needed to highlight these disparities. As regards the applicability of paragraph 10 of the document, the basic needs of the poor were overwhelming in Africa, and as such there was a much greater need for measures to take this into consideration when considering initiatives. In particular, while there may be fruits inherent within the globalization processes, the trend may initiate a restructuring that had a negative impact on the poor. He urged the ILO to address itself to the rising phenomenon of street children, as street life was equally harmful to the natural development of the child and action to prevent this trend would be welcomed by all those concerned.

21. The representative of the Government of Italy recalled the appeal contained in the ILO Constitution and the Philadelphia Declaration for the protection and the provision of welfare for children. He acknowledged the worldwide awareness of the need to address the problem of child labour, and conveyed his government's financial support, in spite of constraints, which would be directed towards the supply of equipment to children's hospitals and the opening of schools in South Asia jointly through UNICEF and IPEC. The Italian Government considered the intervention of employers' and workers' organizations particularly valuable, as was the intervention of NGOs and religious missions working in the field who could identify the problem of children and the best way to act.

22. The representative of the Government of Japan expressed his Government's appreciation for the strengthening of the ILO's activities on the elimination of the most intolerable forms of child labour. The Government of Japan was fully aware of the importance of tackling this particular problem, and lent its full support to the new Convention. His Government intended to seek the views of, and closely cooperate with, trade unions and employers' organizations in Japan to discuss how best Japan could participate in and support the adoption of the new Convention.

23. Mr. Anand (Employer member) stressed that, while IPEC placed emphasis on the curative aspects of child labour, within the Committee it was important to recognize the need to take stock of the preventive aspects of a future increase in child labour through excessive population growth. Persisting poverty, particularly in South Asia, combined with an unsatisfactory population policy would definitely promote the upward trend of child labour. World Employment had nothing much to offer for the subregion by way of analysis or optimism. He hoped that suitable linkages with other UN programmes, for example those of UNFPA and UNICEF, would be simultaneously established and NGOs would become involved so as to place emphasis on long-term prevention objectives. He requested that policy-makers take into consideration the importance of social actors working together.

24. The representative of the Government of India reiterated his earlier comments that the problem of child labour should be tackled separately from the problems of poverty, unemployment and underemployment, for poverty was the outcome of hostile factors, and child labour, by destroying the most productive form of future human resources, only perpetuated these factors. He advocated the adoption of a multiple strategy to address all these problems -- poverty, illiteracy, unemployment and underemployment -- in a uniform manner, and also to place child labour in its proper perspective.

25. The Worker Vice-Chairperson reiterated concern that, in spite of Conventions Nos. 138 and 29, the problem of child labour persisted worldwide. Consequently, new Conventions should strengthen the content of existing ones. Although the issue of the eradication of poverty and the elimination of child labour could not be separated, this did not mean that the problem of child labour could not be tackled immediately. He called for greater cooperation between the Workers' and Employers' groups to deal with these issues. He urged the ILO and Governments to take measures to ensure that poverty did not increase and to exercise their influence with the IMF and the World Bank to review structural adjustment programmes which were having a negative impact on countries and contributing to the problem of child labour. The relationship between the ILO and the Bretton Woods institutions should be used as a framework to address such problems.

26. Mr. Tabani (Employer member) expressed appreciation of the report prepared by ILO-IPEC, which portrayed the intensive work being done by the ILO in the field of child labour. He supported the comments raised earlier by the Employer Vice-Chairperson, and commended the ILO-IPEC on the work being done in South Asia, particularly in Pakistan. He drew attention to paragraph 30 of the document, which dealt with information dissemination and the methodical expansion of public information, as well as outreach in partnership with PRESSE. He fully supported the ideas expressed therein, and stated that the ILO should pursue these initiatives with vigour so as to bring the problem of child labour to the fore, to keep the public up to date on progress being made, and increase awareness of the subject.

27. The representative of the Government of China praised the ILO-IPEC for an informative paper. Child labour destroyed the physical and mental health of children, and it was imperative to adopt measures to address the problems raised. This was a shared responsibility for all governments and for the international community as a whole. The Chinese Government had adopted stringent legislative and practical measures to deal with child labour. He expressed his Government's full support for the new Convention: his Government would actively participate in its formulation. He reiterated the points made on linkages between poverty and the persistence of child labour, and urged the ILO to play a greater role in addressing these linkages through its technical cooperation and assistance programmes to developing countries. He urged the international community to take full account of the diversity and complexity of the problem.

28. The representative of the Government of Egypt expressed her Government's support for the new Convention. She acknowledged the international support of donor countries, particularly Germany and Spain, but urged the Committee to take into account the different socio-economic backgrounds of the different participating countries. She welcomed IPEC's concern to tackle child labour in Africa, and expressed the hope that the attention given to Africa would be commensurate with the magnitude of the problem. Egypt had modernized its legislation in the light of the problem of child labour and in line with the country's ratification of the International Declaration on the Rights of the Child in 1990. Egypt had declared a decade for the protection of children from 1989-99, and established a Council in 1988 for the protection of childhood. In addition, a Memorandum of Understanding had been signed with IPEC in 1996, and a national programme of action drawn up which included project activities with employers' and workers' organizations.

29. The representative of the Government of South Africa stated that the Office paper would be useful for consideration in the South African context. The social partners were very important where they spearheaded the international campaign against child labour: in South Africa, for example, there were currently over 50,000 NGOs, many of which were beginning to wind up their activities because they had worked in the struggle against apartheid. South Africa was ready to participate in IPEC, and the Department of Labour had undertaken a census in November 1996 to assess how many children were affected. The country's new Constitution, adopted in December 1996, now legally and politically defined a child as anyone below the age of 18. South Africa had also actively participated in a number of international conferences, but he would also like to see the Office develop a strategy on the number of international events spearheaded by the ILO and IPEC. His Government would ratify the Convention on the Rights of the Child, and tripartite discussions on this would take place shortly within South Africa. He conveyed his appreciation to donors with whom certain surveys had been developed on basic conditions of employment and child labour. He stressed his country's need for research and for the exchange of information, and he hoped to work more closely with the ILO's Bureau of Statistics to set up a reliable computerized database. He supported the principle of "a crime against a child anywhere is a crime everywhere", and informed the Committee that paedophiles taking advantage of the transitional phase in South Africa had been extradited. He further supported the comments of the Swaziland delegate on the issue of street children, as this was also a growing phenomenon in many cities of South Africa. He drew the Committee's attention to the use of the media as a powerful tool to stir up national debate, as had successfully been done in South Africa by a film produced by the ICFTU and the British TUC. His Government was reviewing the possibility of limited sanctions against the products of child labour, particularly within the football industry. The effects of structural adjustment would be addressed at the various meetings of the OAU and SADC, and he expressed the hope that more resources would be set aside from the ILO's technical cooperation budget to subsidise the IPEC contribution to Third World countries.

30. The representative of the Government of Uganda welcomed the document prepared for the meeting and stressed that the partnership of governments and of employers' and workers' groups was crucial to work on child labour. He supported the statement by the representative of Swaziland that there was a need to distinguish child labour from child training, as in Africa the latter was more prevalent. He hoped that this could be reflected in the new Convention. Uganda had ratified the UN Convention on the Rights of the Child, whose principles were now embodied in the country's Constitution of 1995 (article 34(4)). The approach to child labour should be multidimensional, and member States of the East African Cooperation group, i.e. Kenya, Tanzania and Uganda, had held a conference in February at which the topic of child labour had featured prominently as one area for the harmonization of legislation and cooperation. He thanked the donor countries for their financial support to the IPEC programme, and supported the idea that the ILO should allocate more funds from its regular budget for the programme's activities.

31. The representative of the Government of Brazil stated that the Government of Brazil had defined the fight against child labour as a top priority in its social policy with a series of short and mid-term measures taken in this respect. He extended his appreciation to IPEC for the support it had extended to the development of national policies to tackle child labour. He extended his Government's full support for the new Convention and paid tribute to the Government of the Netherlands for organizing the international ministerial conference on child labour, held in February in Amsterdam, which had provided a forum for a fruitful exchange of views and opinions on the subject of child labour.

32. The Employer Vice-Chairperson requested specific clarification as to whether the Office was planning a general policy recommendation on the concept of "a crime against a child anywhere is a crime everywhere". He had also asked whether, if resources were a constraint to the expansion of the programme, there was any objection to private donors, and if so, whether this could be re-examined. Finally, with respect to earlier remarks on programmes of the Bretton Woods institutions, he noted that at the High-Level Meeting in 1987 the need for structural adjustment had been recognized, that it frequently brought some pain, and programmes to minimize or mitigate the negative aspects of restructuring were needed. If child labour had been a direct result of structural adjustment, discussions should take place between the ILO and the relevant institutions to see what could be done and whether an operational programme could be applied through IPEC when the welfare of children was threatened.

33. The Worker Vice-Chairperson stated that Worker members supported the idea of greater cooperation between the ILO and the Bretton Woods institutions, providing this led to the incorporation of ILO principles in the policy recommendations and programmes implemented by the Bretton Woods institutions. He also reiterated the concern of the Workers' group that the degree of poverty and suffering had increased as a result of structural adjustment. In the discussion to be held on World Employment, it would be seen that even in countries which were considered to be successfully implementing structural adjustment reforms, the gaps between social groups were widening.

34. The representative of the Director-General (Mr. Taqi, Assistant Director-General), in response to the Employer Vice-Chairperson's comments, confirmed that funds from private donors, i.e. non-governmental sources, were welcomed by the ILO in line with recent guidelines that were less restrictive than previous ones and were designed to ensure that the independence of the work of the Office was not compromised by the donation. He gave an example of an important initiative in Italy which had seen employers' and workers' joining forces to collect over US$1 million as a contribution to the IPEC programme.

35. Mr. Bequele thanked the Committee for their comments on the quality of report, the work of the ILO in general and IPEC in particular. The question of terminology involved justified concerns that had been raised before: the secretariat had used the term "extreme forms of child labour" as a compromise, and a final decision would be reached regarding the correct terminology at the Conference in 1998. Convention No. 138 remained the fundamental Convention whose framework defined the work of the ILO in the field of child labour. The new Convention would be complementary, i.e. simpler in text and more amenable to greater ratification. As regards policy issues, the link between poverty and child labour had been taken into account by the Office, which retained the three objectives of prevention, withdrawal and rehabilitation within all its projects, while addressing concerns of eliminating poverty and providing universal education. The tricky but fundamental principle of "a crime against a child anywhere is a crime everywhere" was a powerful concept, and was invoked in the Office's report to the Conference in June 1996 to focus attention on the fact that there were certain types of child exploitation which were of an international nature e.g. trafficking, prostitution, cross-border problems, etc. It would be for the Conference in 1998 to decide whether the concept was acceptable and in what form. In support of this, the questionnaire sent to member States by the Office requested views on what kind of international judicial and technical assistance could be provided so as to reinforce the campaign against child labour. Mr. Bequele further noted that the Office would continue to reinforce its work on research and statistics, as well as provide factual and objective analyses on controversial issues such as labelling. In reference to IPEC, the composition of the IPEC Steering Committee had been decided six years previously, in consultation with members of the Governing Body, but in view of the fact that many things had changed since then, it was for the present Committee to decide the future supervisory framework for IPEC. As regards resources, he supported Mr. Taqi's earlier response, affirming that the Office was interested in exploring new avenues for the mobilization of new resources for IPEC. Finally with regards to evaluation, in addition to those mentioned by the representative of the Government of Germany, Mr. Bequele stated that tripartite evaluation exercises were also being carried out at the national level, as mentioned by the representative of the Government of India, and that these exercises would be carried out more often to enrich the IPEC experience.

36. Ms. Hagen (Deputy Director-General), commenting on the dialogue with the Bretton Woods institutions, stated that it focused on the short- and medium-term effects of structural adjustment having a negative impact on employment and poverty. The importance of targeted safety nets, especially for low-income groups, was a concern because of the spillover effect on children due to budget cuts in education and health. A significant change over the years had occurred in both the World Bank and in the IMF regarding the negative impacts of budget cuts in the programmes that were there to help children and the need for a more balanced approach to budget planning was required. Dialogue had focused more strikingly on the significance of core international labour standards and the need for consistency between the policies of the Bretton Woods institutions and the ILO. Discussions with Mr. Wolfensohn (President of the World Bank) had focused on an enhanced partnership with the Bank, which was already about to propose a different approach to its involvement in the campaign against child labour. Ongoing projects would be reviewed not only to see if there were any elements which tended to exacerbate child labour, especially in the area of public works projects, but also within educational projects to review whether there were components which contributed to child labour and enhance those elements which provided educational opportunities for children. The Office was therefore very encouraged by this increased cooperation between the two institutions and the ILO, which would see increased dialogue to review structural adjustment programmes in the coming years.

The role of enterprise development in employment promotion
and social progress: An ILO strategy

37. The Chief of the Entrepreneurship and Management Development Branch (Mr. Lisk) presented the Office paper.(2) The paper had been prepared in response to a request by the Officers and other members of the Committee at its meeting in November 1996. It was intended to highlight the ILO's involvement in enterprise development, including policies arising from the first ILO Enterprise Forum, held in Geneva in November 1996, on which a separate full report was available. The paper reviewed the contribution of enterprise development to achieving the twin goals of employment promotion and social progress. The first section of the paper established the rationale for enterprise development as a major ILO concern; the second presented the elements of the ILO's Enterprise Development Programme and related activities, and showed the place of enterprise development in the ILO's global programme; the third section provided the framework of an ILO enterprise strategy, including guidelines for promoting entrepreneurship and enterprise development as a means of achieving employment promotion and social progress. The ILO Enterprise Development Programme was concerned with all sizes and types of enterprise, and was responsive to the widely varying priorities and concerns of member States. The promotion of tripartism was also enhanced through ILO activities in enterprise development, which were developed in close harmony with other major programmes. The role of the State as a facilitator of enterprise activity was reinforced by technical assistance to improve productivity and competitiveness and to promote social objectives. Employers' organizations were assisted to expand their coverage and increase the impact of their promotional activities, as well as providing an institutional framework within the ILO for channelling technical assistance to promote enterprise development. The interests of workers and their organizations were served by technical assistance designed to improve working conditions at the enterprise level, encourage equitable sharing of productivity gains, and promote the basic rights of workers, in accordance with existing labour legislation, ILO principles, and international labour standards.

38. The Worker Vice-Chairperson pointed out that enterprises were not the sole representatives of business -- no business could function without its workers. Moreover, it was the workers who felt most of the pain of structural adjustment, and from the impact of the globalization of trade on every economy. He referred to the work of Professor Lester Thurow on the "The Future of Capitalism", and on how fundamental economic forces were reshaping the nature of capitalism. Divisions between the rich and poor were being exacerbated. The ILO was expected to help mitigate such problems, and the international community expected much of the ILO, as illustrated by the outcome of the World Summit for Social Development and the December 1996 WTO Ministerial Conference in Singapore, yet at the same time governments were attempting to reduce the resources of the ILO through budget reductions. The Worker members felt a mixture of confusion and hope on reading the Office paper, which apparently made reference to ILO principles, the Declaration of Philadelphia, tripartism and other social concerns. However, these important considerations were not reflected in past activities of the Enterprise Department, nor were they incorporated into the Programme and Budget proposals for 1998-99. This contributed to the view that this approach to enterprise development would not satisfactorily meet ILO objectives, and the Workers' group could not accept this submissively. In this connection, he emphasized that all ILO activities ought to reflect the needs of workers as much as employers, who were naturally mainly concerned with profits. The ILO ought not to undertake activities on which it did not have a comparative advantage or where other organizations had greater efficiency and experience. In particular, he drew attention to proposed activities on credit schemes and financial arrangements for SMEs. The ILO should not be engaged in such activities. Instead, its programmes should concentrate on issues such as poor industrial relations, which caused many of the bankruptcies among small and medium enterprises. The Enterprise Department should also devote resources to the promotion of international labour standards in small and medium-sized enterprises. Today's reality was of large companies taking steps such as the dismissal of 3,000 workers by a French company. He asked what the ILO's reaction was to this kind of development among multinational enterprises. In his view, the activities of the Enterprise Department concentrated too much on private sector enterprises, and it was important for more resources to be devoted to assisting enterprises in the public sector. Paragraphs 10 to 17 describing enterprise development in the ILO programme were confined to a narrow area. The corresponding activities seemed simplistic, and the Workers' group was not satisfied. Specifically, he asked the Office to explain what resources were going to be available to support the assertion in paragraph 14 that the enterprise programme was going to work with all constituents. Furthermore, criticism had been expressed of the Enterprise Forum, as mentioned in paragraphs 15-17. It ought to have been more truly tripartite, and should have concentrated more on the promotion of better industrial relations in enterprises. In conclusion, he noted that the Worker members had never been consulted on the contents of the strategy. Regarding the final paragraph, he considered that collaboration with other organizations ought to include the WTO.

39. The Employer Vice-Chairperson stated that the comments of the Workers' group made him feel like Sisyphus, who in Greek legend was forever condemned to push a rock to a hilltop, only to see it roll down again time after time. He wondered whether the comments just heard were an attack on the paper, on the Director-General's programme and budget proposals, or both, or on enterprises in general? Workers were naturally essential to the success of an enterprise, and many good employers in countries in the United States, influenced to some extent by the practices of Japanese industries, had achieved excellent results by working cooperatively with workers and their representatives, and took this for granted. The notion of "exploited workers" in the United States was not factual. Moreover, "globalization" was not an evil conspiracy, nor was it an entirely new phenomenon but a fact of economic life. The paper could usefully refer to investors as well as entrepreneurs. Sometimes they were the same, sometimes not, but an enterprise could not function without them any more than they could without the workers. The report seemed an attempt to rationalize an enterprise function for the ILO. This should not be in question. The ILO had an enterprise function, because enterprise was the source of all employment. Moreover, experience showed that private enterprise was the main source of freely chosen, sustainable and productive employment. Of course, public enterprises which functioned on commercial terms in market conditions could also provide such employment. On the other hand, private enterprises which operated for various reasons were heavily protected or subsidized under cartel conditions or provided unproductive or unsustainable employment. An enterprise strategy consisted of two elements: the provision of policy advice to governments and the social partners on how to create the right framework for enterprise creation, and development and technical assistance. The former included policy on macroeconomic conditions, e.g. stable fiscal and monetary policies which did not overlook savings or investment, liberal trade regimes, tax rates that did not discourage investment or regulatory structures to support free markets, especially flexible labour regulations to encourage, not discourage investors, especially in small businesses. The ILO should avoid propaganda against flexible labour markets. It was also important for such policy approaches to be supported by a positive cultural environment which educated people for continual retraining and adaptation to technological change, and which viewed business not as an evil, but as a creator of wealth and welfare. In addition to policy advice, the ILO should provide technical assistance in its areas of competence. The paper lacked sufficient detail on technical assistance, and the list in paragraph 13 was not complete and should be explained. Important themes included management training, organization of work, and enterprise financing (where the ILO might have some innovative ideas, even though it was not an issue where the ILO would appear to have comparative advantage). The ILO enterprise programme ought to be carefully evaluated, after it had had further experience. Returning to the comments by the Worker Vice-Chairperson on behalf of the Workers' group, he was puzzled by the apparent hostility to enterprise, which seemed to have arisen after the success of the first Enterprise Forum. He was in full agreement that all groups ought to contribute to the content of the next Enterprise Forum. In conclusion, he stated that the proposed International Small Enterprise Programme could be very useful, but not enough details were provided and the International Labour Conference would need to fill in the details of the programme. The importance of job creation through SMEs should not be doubted. Finally, the importance of the role of the ILO in eliminating poverty through the promotion of enterprise was clearly established.

40. The representative of the Government of Swaziland observed that the paper had the right focus in relation to employment promotion and that there was an important role for small enterprises in the battle against unemployment. Many successful small enterprises would become the large employers of the future. However, many small employers were not affiliated to employers' organizations, and were therefore denied the benefit of information and support from the ILO. He emphasized the importance of the tripartite relationship in all ILO activities, and commended the paper's promotion of productivity improvement, enterprise competitiveness, and the equitable sharing of benefits. There ought to be strong links in enterprises between training, productivity, job security and social protection. Also, good safety and health practices at work contributed to sound labour relations. Lack of trust at the workplace needed to be overcome, so that productivity improvements could be seen as mutually beneficial to management and workers.

41. Mr. Mansfield (Worker member) stated that no one disputed that enterprise development led to economic growth, for no employment was possible without enterprises. This relationship was apparent to all, and there was no point in constantly repeating it. He did not share the view that workers somehow considered enterprises evil, as had been suggested by the Employer Vice-Chairperson. He detected in the paper an attempt to make the role of the Enterprise Department more palatable to the Workers' group. There appeared to be major inconsistencies between the proposals presented to the PFA and the paper now before the Committee. It was important to avoid the impression that enterprise was the sole province of private sector managers: this excluded the important role both of workers and of the public sector. The Enterprise major programme allocated significant resources to developing new capital and financing arrangements for enterprise development. This was not an area where the ILO held a comparative advantage, and ought to be left to other agencies. However, there were significant areas where the Enterprise Department ought to be engaged, which had been ignored. These included the development of collective bargaining skills for enterprise managers and trade union leaders at the enterprise level. This was a growing need, since in many countries collective bargaining was increasingly delegated to the enterprise level. Other areas which required attention included skill development at the enterprise level and social issues in enterprise development (discrimination, child labour and equal pay). He sought assurances that these issues would be addressed. In addition, he emphasized the importance of the promotion of improved standards of management. Some trade union organizations might also benefit from the upgrading of their own management competences. In conclusion, he suggested that these new work proposals should replace items currently contained in the programme proposals for the Enterprise Department. The next Enterprise Forum must be organized in a truly tripartite manner. Responsibility for the Forum should be given to the Committee on Employment and Social Policy, and therefore a report on arrangements for the second Forum ought to be presented to the November 1997 meeting.

42. The representative of the Government of India thought that the paper was conceptual rather than operational, and unfortunately did not show clearly enough how its laudable intentions would be carried out. As in most human endeavour, there was generally scope for improvement, and he drew attention to some omissions. For instance, there was a misleading impression in paragraph 7 that the State was somehow withering away in the face of liberalization, stabilization and adjustment policies. In fact, the State had often assumed the new role of promoter and facilitator of the economy, and this deserved to be noted. Also, references in paragraph 13 to addressing employment needs in transition and post-conflict economies called for more clarity about the types of employment proposed. This would in turn have implications for addressing the management of skill formation. Many existing facilities required massive upgrading and modernization to address emerging needs for superior technical and technological skills. In addition, entrepreneurs required many types of help, for example, to gain access to raw materials and markets, and to the purchasing and sales functions of government.

43. The representative of the Government of Namibia referred to the Summary of Proceedings of the November 1996 Enterprise Forum. He was in sympathy with the views expressed by Worker members that a tripartite basis was essential to the success of such important forums. Tripartism was also the cornerstone for successful employment creation. In many developing countries, enterprises had shown bad attitudes toward workers, even treating them as the personal property of the owner or manager. Although the document had limitations, it nevertheless demonstrated a clear understanding of the issue of support for enterprise within the ILO, and the Enterprise Department should have the support of the Committee. The Committee's discussion ought to be confined to the substantive aspects of the report. Referring to paragraph 21 of the report, he said that in the wake of the World Summit for Social Development, the Director-General should request member States to comment on action taken by them to eliminate poverty through the creation of employment. He drew attention to the importance of the agenda item on general conditions to stimulate job creation in small and medium enterprises at the 1997 International Labour Conference.

44. The representative of the Government of the United States considered that the discussion was part of a continuum, drawing on the outcomes of the High-Level Meeting of a decade ago, and on the employment policy discussion at the June 1996 International Labour Conference. He noted that conclusions were unlikely to be reached today, and thanked the Office for producing the paper. Threads in it showed the beginnings of a rationale in the area of enterprise development. The discussion seemed to be on the right track. The 1997 International Labour Conference would provide a timely opportunity to debate these important issues. The November 1996 Enterprise Forum had had a tripartite flavour, and he had appreciated the substantive contributions of both Mr. Brett (Worker member) and Mr. Oechslin (Employer member). The debate between corporate leaders, and the comments by the Managing Director of the World Economic Forum added a welcome dimension. He emphasized the importance of a private enterprise-based economy in the achievement of growth and social progress. In anticipation of discussions at the June 1997 International Labour Conference, he hoped that any preparatory documents would advance a clear rationale for enterprise development related to the core mandate of the ILO. He expressed the high priority attached by his Government to this work within the ILO.

45. The representative of the Government of Finland referred to World Employment, and observed that growth was the sine qua non of employment. While great emphasis was placed on the right enabling climate for enterprise, this alone was not enough. For crops to grow, a good farmer and a lot of farming were needed also. The document described creditable work, but seemed to neglect the importance of the well-being of workers at the core of any successful enterprise strategy. Continuous learning, direct participation and mutual trust were indispensable to successful enterprise development. All activities ought to be adapted to the needs of member States.

46. The representative of the Government of Italy referred to the vital role of small and micro-enterprises and cooperatives, based on the Italian experience. Key factors in small enterprises included the closeness of management to manpower, responsiveness to technological change, and adaptability to economic realities. While economic growth could help to promote employment, this was not automatic. The closeness of the social partners in these types of enterprise ensured that they each understand both the economic and social issues. Technical assistance to this type of enterprise was likely to be very effective. His Government therefore supported ILO efforts in this field, and he underlined the importance of training, so that this sector could help to achieve its potential for improving living and working conditions.

47. The Employer Vice-Chairperson concurred with Mr. Mansfield. All the fields mentioned were appropriate for ILO activity, though not necessarily within the Enterprise Department. For this reason, there was an Assistant Director-General to promote coordination with the other programmes of the Office. There needed to be coordinated effort throughout the house. On the question of the financing of business, he agreed that this was not an area of ILO comparative advantage, but he was willing to see whether the Office might be able to offer some innovative points in this important area. As he understood it, this was a study rather than an operational programme, and useful suggestions might be made, for instance from multidisciplinary teams. Finally, with reference to the budget of the Department, he said that most of it was extra-budgetarily funded for specific functions, therefore there were some limitations on the flexibility of its use.

48. Mr. Hammar (Assistant Director-General responsible for ILO enterprise activities) thanked the members of the Committee for their comments. This would greatly help the Office for the future. Both the Enterprise Forum and the report under consideration were new, and consequently difficult, undertakings. The Director-General's programme and budget proposals and the Office paper might appear to show differences of emphasis, but they were written for different purposes, and at different times, the paper being naturally influenced in part by the positive outcome of the Enterprise Forum. Referring to the organization of work within the Office, he explained that enterprise-related activities were undertaken by every department. There was close interdepartmental cooperation on such issues as collective bargaining, work organization and international labour standards, but these were the prime responsibility of other departments, and ought not of course to be taken over by the Enterprise Department. As regards tripartite consultation, cooperation was also close with the Employers' and Workers' bureaux, which were invited to all preparatory meetings for the in-house enterprise strategy, and for the Enterprise Forum. Mr. Oechslin (Employer member) and Mr. Brett (Worker member) had been fully consulted on the Forum. Nevertheless, he had listened carefully to the comments made, and these would greatly assist in making improvements for the future. He thanked the Governments of Swaziland, India, Namibia, the United States, Finland and Italy for their advice and support. This explained in part the ILO's huge $60 million Enterprise Programme: the programme addressed a real need. He stressed, as the Employer Vice-Chairperson had mentioned, that some $50 million of this amount was funded from voluntary contributions, which showed that the Department's work was appreciated by ILO constituents and donors. The programme was appreciated by the World Bank, and attracted substantial extra-budgetary funds. Regarding the question of international labour standards, he accepted that additional explicit references could have been made in the Director-General's programme and budget proposals. However, there was frequent reference to the promotion of social justice, and of course, all ILO enterprise activities were implemented according to ILO principles.

49. The Director of the Enterprise and Cooperative Development Department (Mr. Ishida) thanked the members of the Committee for their support and constructive criticism. Since the issue of business finance had been raised by both Employer and Worker members, he briefly explained the programme. It was true that the ILO had no comparative advantage on issues of finance in the private sector. However, the principal purpose of the programme was entrepreneurship development and the development of micro-enterprises and self-employment, ultimately for the purpose of poverty alleviation. The programme was composed of a comprehensive package which included education and training as very important components. Vulnerable groups received basic training in starting and upgrading their businesses. The training was then followed by services in support of identifying business opportunities, marketing and financial management. Access to credit could be critical to this process, including micro-credit, savings and village banking (like the Grameen Bank in Bangladesh). It was vitally important for this sector that the programme study the result of experience not only in developing countries, but also in industrialized countries, where it was frequently described as community-based "social banking".

50. Mr. Lisk, commenting on the benefits for workers from the ILO enterprise programme, stated that the Department was fully aware of their importance and in fact had initiated actions to associate the members of workers' organizations with the activities of the Department. This collaboration included action to provide management training in trade union leadership. Also, the Department was working with a national trade union organization that had recently established a holding company to set up enterprises within the trade union movement, and with another national trade union organization on issues raised by productivity bargaining, and by the equitable sharing of the benefits of productivity. The second point related to the role of the State, where the paper might have given a misleading impression. It was clear from the Director-General's programme and budget proposals that it was the Department's intention to focus on the issue of the role of the State in relation to enterprise. Moreover, this was explicitly singled out in paragraph 3 of the paper.

World Employment 1996-97:
National policies in a global context

51. The Worker Vice-Chairperson considered that the report made a valuable contribution to the literature on macroeconomic and labour-market developments. In particular, it presented a timely and accurate description of problems in both the industrialized and the developing countries. However, he observed that the pain experienced by workers as a result of globalization was underestimated, and would like to see more in-depth studies on the relationship between globalization, labour standards and the quality of employment. He regretted that the Office had not investigated more fully the impact of foreign direct investment on economic and social trends. He supported the statements on the continued relevance of full employment and the policy prescriptions advocated by the Office. Many governments had abandoned their commitment to full employment and had shifted their attention to lowering inflation. This often meant that they virtually accepted an unemployment rate of 7 or 8 per cent. Since the negative effects of globalization and trade liberalization were concentrated on the workers, the Office should look at the issue from a worker's perspective and shed more light on the reality that was confronting workers as a result of globalization. The report accurately described the growth of wage inequalities in the industrialized nations. However, the Office should devote more attention to the social and economic implications of increased wage dispersion. Citing the evidence presented in the report and elsewhere, he underlined the negative impact of widening income gaps on the socially most vulnerable groups. In the developing nations, he pointed out that in the process of structural adjustment, the promotion of privatization and deregulation had brought about not only the widening of income gaps, as in the industrialized countries, but had led to a drastic reduction in employment. To stress his point, he referred to Korea, Singapore and Taiwan, countries that had achieved higher real wages without signs of widening income inequalities, whereas in Chile and Indonesia real wages had decreased and wage dispersion had widened. In other countries, such as Peru, Thailand, Malaysia and Brazil, real wages had increased, but at the same time so had wage inequalities. To conclude, he acknowledged the report did provide valuable guidance and encouragement for those involved in the global employment issue. Thus he considered it important that the report should continue to be published every two years.

52. The Employer Vice-Chairman acknowledged that there were some very interesting and good aspects in the report. He concentrated on the main political thrust of the report, which he found to be the same, yet more sophisticated than, that taken in the previous issue. This could threaten the reputation of the ILO as a centre of excellence and objective research, which he identified with a very specific political tendency. Among the good aspects of the report, it was correct to say that national policy was responsible, but it was the global economy which was today far less forgiving of bad policies on a national level. He approved the discussion on the need to maintain an open economy. However, he could not agree with the idea of managing the transition at a certain pace which, in his view, while a time-honoured approach in trade liberalization, could be elevated to a principle that hurt the economy. For example, the phasing out of subsidies in German coal mines, or the phasing-in over a long timeframe of the restructuring of Air France, might have saved some jobs temporarily, but such gradualism had been costly to the economy as a whole and to the general employment picture. So, while the principle could be implemented positively, it could be elevated to a degree where it was dangerous to the achievement of the objectives. He agreed with the discussion on jobless growth, but pointed out that there was a kind of growth in certain areas without or with very minimum job creation. On full employment, there was a long and interesting discussion within the report on the lack of credibility surrounding the notion of the so-called "end of work". He found some of the statements very sensible to the concept of full employment, which to him was then the highest sustainable level of employment. The whole section on NAIRU (non-accelerating-inflation rate of unemployment) was meant to justify a macroeconomic Keynesian demand-side approach, not a policy limited to supply-side measures, such as labour market deregulation. Any employment policy guided by an instrument drafted in 1964, in the heyday of Keynesianism, was bound to lead to a dead end in policy terms, and at the expense of the reputation of the ILO as a centre of excellence. While accepting that the labour market forces alone were not enough and that macroeconomic policy was a vital element of a comprehensive job strategy, he stressed the importance of labour market reforms as a key element to tackle structural unemployment. The report did not distinguish between cyclical and structural unemployment. "Down with Maastricht" should have been the subtitle of the report. Of course, it was not the labour market alone, but the product market, as well as other institutional factors (i.e. cartels) that needed to be addressed across a broad front. In any case, labour market flexibility was a major aspect of the structural reform necessary to tackle unemployment. It was a really weak argument to assert that (and this was what the report did) the rather weak and isolated partial moves in that direction should have led to the end of unemployment. The OECD Job Study, as well as the IMF and the G7 Conference in Detroit, had all made it clear that what was needed was a broad and deep campaign tailored to national needs. Despite the uptakes in European output, employment had remained stagnant. Most experts agreed that the minor increase in output that could be expected would not make a significant dent in the situation any more than in previous long representative periods. The fact was that output growth in the United States in recent years had been about the same as in the European Union (see the table on page 20 of the report). IMF statistics and projections estimated that European growth would be 2 per cent higher in 1997 than that in the United States. However, he noted that the United States employment performance since 1992 had led to the creation of 11.8 million new jobs. In the European Union, total employment had been 148.6 million in 1992, while at the end of 1996 it descended to 146.4 million, i.e. a net loss of 2.2 million jobs. In fact, unemployment in some major European countries continued to move upwards despite the changes in output. As a generalization, structural unemployment rates in most European countries continued to rise at diverse rates. The exceptions were the United Kingdom, Ireland and the Netherlands. As for the European Union, it was estimated that structural unemployment could be as high as 9 per cent of a total unemployment figure of 11 per cent. OECD analysis confirmed that labour market reforms were a key element, although not the only one, in bringing down structural unemployment. This was not to say that macroeconomic policy was not a vital element of a comprehensive job strategy. There were also significant synergies between structural reforms in different fields, such as labour market flexibility and increased product market competition. There were also interactions between macroeconomic conditions and labour market reforms. In most European countries, however, it was generally recognized that the progressive elimination of fiscal imbalances was necessary for an improvement in growth performance in the medium term. On the other hand, fiscal imbalances themselves were related to the shortcomings in the functioning of labour markets, which had resulted in a dramatic upward trend in unemployment over the past 25 years. In Europe, any backsliding from fiscal consolidation targets, in addition to causing a shock in financial markets, would undermine the EMU process, with incalculable consequences. Increased labour market flexibility would be needed, once EMU became effective, to substitute for the loss of the exchange rate instrument when countries were faced with the need to adjust, as they inevitably would be. Concerning the United States, he observed in Chapter 3 of the report that the widening of labour market inequality was simply another form of derogation from full employment. The point was made again that low productivity could reflect a high degree of underemployment if workers were displaced from a high-productivity sector to low productivity and low wages. He could not really understand of which United States the report was talking. The report gave the impression that the United States was an impoverished, uncompetitive, unproductive country, which did not really seem to be the case. However, the latest Stiglitz report recognized that, by far, most new jobs in the United States were high paying, higher skilled and higher productive jobs. Thus, the argument fell apart. Furthermore, the Office did not take into account the fact that the validity of the statistics on productivity and real wages had for some time been suspect on a number of grounds. They were being reviewed on a major scale in the wake of the recent Baskin Commission calculations, which estimated that there had been an upward bias in the United States consumer price index, calculated conservatively at 1.1 per cent. If both productivity and real wages were recalculated, one would see a considerable difference from the allegations that wages were stagnating, that the lowest part of the wage force was going into deeper poverty, or that the average length of the working week was increasing. This was not to claim that the United States did not have a problem with wage inequality: this was a subject that many economists and others involved in public policy were examining very carefully. For his part, he had the impression that the Office felt that trade was considered to play a very minor role in this aspect. But there were arguments as to how much de-unionization had contributed to the situation: the most authoritative judgement was that the increasing wage dispersion was due to the rising demand for skills and the premium placed on education. This trend left the lowest quintile (in the scale of wages) in the United States persistently lagging behind compared to the rest of the workforce. There was admittedly no easy answer to this. He agreed with the report that training was not a panacea. This was a very complex problem involving cultural elements. It was a major social problem for the United States, which needed attention. He was surprised to read in the report that institutional changes could account for wage dispersion in the United States. But the lack of institutional changes, i.e. labour market rigidities, was alleged not to account for structural unemployment in Europe. In fact, the difficulty and cost of laying off workers was frequently cited as being the main aspect of labour market reform and a deterrent to hiring. This was one long-term reason why investment in Europe, although frequently at rates that were much higher than in the United States, had not produced higher rates of output. A simple explanation was that investment in Europe manufacturing had been concentrating on labour-saving capital and not on technology and factor productivity, yielding both high labour productivity and high unemployment. To conclude his remarks on industrialized countries, he insisted that the main prescription of deficit financing was the result of a faulty analysis of the nature of unemployment in Europe. It contained a wrong medicine which, if implemented, would lead to crowding out savings and productive investment and lead to higher taxes and interest rates and discourage further job growth. He felt that the flanking measures, which according to the Office would be necessary to curb inflationary consequences, would probably either achieve higher inflation or stultify productivity growth by interfering with the optimal allocation of labour.

53. Turning to transition economies, he noted that the report had made clear that recovery had been the strongest where reform had been the earliest and gone the furthest. However, the report went on to recommend looser macroeconomic policies and allowed for some inflation. This was not sound, even in countries where there had been lower inflation. There was a need to safeguard macroeconomic stability. Fiscal deficits remained high in many such countries. Even in some which had gone furthest in the transition, large tax and wage arrears and non-performing loans had hindered enterprise transformation. Nevertheless, he recommended the report's sensible sections on the need to develop labour market institutions and promote enterprise growth. He was somewhat more dubious about the recommendations on employment subsidies and temporary protection in the form of tariff equivalents. Theoretically, there might be a justification for this, but his concern was that time-bound protectionism had a habit of being unbound.

54. Regarding developing countries, it would be presumptuous to generalize. Regions differed, as did countries within a region. The report left out a large part of the world. It did not recognize that, even in developing countries, the strong performers were those countries which had contained fiscal imbalances and where the role of the public sector had been mainly geared towards private sector development. The less successful countries were characterized by large fiscal imbalances which, to a large extent, had been furthered by loss-making public enterprises and extensive regulations on the private sector and foreign trade. The ILO document seemed to lean in favour of the so-called "development state model". This was certainly a valid model that had had success in the Pacific Rim. To the extent that the development state went beyond actively creating a good framework for business activity, it could fail. In Korea the petrochemical industry provided a good example of this. In asserting that severances were generally not a problem in less developed countries, the report seemed to ignore several important countries, like India. If he remembered correctly, the recent Korean labour problem concerned the right on termination of employment: while there might be no blanket presumption, as the ILO report maintained, labour regulations were invariably sources of rigidities. There were many indications that such rigidities existed in a number of developing countries. Looking at wage dispersion in favour of skilled workers, especially in Chile, the document submitted to the Committee stated somehow that technology imported via foreign direct investment could be a cause for wage dispersion. As far as developed countries were concerned, the ILO analysis of that issue in the report was very different. Finally, he warned against gradualist policies: shock therapy policies were obviously dangerous, but phased policies could lead to a serious postponement of the benefits of adjustment, while not really mitigating the pain, except for certain selected privileged groups.

55. The representative of the Government of France pointed out that the French Ministry of Labour had organized a meeting with the majority of French experts to discuss the report, which had brought with it an element of optimism through its demonstration that full employment was possible. In his opinion, the report put an end to a certain number of doctrines and books claiming there was no more work. On the analysis that the difficulties facing all industrialized and developing countries were not due to technological progress, however, he found the demonstration to be a little weaker, as there was no question that sudden technological progress was one element responsible for the employment situation. In relation to the Employer Vice-Chairperson's previous comments, he also had the impression that the ILO was still influenced by the Keynes theory. On the question of full employment, he considered the analysis of the report to be somewhat insufficient, as it failed to analyse in detail what full employment could be over the next three years. Employment had to be redefined in a slightly different way; the content of employment and the quality of jobs had to be taken into account, and the concept of employability had to be introduced as a supplementary element. Moreover, he did not agree with the ILO's categorization of part-time jobs as atypical and thus unacceptable types of jobs: modern jobs differed in quality. France was ready to be more closely associated in the preparation of future reports of this nature. Finally, as regards the publicity and recognition to be given to the report in the United Nations system in New York, he urged the ILO to show a more active presence in the Economic and Social Council (ECOSOC): ways should be devised for ILO Employers and Workers to be better represented in the Council in order to boost tripartism in the UN system. However, he thanked Ms. Hagen for her very active participation in the last meeting of ECOSOC.

56. The representative of the Government of Ethiopia believed that the report could serve as an additional input for the design and implementation of sound and prudent national employment and social policy. He fully concurred with the report's analysis that regular wage employment was not a dominant mode of employment in developing countries, where the majority of the employed were in self-employment or casual wage employment. Nevertheless, the report had three shortcomings. First, it was a dangerous generalization to hold imports from low-wage countries and the shift of production to lower-cost locations responsible for rising employment problems in the developed countries: such generalizations might strengthen the barriers in international trade, compounding further problems of unfavourable terms of trade and severely compressing the export earnings of developing countries. Export growth was the only dependable source of investment for economic development in poor countries, and increased exports from developing countries were strongly associated with more imports of capital and intermediate goods from developed countries, which brought more jobs for the advanced nations. Secondly, the pattern of foreign direct investment (FDI) had been overlooked by the report. The dismal situation of the least developed countries in attracting FDI and the risk of the exclusion of the poor from the mainstream of globalization, as well as the disappearance of jobs and the decline in real wages of unskilled labour, warranted attention from the ILO. Finally, in its analysis of national policies in mitigating the negative social effects of globalization, the report had failed to adequately address the vulnerability of poor economies to international economic shocks.

57. The representative of the Government of India joined previous speakers in congratulating the Office on an excellent report. It had set out the advantages of full, freely chosen and productive employment and the ills associated with unemployment. Regarding the limitations of the report, there was no constitutional or legal guarantee of the right to work in many developing countries, and the backward rural structure severely hindered the improvement of agricultural productivity, as well as the living conditions of the poor. Nor could employment be reviewed in isolation from minimum wages, and there was a sociological dimension to full employment. He did not agree with the optimistic analysis of full employment in the report, and was uncertain whether the prescriptions given by the report would yield results in terms of ground-level concrete realities. In particular, the prescriptions left many dilemmas unresolved in many developing countries. The ILO should undertake studies to promote a closer interface between foreign direct investment (FDI) and the local economy; to assist in building up a partnership between FDI, labour, local communities and government; and to adopt multiple strategies to enhance the capacities of its constituents to formulate and implement a comprehensive employment promotion and poverty alienation strategy. For this purpose, he considered it necessary for the ILO to move away from outcome to process, from the management of resources to empowerment of groups and communities, from target setting to institutional development.

58. The representative of the Government of the United States pointed out that the centre of job creation in the United States was the market. He was pleased to find that the report acknowledged the role of competition and welcomed its positive views on globalization and global competition. Referring to recent United States labour statistics, he pointed out that deregulation, technological advances, increased trade and restructuring had led to lower inflation, higher competition, and more efficient firms in the United States. On the subject of wage inequality, he presented the conclusion of a recent colloquium in New York which highlighted technological change as the main contributor to changes in incomes and regarded factors like trade liberalization, demographic shifts, the decline in real minimum wages, decline in unionization and increase in immigration as less important. On NAIRU, he suggested that the debate should move on to a study of such questions as the number of people in low-wage jobs that could be transferred to high-wage jobs and the educational aspect. He emphasized the role of competition, and wished for the continuation of this work by the Office.

59. Mr. Mansfield (Worker member) recalled that, in the early 1980s, when the ILO had made the reduction of unemployment a major priority, world unemployment was much lower than today. The continued expansion of global unemployment made it essential for the ILO to continue its work in promoting the debate on policy responses to unemployment, and the Worker members wished to strongly support the continued publication of the report every two years as an ILO initiative. On the issue of full employment, he rejected the proposition that full employment was unachievable and considered policies that implicitly accepted a NAIRU unemployment rate of 6 to 8 per cent morally and politically unacceptable. Similarly, the economic criteria established for the European Monetary Union were another example of how policy-makers had set priorities that neglected the impact on employment and social conditions more generally. The Workers' group agreed with the report's assessment that there was room for some relaxation of fiscal and monetary policies to promote higher growth and more jobs. Citing a comment by a German industrialist and politician in The Times of 14 March 1997, he stressed that expansionary macroeconomic policy was an indispensable condition for reducing unemployment and achieving adequate growth. In regard to trade liberalization and globalization, the Workers' group urged the ILO to give careful attention to some of the realities facing working people as a consequence of globalization. Referring to the address of Mr. Smadja of the World Economic Forum at the ILO Enterprise Forum in 1996, who had acknowledged the grave social costs associated with globalization, he pointed out that the challenge for the ILO was to harness the productive potential of globalization so that it brought full employment and social justice. The Workers' group would like to see in future reports more statistical data and more attention to the success stories of particular countries. They did not support the proposal that training should be the main theme of the next report. Responding to the remarks by the Employer Vice-Chairperson, he insisted that the phasing-in of economic reform had to be done in a socially acceptable way and that the contribution of the United States budgetary deficit to economic growth showed that the need for fiscal balance was not absolute. In concluding, he suggested that the future report should advocate the inclusion of employment creation goals in structural adjustment programmes. The next report should also concentrate on macroeconomic policy issues and active labour market programmes, and examine the impact of international financial markets on employment. Finally, the Workers' group supported a tripartite high-level conference that would include senior ministers in the finance area to discuss strategies to combat unemployment.

60. Mr. Funes de Rioja (Employer member) agreed with the representative of the Government of France in connection with a detected prejudice in the report which consisted in viewing part-time work as atypical or precarious. The Employers' group did not agree that labour market regulation did not raise labour costs and that hyper-inflation removed workers' purchasing power faster than anything else in countries like his own.

61. The representative of the Government of Finland, quoting the report, pointed out that globalization indirectly resulted in social dislocation. Therefore, the transition to a more open world would have to be managed in a way that mitigated these socially adverse effects. While excessively slow growth was the main reason for employment problems, macroeconomic decisions brought only marginal results. A prominent part of the next report should be dedicated to studies on micro-level employment creation, and a specific effort should be made to locate the common denominators behind new jobs.

62. The representative of the Government of Japan pointed out that a combination of low unemployment and the absence of gaps in wage ratios was the pillar of Japan's labour policy. However, he found the report somewhat shallow, and it contained a number of questionable points. Referring to the section on labour market rigidity, he remarked that it was commonly recognized that labour market rigidity was not the sole or main cause of unemployment, but the real issue here was to what extent of labour market elements were associated with unemployment. The levels of influence of such elements needed to be looked at from a macroeconomic policy point of view. On labour market policies, the report underestimated the significance of these policies and based its conclusion of these policies' effectiveness on little actual evidence. The ILO should undertake studies on what other agencies were doing in the area of employment and submit the results at the next Committee meeting.

63. The representative of the Government of Malaysia inquired about the follow-up action taken by the ILO to disseminate the findings of the report to member States and how these findings were translated into programmes and action to overcome the problem of employment generation. The MDTs could play a meaningful role in this direction.

64. The representative of the Government of Hungary, commenting on the chapter on the transition economies, contended the report's suggestion that the stabilization-oriented policies should be reconsidered, and pointed out that it could be dangerous, if not fatal, to lose the equilibrium just after it had produced its first results. She would appreciate all advice and suggestions that also took into account socially acceptable solutions. On labour market institutions, she did not support the idea that the lack of such institutions at the beginning of transition was a cause of rising unemployment. As regards the Hungarian unemployment benefit system, the reference in the report was outdated. Furthermore, the idea of transitional employment subsidies was inappropriate: some versions of such policies had been implemented in a number of countries as temporary protection against open unemployment. However, they were not convincing, and it was preferable to adopt a realistic policy at the beginning, as this would be more beneficial in the long run. Nevertheless, after a certain time, when reforms had gathered sufficient momentum, such policies could be effectively implemented in certain areas and under certain circumstances.

65. Mr. Varela (Employer member) proposed that for the next issue of the report, a draft be circulated to the Committee and discussed by the Governing Body before being published.

66. Mr. Falbr (Worker member) responded to the Employer Vice-Chairperson's remarks on rapidity. Despite its favourable position at the onset of transition, the Czech Republic was not a success. The "crippled" mass privatization had led to an uncertain future for the privatized companies and social frustration as foreign direct investment fell drastically, bankruptcies rose and a high budget deficit resulted, creating fears of a Mexico-style financial crisis, which could be repeated in Hungary. Rapidity and extreme liberal approaches brought more danger than results.

67. The representative of the Government of China considered the report a valuable reference work, providing much valuable information and many constructive suggestions and views. The Chinese Government recognized employment's role in social stability and security, and attached great importance to the issue of full employment. Many efforts were made for the "re-employment project", where people were retained for new jobs requiring new skills. It was therefore advisable to make training the theme of the next report.

68. The Employer Vice-Chairperson, replying to the representative of the Government of France and others on the optimism regarding the objective of full employment, referred them to the OECD synthesis paper. He was not pessimistic, and considered that there was a strategy to achieve the results, though not without great political difficulties. Regarding the United States budget deficit, it was never outrageously high as a percentage of GDP, but nevertheless it was an issue of great political concern. In the United States concern over the budget deficit was caused by the fact that it was crowding out savings and private investment, and thus had long-term consequences for productive employment. As for macroeconomic policies, he acknowledged that they were necessary as part of a balanced package of reform measures, but in most cases what was needed was a macroeconomic policy aimed at eliminating fiscal imbalances and achieving stability. On the issue of NAIRU, the 8 per cent of NAIRU in Europe reflected the level of structural unemployment in Europe; in the United States NAIRU was between 5 and 6 per cent. On EMU he recalled that this was a further step towards European integration, which had been a source of great dynamism in the world economy. A divided Europe was not good for workers in individual countries following protectionist policies. Responding to Mr. Mansfield, he assured that his concern about the report was not what other institutions had to say about it, but the fact that the conclusions and the strategies advanced were not apparent from the facts and statistics, even those presented in the report. Future report should concentrate on providing more statistics and analysis. Moreover, he denied having advanced brutal reforms, but cautioned that the time-frame should not be too long, as this would prolong the pain and favour privileged groups. For the next report, he suggested that the theme should be the impact of technological change on the demand for skills and training. It should deal with changing work patterns and examine carefully the impact of accelerating technological change, since this had been blamed for wage dispersion and unemployment. Training should be approached in this context. He agreed with the comments in the report that active labour market policies, of which training was an important component, had not lived up to expectations, but noted that a recent OECD report had maintained that their effectiveness could be improved. A more thorough analysis of these issues was needed, and no organization was more qualified to provide one than the ILO.

69. The Worker Vice-Chairperson responded to the suggestion by Mr. Varela about the next report. It was clear that the report was an Office responsibility. Prior consultation would lose time and run the risk of losing its focus.

70. The Chief of the Cross-Departmental Analysis and Reports Team (Mr. Lee) noted the number and the quality of the statements made on the report, and was pleased to note that the debate continued and that areas of agreement had widened. The specific suggestions on the themes of the future report had been useful. In particular, he took heed of the question of the social cost of adaptation to globalization and technical progress, which had a common theme that arose from particular groups of workers in particularly poor countries adjusting to the world economy. On issues of employment creation and structural adjustment under economic reform, the pace of reform and the role of particular instruments for combining equity, safety nets and social justice with the globalization process, he acknowledged the risks involved in the whole question of trying to control the pace of reform, the problems of incentive compatibility and the problems of the danger of protectionist interests. Similar problems arose with particular machinery dealing with the social aspects of globalization. There was much experimentation and many studies to be done to refine the machinery, and in that sense the idea of describing success stories was an excellent one. Also of interest was the idea of examining active labour market policies, broadening the statistical basis of the report and covering micro-level employment creation. Three specific suggestions made during the debate were very useful: to go beyond the concept of NAIRU and examine the whole issue of upgrading the skills of workers at the bottom end of the labour market so they could move to higher productivity jobs; to disseminate the report in developing countries; and to develop the concept of full employment further.

71. Mr. Taqi noted that, due to time constraints, the second item on the agenda -- the preliminary report on a synthesis of ACC Task Force country employment policy reviews -- was left unexamined. However, no serious harm had been done, as the process of preparing the full ACC synthesis paper was continuing and it was hoped that the paper would be considered by the ACC in April 1997. For the Committee's next meeting, the Office would be able to present not only the whole synthesis report, which would include more detailed analysis of the particular countries covered, as well as a report on the ACC's consideration of the report and any conclusions that might have been reached. The Committee could discuss the matter in November.

Geneva, 25 March 1997.

(Signed) R. Sarmiento,

1. GB.268/ESP/4.

2. GB.268/ESP/1.

Updated by VC. Approved by NdW. Last update: 26 January 2000.