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Frank Praises Changes To World Bank’s “Doing Business” Report

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Washington, DC, April 28, 2009 | comments

 

In an important shift in the World Bank’s approach to development, today the Bank announced the suspension of the controversial “Employing Worker” Indicator (EWI) and a commitment to reexamine and revise both the EWI and the “Paying Taxes” Indicator in its annual country-ranking exercise called Doing Business.

The World Bank’s highest-circulation annual flagship publication, Doing Business measures the cost to firms of selected business regulations in 181 countries and then ranks each country with a global Doing Business Rank based on each country’s ease of doing business.

While the Report rates governments on a number of constructive topics, it also includes an “Employing Workers” Indicator (EWI), which gives the best scores to countries that have the least amount of labor regulation in areas such as minimum wage levels, maximum hours per work week, requirements for advanced notice for layoffs, and severance pay.  The Report also incorporates a “Social Contributions and Labor Taxes” indicator that actively discourages the provision of social protection programs by rewarding countries with the lowest level of mandatory employer contributions to non-wage benefits such as pension plans, healthcare, unemployment insurance, and maternity leave.

According to an announcement posted on its Doing Business website, Bank Management yesterday sent a memo to Country and Sector Directors informing them that staff are to be notified that “the EWI does not represent World Bank policy and should not be used as a basis for policy advice or in any country program documents that outline or evaluate the development strategy or assistance program for a recipient country.”

Rep. Barney Frank (D-MA), Chairman of the House Financial Services Committee, who has been a strong critic of the Report responded, “I very much welcome this news, and I believe the leadership of the Bank deserves great credit for recognizing that social aspects of development need much greater attention.”

“One of the most positive things to happen in the economic area in the past few years,” added Frank, “has been the willingness of people to rethink their commitment to the excessively rigid development framework frequently referred to as the ‘Washington Consensus.’”

“The notion that fairness for working men and women is somehow antithetical to good Bank practice makes neither economic nor social sense, and I am pleased that this anti-worker indicator will no longer be promoted by the Bank,” said Frank.

Last Congress, Frank held a hearing to examine the approach to worker rights in the Doing Business Report, during which the Committee received strongly critical testimony of the report from representatives of the AFL-CIO, the International Trade Union Confederation, and the Carnegie Endowment for International Peace. 

In June, the Financial Services Committee approved legislation authorizing $3.7 billion for the World Bank Group that included a call for reforms to the labor and paying taxes aspects of the Doing Business Report.

Frank also spoke directly to IMF Managing Director Dominique Strauss-Kahn and World Bank President Robert Zoellick about his concerns with the Report, particularly given its increasing global mandate and scope, and the many channels through which Doing Business is being given force.

Several months after Frank’s meeting with Strauss-Kahn, Frank learned that IMF management had directed staff not to use the EWI labor index as a basis for labor market analysis in staff reports or country documents without independent corroborating research.  The IMF Note on Labor referred to the various methodological problems with the labor indicator, many of which had been criticized in a June 2008 report on Doing Business by the World Bank's independent investigation arm.

 

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