Working conditions and economic development

Key note speech by State Secretary Jan-Erik Støstad, Ministry of Labour and Social Inclusion, Norway, at the China International Forum on Work Safety, Beijing 18 November 2008.

 

1. Introduction

Your excellencies, ladies and gentlemen,

Good afternoon to you all. It is a great privilege for me to address this very important conference. I will speak to you today on the topic of “Working conditions and economic development”.

My main thesis today is very simple, but very important: improving working conditions helps economic growth, and makes economic growth sustainable. I am going to discuss this thesis, and I will use my own country Norway as an example.

I will, however, start out by making a few comments on the current global economic situation. Because it is already clear that adverse economic development following the current crisis may have long term implications also for working conditions.

As we all know the world faces a major financial crisis. Hopefully, a systemic breakdown of the financial markets has been avoided by strong and coordinated action from policymakers all over the world. A major slowdown in economic activity worldwide is alas almost certain. And as the Director General of the ILO, Juan Somavia, recently said: “This is not simply a crisis on Wall Street, this is a crisis on all streets”.

Many will lose their jobs. ILO has suggested 20 million people. This “jobloss aspect” is on many policymakers minds. What has been less discussed is that a serious downturn may lead to an even tougher business climate and a weakened bargaining position for employees and their organisations.

There is a risk that the economic downturn makes working conditions worse, even in  workplaces not directly hit by the crisis. There is a risk that the ongoing struggle for a decent work for all meets new obstacles, new hurdles.

Thus, we must be prepared to work even harder to ensure that the fruits of globalisation are more evenly shared. World leaders, including leaders of important organisations such as the IMF and the ILO, have a challenging task ahead. They have to deal with the crisis in a way that stabilizes the financial and economic system, reduces joblosses, and supports, not undermines, the shared ambition of decent work for all.

The economic crisis makes the task of improving working conditions even more important. For even though my main thesis is that improved working conditions fosters good economic development, the “reverse” logic may also come true: If economic growth stops or there is a recession in major economies, I am afraid strong political will is required to counter negative effects on working conditions. And if we fail in this, and working conditions suffer, I believe that also the long term economic development will be harmed.

Let me turn to the long term or basic issues of working conditions and economic development. First some numbers:

According to the ILO, more than two million people die from occupational accidents or work-related diseases every year. Worldwide there are 270 million occupational accidents and 160 million cases of occupational disease each year. The ILO has estimated that the economic losses due to poor protection may total as much as 4 % of World GDP.

To this we must add the subjective and often long lasting costs of pain, fear and losses suffered by the victims and their families that cannot be calculated in economic terms, but are nevertheless the most important costs to workers who become victims to injuries and diseases at work.  

The level of safety at the workplace varies considerably between countries, economic sectors and social groups. Throughout the world, the poorest and least protected are the most affected. Many developing countries, where a large part of the workers are engaged in hazardous work, such as mining, logging, agriculture and fisheries are particularly vulnerable.

Important parts of this variation in safety standards result from different levels of economic development. But I will warn against expecting that focus on economic development alone will eventually lead to better working conditions, and that in the meantime safeguarding and improving working conditions may be ignored by employers and policymakers. Or worse still, let working conditions deteriorate to win contracts and market shares in a more competitive world.

Economic development in a country cannot be seen as independent of how it treats its workers. My claim is that in the long run both the business sector and the country as a whole benefits from good and improving working conditions, where safe work is the accepted norm throughout the economy and where businesses take a natural responsibility for a good working environment.

The story of my own country may perhaps be instructive in this respect.

 

2. Norway - developments

Norway is now a rich country. But when we got our first Workers Protection Act in 1892, together with our first Labour Inspectorate, we were among the poorest countries in Europe. Back then, income per capita in Norway may have been about 6000 dollars in today’s value of money. Most employers did very little to prevent occupational injuries and diseases, and a large number of workers were killed, badly injured or got serious diseases at the workplace.

During the next 80 years, into the 1970ies, our legislation on occupational safety and health expanded and our labour inspection authority were gradually strengthened. We reduced weekly working hours from 60 to 40 hours and a number of social reforms were introduced. At that time, income per capita in Norway had risen to 31 000 dollars.

In the middle of the 1970ies the trade unions of Norway, together with the Labour Party found that the improvements at the workplaces were moving too slowly. The Government decided to revise the legislation, which led to a new Act on Worker Protection and Working Environment, that came into force in 1977. This new act emphasised stronger the employers responsibility for preventing accidents and diseases. Employers could even be imprisoned if they seriously failed to comply with the requirements of the act. The act gave the workers and their representatives a stronger position. The employers strongly opposed some of the new principles, but after long discussions, both in the society in general and in Parliament, the act was adopted, almost unanimously. After it came into force, the act has become broadly accepted and respected also by employers.

In the years after 1977, the Labour Inspection Authority was strengthened and given considerably increased resources, in order to follow up the new act more effectively.

Norway, as well as the other Scandinavian countries, is a welfare state. This means that it is not only the individual worker who pays if we put workers safety and health at risk, but also the government and the taxpayers, since the taxpayers in our model pay most of the costs for medical treatment, rehabilitation, disability pensions etc. This has contributed to a broad and growing understanding of the relationship between social reforms and the responsibility to protect workers against injuries and diseases at work. As taxpayers, we must all pay if unsafe or unhealthy workplaces make workers have to quit and perhaps leave the workforce instead of keep on contributing to GDP and welfare. So, we have learned, I believe, that it is not only to the disadvantage of the individual worker if he or she gets disabled, it is a loss to the community and society as well.

Today, I think it is fair to say that the majority of Norwegian employers regard prevention as an integral part of their activities, as high safety and health standards at work is seen as part of good business performance.

The Norwegian model for social dialogue has been a crucial factor for this development. In fact, social dialogue between a democratic government and independent worker’s and employer’s organisations has in my view perhaps been the most important precondition for achieving social development and social justice in Norway.

Our legislation on safety and health at work was again thoroughly revised in 2005. A Committee with representatives from workers, employers, government and independent experts proposed a large number of amendments in order to bring the act from 1977 more up to date. And it was striking how the different parties were in far more agreement on most issues concerning safety and health at work than in 1977.

And by now 56 000 dollars is the measured income per capita in Norway. So, strong economic growth has for decades gone hand in hand with an active policy on occupational health and safety. And I believe this active policy for good working conditions is also a main reason why we in the Nordic countries have managed to spread the welfare of the economy more evenly between our workers and inhabitants than in many other nations.

 

3. New challenges for Norway

Now, I don’t want to paint a too rosy picture of Norway. We face many challenges if we are to maintain our welfare levels and develop them further. One recent challenge to Norway is the increased pressure on working conditions in light of labour migration after the EU-enlargement in 2004, when ten new countries became part of the Union, mainly from eastern and central Europe.

After the enlargement, which affects Norway through a comprehensive special agreement, although Norway is not an EU-member, labour migration to Norway has increased dramatically. An estimate suggests that there are now between 100 000 and 150 000 workers from the new Eastern Europe member states in Norway. This represents as much as 5 percent of the Norwegian workforce.

Foreign workers are a positive and important supplement to the Norwegian labour force. But we have at the same time seen far too many incidents of unacceptable conditions in terms of health and safety precautions, as well as wages and working hours, in sum what we call “social dumping”, since the EU-enlargement.

To meet these challenges, the Government has implemented several measures against social dumping within the two action plans. The most important measure has been to once again strengthen the Labour Inspectorate. It has been given increased resources and the power to supervise that terms on wages and working conditions also for foreign workers are complied with. These measures are necessary, also in a rich country as Norway. The goal of decent work for all is not won once and for all even in a well regulated labour market with generally very good working conditions, but must be a continuous and long term effort.

 

4. Norway and Decent Work in other countries

Let me now, for a moment towards the end, turn to Norway’s efforts to strengthen working conditions in other countries. Norway is a small country, and there are obvious limits to what we can hope to achieve in this respect. But we feel a responsibility to do what we can.

So, after the founding of the ILO in 1917, Norway has always tried to participate as professionally and actively as possible in the organisation, on a tripartite basis.

Norway strongly supports ILOs efforts for a fair globalisation. Related to our topic here today “fair globalisation” must mean that the benefits of globalisation should also be used to improve working conditions. Or, to put it stronger, for a viable globalisation as well as sustainable growth nationally, a precondition in my view is that ILO’s Decent Work Agenda is pursued with vigour.

In September this year the Norwegian Government took one step further, as we, at the international Decent Work Conference arranged in Oslo, presented a coherent strategy for promoting labour rights in other countries. As far as we know, no other country has started out to establish such a national strategy.

Our goal with this new strategy is to strengthen Norwegian policies for decent work, and make them more accountable. To achieve this, a major part of the strategy is to coordinate Norwegian policies and relevant ministries far better than until now. For it is a fact that many parts of government policies - for instance foreign policy, development aid policy, trade policy and industrial policy - influence working conditions in other countries, and our approach in these different areas must be clearly more systematic and guided by the same considerations and principles.

The strategy consists of seven elements, which will be specified in cooperation with the social partners. I will not go into each of the items, but underline that we will make a special effort to do what we can to strengthen the verification and enforcement of laws and regulations concerning labour standards. As we see it, more focus on enforcement is crucial to achieve long term results in this area.

 

5. Summing up

Let me conclude. As I have put forward, the economic losses caused by occupational accidents and diseases are considerable, in the short term but not the least in the long term. These losses are inflicted on the worker, his or her employer but also, and this is a main point, on the society as a whole and the prospects for economic development and welfare.

Improving working conditions is in general good for the long term economic profitability of firms. Efforts to improve safety and health at company level is good business, and should turn up also in shareholder value if the mechanisms are properly understood in the financial market!

Improving working conditions is in my view a necessary step for sustainable growth at the regional or national level, increasing the ratio of workers to dependants in the economy. Sick workers still consume, but they don’t produce!

I believe Norway’s experience for more than 100 years illustrates this. We have had an active policy towards health and safety in the workplace, and in this period economic development has been, as i have shown you, very good indeed.

And, we believe dialogue between the government and responsible and independent social partners at all levels has been crucial for these results.

An important challenge everywhere is to generate understanding at company level that efforts to improve working conditions are good also for the society at large – and take this into consideration.

So, let me finally say that I think the business culture is important to achieve good working conditions and hence lay a solid foundation for economic development. Workers should not be seen as just another technical factor of production, which can be replaced at no cost when not functioning 100 percent. Firms have to view their employees as the main source of strength to production and profitability, and invest properly in good cooperation mechanisms and measures to improve working conditions.

It has been a privilege talking to you. I wish you all the best for this conference and for the important work you do at home. Thank you very much for your attention!