The Trade Pact is sinking beyond US pressure for tougher labor standards

The US and other trade negotiators working on the Indo-Pacific Economic Framework for Prosperity (IPEF) are in San Francisco this week to see how much progress they can put on paper before making a big announcement. The answer, it turns out, is not much. US calls for other countries to sign up to “strong and enforceable labor standards” have hit roadblocks. Not surprisingly—those other countries would have to implement labor laws that may not be in their best economic interest and may even delay their own workers.

Asking countries to recognize basic human rights and ban forced labor is one thing. But it is not always a good idea to force less developed countries to have the same labor laws as advanced industrial economies.

First, consider child labor prohibitions. Obviously, we shouldn’t encourage child labor — but should we discourage trade with countries that use it? Child labor often exists in poor countries where the alternative can be even worse. When countries are offered more trade opportunities that can boost economic growth and household incomes, child employment decreases and school enrollment increases.

That’s exactly what a study published by the National Bureau of Economic Research says were found: Regional trade agreements (RTAs) without child labor bans tend to reduce child employment and increase school enrollment. The opposite is also true: RTAs with child labor bans tend to lead to higher rates of child labor and lower school enrollment, particularly for 14-17 year olds. That is, the work patterns had the opposite of the intended effect.

The economic intuition here is that the increase in incomes from trade liberalization leads to a reduction in the need for child labor. When parents have better employment options and more income, they send their children to school. The basic solution for policymakers is simple enough: remove trade barriers with the developing world, but don’t micromanage their labor laws. Any decent parent would rather see school children in the classroom than on the factory floor.

Second, think calls to ban “gig workers” from key sectors of the economy. In particular, many do not want to let IPEF nations classify workers as “gig workers” instead of “employees” of large transportation, food service, retail and other online companies. However, strict, top-down labor standards and rules about who can and cannot qualify as a gig economy worker limit worker flexibility and innovation, and could end up harming the workers themselves that these IPEF provisions are intended to help, such as women and minorities.

Gig workers are self-employed and don’t strike against themselves, which is what unions tend to do disfavour gig workers. But according to Bureau of Labor Statisticsthe majority (79 percent) of independent contractors prefer their arrangements to traditional employment.

Pew References that women and non-Whites have higher than average participation rates in the gig economy. Freelancers on Upwork’s ‘Freeland Forward’ surveys mention Dependent care obligations, personal circumstances or a strong preference for work flexibility (over job stability) are the main reasons.

As has my colleague Liya Palagashvili famous, gig economy jobs give workers the opportunity to supplement their income on their own schedule, and this tends to disproportionately benefit women. It turns out that women in particular prefer jobs with more independence and shorter work weeks, and women self-select into independent jobs that have more time flexibility.

A better approach, as Palagashvili again noted, would be promotion portable benefits. Portable benefits, both in the US and internationally, “will allow independent workers to maintain their non-traditional work arrangements and improve their access to flexible benefits.” Some states have adoptive or is seeing this innovative approach.

These are just a few reasons why micromanaging other countries’ labor laws is less productive than you might think. IPEF states are expected to address these issues again next year, when the US political situation may be different. But the finances will be the same.

Instead of the U.S. imposing rigid, top-down labor standards on others, policymakers should let countries design their own labor laws and find ways to create a flexible, innovative, and resilient workforce for all. workers in IPEF countries.