The World Bank needs to take labour market policy out of the hands of “Doing Business”

The release today of the latest edition of Doing Business, a World Bank “flagship report” that grades and ranks countries on how business-friendly their regulations are, confirms what was already announced six months ago: for the second time in six years, the World Bank ignored most of the recommendations of a substantial review of Doing Business that it had itself ordered.

The last review, produced in June 2013 by an independent panel under the chairmanship of former South African finance minister Trevor Manuel, recommended major methodological changes, the deletion of two particularly controversial indicators – on labour and business tax rates – and the elimination of the overall “ease-of-doing-business” index and ranking.

In April, the Bank responded to the Manuel panel by announcing that the next edition would contain only minor changes to the methodology.

The International Trade Union Confederation (ITUC) was among a group of civil society organisations that criticised the Bank for going forward with the publication of Doing Business 2015 without fixing the “strong flaws”, to use the words of the Manuel panel, of the report.

One of these strong flaws has been recognised by the Bank for several years. In 2009 it suspended the report’s “Employing Workers Indicator” (EWI), acknowledging that it measured only the costs and not the benefits of labour regulations.

It is noteworthy that the Bank did so while the global economy was in the midst of its deepest recession in seven decades after the near-collapse of the financial sector, resulting in millions of job losses and reduced living standards for millions of other workers.

The Bank created an advisory group to comment on the methodology of the EWI and help devise a “Worker Protection Indicator” (WPI), but the Bank ended the group’s deliberations in early 2011 before it began any serious work on the WPI.

In any case, the fact that half of those the Bank chose to name to its advisory group were opposed to any form of WPI, even though the group’s mandate was to advise on its formulation, did not presage a fruitful outcome.

EWI lives on

Since suspending the EWI, including removing it from the ease-of-doing-business index and ordering Bank staff to stop using it for policy advice, the Bank has nonetheless continued to collect and publish data for the EWI in Doing Business, accompanied by an annexed descriptive chapter that has usually consisted of crude editorialising against labour regulations.

In Doing Business 2015 the whole EWI chapter and its pro-deregulation rant have disappeared, which in itself is welcome.

However, a database on labour market regulation remains in Doing Business 2015 and is even expanded with three “research questions” that appear to be a half-hearted attempt to measure some “good” regulations, using the credibility-straining simplification that one is accustomed to seeing in the report.

If one takes the database seriously, one would have to conclude that Eritrea and Uzbekistan offer the same kind of unemployment benefits as Denmark and Australia.

But the fact that for many countries a blank space is given in reply to the question “Unemployment protection scheme?” seems to indicate that the Doing Business team has not yet determined how to identify a legitimate unemployment benefits programme.

It is also clear that those who prepare Doing Business have no idea about how this kind of information can be meaningfully scored in a manner that is compatible with the publication’s anti-regulation methodology.

That is precisely why the Manuel panel recommended that the Bank should develop a “new approach on labour market policy … outside the Doing Business project”.


The 330-page Doing Business 2015 is available on the World Bank’s web site at: