Why Do Labor Standards Differ Across Muslim Countries?

Introduction

As the world gets more and more globalized, some regional/state issues like working conditions become matters of the international audience. Worldwide connections and increased information techniques have helped to increase individual awareness. Many developed countries have created different programs to encourage better working conditions for their citizens. The issue has been on the agenda of not only economists but also governments and non-governmental, humanitarian organizations for some time. There has been progress on the issue, partly by reason of International Labor Organization’s (ILO) endorsement of these labor rights as human rights thus the majority of countries have ratified the core labor rights throughout the last decade.

Concerns about the labor rights came into question for the first time in the United Kingdom during the Industrial Revolution. Recognizing rights and enforcing standards universally is crucial for achieving global social justice. Even though the need for an international organization to regulate labor rights was obvious no major steps were taken until the end of First World War. In 1919, ILO was established as a special branch of the United Nations, with an aim to establish internationally recognized human and labor rights, to persuade nations to recognize these rights and to resolve disputed issues regarding their implementation.

The issue of labor standards can be analyzed from different aspects. One aspect of studying labor rights is to relate labor rights with human rights. Implementation of basic rights surely helps to protect human dignity and promotes social justice, but it does so at the expense of an increase in labor costs. As the globalization expands to more countries, competition between and within countries intensifies in a great manner. The increase in competition puts workers in danger since labor is not as mobile as capital, and therefore regarded as the primary production factor whose costs could be diminished easily. This in return provides labor cost advantage/disadvantage to countries with weak/strong civil liberties since countries with better civil liberties tend to have higher labor standards. Considering the fact that labor standards may cause labor costs to increase, some developing countries tend to rule them out, and many of them race to the bottom to attract foreign direct investment (Davies & Vadlamannati, 2013).

Another line of research explores the relationship between labor standards and export performance (Felbermayr, Prat, & Schmerer, 2008; Hur, 2009; Duanmu, 2014). If labor standards are cost-push factors, then in countries where labor is well protected, export goods would be more expensive with respect to the countries where labor is less protected. Thus, the former group of countries would have a lower level of economic growth than the latter one. In addition, governments, especially in lower income regions of the world, might tolerate poor working conditions to attract foreign direct investment, stating another case of a race to the bottom.

However, labor standards are not necessarily linked only to cost-push factors. Considering especially the fundamental labor standards (FLS) which we discuss in detail below, can be accepted as the foundations of basic human rights. Since human capital is the engine of growth in modern economies, it is not reasonable to think that human capital accumulation can be achieved without protecting labor properly. Preventing and protecting child labor, for instance, is crucial for human capital development. Furthermore, human capital is an important production factor for both attracting (Blomström & Kokko, 2003; Noorbakhsh, Paloni, & Youssef, 2001) and reaping the benefits of foreign direct investments (Aksoy & Gönel, 2016; Xu, 2000). Hence a counter argument is that well-protected labor rights are, quite the contrary, a prerequisite for human capital development and long-run economic growth.