DOING BUSINESS 2009 - JOHN J. HADDAD, Ph.D.

22 Doing Business 2009duration of fixed-term contracts from 3 high-income economies follow with 16,years to 2. The United Kingdom increased with Australia, Germany and Switzerlandall reforming more than once.the paid annual leave to which workersare entitled from 20 working days to 24. In Africa, Uganda (in 2006), Mozambique(in 2007) and Burkina Faso (inWhat are the reform trends? 2008) enacted new labor laws, introducingworker protections while increasingthe flexibility of labor regulations.Across the world, Doing Business has recordedonly 77 reforms affecting the employingworkers indicators since 2004. Of working hours. Yet among regions, Af-Namibia (in 2004) eased restrictions onthe 77 reforms, 47 made labor regulations rica continues to have the most rigidmore flexible; 30 made them more rigid. labor regulations. Dismissal costs forLabor reforms are rare. This is unsurprising.Governmentsa worker with 20 years of employmentFIGURE 4.3Rigid labor regulationsworkareonassociatedsuch reformswith highamountinformalityto moreandthanhigh3unemploymentyears of salarySize for years, of informal and sector there (% are of GDP) many stakeholdersinvolved. Labor reforms normally in Zimbabwe. Africa is also home toin Sierra Leone and more than 8 yearsFemale unemployment (%)30imply a tripartite consultation—between12the countries with the largest numbersgovernment, employers’ representatives of mandatory paid annual leave days:20and workers’ representatives. Finding the Eritrea 8 with 34, Ethiopia with 33 andright balance of interests is a challenging Cameroon with 32.10 and important exercise.Three reformers stand out in EasternEurope and Central Asia. Slovakia4Moving toward more flexible (in 2004) and Azerbaijan (in 2008) introducedLeast rigid flexibility in the use of Most fixed-rigidregulations00Least rigid Most rigidGovernments Economies in Eastern ranked Europe by and term contracts, Economies in work ranked schedules by andrigidity of employment index, quintilesrigidity of employment index, quintilesCentral Asia have been the most active in redundancy requirements. GeorgiaNote: Relationships are significant at the 1% level for size of the informal sector and at the 10% level for female unemployment, and remainsignificantreformerswhen controllingin theforpastincome5peryears,capita.introducing19 Doing reforms Business database; increasing WEF (2007); World the Bank, flexibility World Development and Indicators 2006 database. and also introduced changes inmade big changes in those areas in 2005Source:of labor regulations (figure 4.4). OECD notice periods and severance payments.Reform was widespread: 8 of the 10countries in the region that have joinedthe European Union have reformed theirlabor laws. Several, including Lithuaniaand Romania, did so to harmonize theirlaws with EU legislation.In South Asia 2 economies have reformed.Bhutan went far, implementingits first labor code in 2007. The new laborcode established protective measures forworkers without imposing heavy burdenson employers. The protections createdincentives for workers to join the privatesector—and employers now have a largerpool of candidates to choose from. Thebetter working conditions have led tohigher productivity. 14In Latin America, Colombia andArgentina made labor regulations moreflexible. Both made redundancy dismissalseasier—Colombia in 2004 and Argentinain 2005. Argentina also reduceddismissal costs in 2007. In East Asiaand Pacific, Vietnam eased restrictionson fixed-term contracts, and Taiwan(China) on working hours. Except forIsrael, no economies in the Middle Eastand North Africa made labor regulationsmore flexible.FIGURE 4.4Most reforms in Eastern Europe & Central AsiaEastern Europe& Central Asia(28 economies)OECDhigh income(24 economies)Sub-SaharanAfrica(46 economies)Latin America& Caribbean(32 economies)East Asia& Pacific(24 economies)Number of reforms increasing flexibility of labor regulationsby Doing Business report yearDB2005 DB2006 DB2007 DB2008 DB20092341619FIGURE 4.5Top 4 reform features inemploying workersReforms including feature since DB2005 (%)Made working hours more flexible29%Eased restrictions on fixed-term contracts15%Reduced dismissal costs11%Removed requirements for dismissalsNote: A reform may include several reform features.Source: Doing Business database.36%South Asia(8 economies)2Middle East &North Africa(19 economies)1Note: A reform is counted as 1 reform per reforming economy per year.Source: Doing Business database.FIGURE 4.2FIGURE 4.1Economies with rigid labor regulations have fewer business start-upsRankings on employing workers(c) The International Bank for Reconstruction Rigidity and of employment Development / The are World based Bank on 4 subindicators