Costing, comparing and competing: developing an approach to the benchmarking of labour market regulation

Costing, comparing and competing: developing an approach to the benchmarking of labour market regulation

Validity of efforts to measure labour regulation

Focusing specifically on the methodology employed in the Doing Business (DB) survey, and its results for South Africa, this paper discusses the validity of efforts to measure labour regulation. It identifies a number of methodological problems that constrain any such endeavor.

Since the advent of democracy in South Africa, the regulation of the labour market has been a source of ongoing debate. This paper presents evidence that certain scores arrived at in the case of South Africa are incorrect, materially affecting the country’s ranking in terms of the survey. These errors can be attributed to shortcomings in the survey’s methodology as well as the simplistic conceptions of law reflected in the surveys. However, this finding does not imply that endeavors to measure the costs of regulation are without value.

Key points include:

  • the conclusion that South Africa has priority rules appears to be based on the case law interpreting the legislation, which is not permissible in terms of the DB methodology
  • DB assumes that the cost imposed on an employer has negative economic consequences for that employer and the economy as a whole - DB takes no account of the capacity of labour market regulation to produce greater equity
  • the DB index ignores the fact that many of the real impacts of a law may stem from the way it is interpreted or applied by functionaries such as arbitrators, judges, labour inspectors, stakeholders such as employers, employees and trade unions, as well as professionals such as labour consultants and lawyers.
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