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4 Impacts of Education and Training on Core Labor Standards Compliance This panel focused on education and training provided to stakeholder groups to promote and measure compliance with core labor standards. Rep- resentation included workers, business, government, and technical as- sistance providers. Panelists were asked to describe examples of education and training programs that impact compliance with international labor standards, and to discuss in particular those issues related to governance, access, and cost. Panelists were asked to envision the flow of education and training within the system involving tripartite stakeholders workers, busi- ness, and government and to identify the factors that facilitate or inhibit this flow. WORKERS Roland Schneider (Trade Union Advisory Committee, OECD) de- scribed trade union education as contributing to the formation of human and social capital in what he argues is a much-needed broader concept of human capital: In my view, we need a concept For human capital! that goes be- yond the role of skills for productivity and earnings a concept that does not simply measure human capital by focusing on the length or duration of education and training. 25

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26 HUMAN CAPITAL INVESTMENT According to Schneider, a broader view should include the concept of so- cial capital, which he defined as formal and informal networks that "enable people to mobilize resources and achieve common goods." In this sense, education and training provided by trade unions exemplify this broader view. Schneider described a trade union course related to textiles and gar- ments. The course covers globalization in the context of the textile and garment sectors, changes within the industry, the impact of multinational enterprises, the roles of management and trade unions, and strategies for negotiating and implementing core labor standards. One joint union-em- ployer session focuses on perspectives of globalization, trade, and core labor standards. The course offers participants the opportunity to discuss the building of alliances between trade unions and their allies, including part- nerships between different unions. In a discussion of access to training and determinants of cost, Schneider described state support for education and training in Germany. About half of all workers in Germany have the right to go on educational and training leave while employers continue to maintain their salaries. (The workers cover the cost of training, but unions do not generally charge members to attend courses.) The legal basis for this right is a federal matter, however, and not all states have adopted these provisions. Legal provisions also exist to protect the education and training of work council members in Ger- many. 1 These laws entitle workers to elect representatives to work councils. Additionally, employers must provide the means to enable these representa- tives to conduct meaningful negotiations with their employers, including covering all costs related to training work council members. Schneider noted that this legal provision enables trade unions to provide training to worker representatives rather than to a large number of individual partici- pants. These provisions are therefore important determinants of access and cost. IWork councils in Germany serve the purpose of representing employee interests in the workplace. Employees elect representatives to serve on the council. Work councils communi- cate employee concerns to management and monitor compliance with labor laws, safety regulations, and collective bargaining agreements. The councils also have influence in per- sonnel management decisions, the working environment, and vocational training.

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IMPACTS OF EDUCATIONAND TRAINING BUSINESS 27 Elliot Schrage (Council on Foreign Relations) framed his discussion with four questions: What are the causes of noncompliance? Who needs training? How has the business community responded? Where can we look for lessons learned? He cited four overlapping causes of noncompliance with core interna- tional labor standards in the context of emerging markets: malevolence, ignorance, incompetence, and helplessness. According to Schrage, malevo- lence the idea that factory owners and managers are evil receives a con- siderable amount of attention although it is not a primary cause of non- compliance. Ignorance of labor standards and laws exists, particularly in terms of supply-chain conditions. For example, in soccer ball production in Pakistan part of Nike's supply chain subcontractors used child labor to produce soccer balls, but child workers were not employed at the Nike factory. "So Nike had no awareness of the existence and the depth of child labor in its supply chain, and Lit was] by no means alone. The entire indus- try was ignorant of that," Schrage said. The argument that Nike should have known suggests incompetence. Schrage said that noncompliance re- sults in part from incompetence poor management systems and poor edu- cation of managers. Managers may be aware of their responsibilities related to compliance with labor standards but do not have the tools to implement programs. This overlaps with the last category, helplessness. Factory man- agers lack the tools to enforce or apply labor standards in part because of the failures of other stakeholders. Schrage provided two examples: the fail- ure of government to provide a reliable system of identification to deter- mine the age of workers and the failure of global customers to understand the impacts of"eccentric or idiosyncratic production schedules." In the latter case, changes to production schedules with no advance notice prompt suppliers to take dramatic steps to meet those demands, and these steps may include violations of labor standards. Training is therefore required for workers, managers, government offi- cials, and global customers. As Schrage explained, training workers to know their rights would be an effective way of addressing employers' malevolence or ignorance. Management training to clarify responsibilities and duties would address ignorance and incompetence. Government officials should have knowledge of the laws and how those laws intersect with management practices so that they can assist managers in developing appropriate sys- tems. And global customers should understand the role of the retailer in

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28 HUMAN CAPITAL INVESTMENT promoting compliance from the standpoint of production management, rather than policing. Low-wage industries, such as toys, apparel, and agriculture, driven by bad publicity and lawsuits, have responded by focusing on legal issues rather than viewing compliance through economic and development perspectives. Private-sector responses have been driven by supply-chain practices. Schrage explained that from the microeconomic perspective, training makes the most sense in tight supply chains because multinationals can capture more of the benefit, but policing makes more sense in loose supply chains. As models of success, Schrage referred to compliance regimes such as the Fair Labor Association, the Ethical Trading Initiative, and Worldwide Responsible Apparel Production (WRAP). Although these programs em- phasize compliance, they do require an investment in education and train- ing. Schrage argued that far too few resources have been devoted to the education and training components compared to what has gone to support policing. He also noted that Global Alliance for Workers and Communi- ties serves as an interesting model, with human capital investment pro- grams in Indonesia, India, Vietnam, and Thailand. These programs use the factory base as a delivery system of services and education on a range of issues beyond labor standards compliance. Last, Schrage suggested two questions for future research: How can global supply chains be leveraged to promote education, training, and com- pliance? And does compliance with labor standards improve productivity in low-wage countries? GOVERNMENT Michaela Meehan of the U.S. Agency for International Development (USAID) described USAID's approach to worker education. USAID en- dorses trade unions to promote democracy throughout the world. Meehan said that USAID considers unions as "incubators for democracy," and USAID's Office of Democracy and Governance devotes the bulk of its program to education and training of workers, usually through free trade unions. Meehan explained that USAID fosters trade union movements be- cause of their representation, sustainability, and replicability. Trade unions represent tens of thousands of workers and tend to represent the nonelite members of society who often do not have other avenues for expressing a public voice. Also of critical importance, according to Meehan, is that trade unions are "one of the vehicles that can cross ethnic, religious, and gender

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IMPACTS OF EDUCATIONAND TRAINING 29 divides." Trade unions have sustainability; they have assets that can be in- vested to sustain programs when government funding is no longer avail- able. Trade unions have replicability; they "mimic political governance sys- tems," Meehan said. The structure of free trade unions has an important function, as local affiliates reach out to the regional and national levels, which in turn are tied into an international framework. Meehan also men- tioned several of USAID's implementing partners, including the American Center for International Labor Solidarity, the International Labor Rights Fund, and the Academy for Educational Development. She provided several examples to illustrate USAID's approach to edu- cation and training related to labor standards more broadly. In an eco- nomic literacy program under way in Brazil, the rationale for the training is to provide workers with a basic understanding of economic theory in prac- tical application the consequences of having a strike, losing contracts, negotiating higher wages, lobbying the government, and so on. This pro- gram is now being used in other countries as well. Meehan described in detail a program in Bangladesh aimed at women workers in the garment industry. USAID has established women's education centers that are easily accessible to women outside of working hours. The centers provide legal assistance with respect to the workers' rights covered under national law and international conventions. Workers also receive occupational health and safety training, an area in which the Bangladesh manufacturers and exporters association has an interest. Meehan noted that USAID lacks the objective empirical evidence to determine whether these programs increase compliance but is currently developing a research program on the subject. Meehan added that it is important to be aware of the possible negative consequences of promoting trade unions and labor standards compliance. For example, there are countries where trade union members are targeted for assassination. This raises serious issues about when to intervene and with what types of programs. It is important to consider the political cli- mate and whether appropriate infrastructure exists, such as a legal frame- work. TECHNICAL ASSISTANCE PROVIDERS Representatives from the ILO were invited to describe technical assis- tance programs related to management training and labor inspection. Michael Urminsky described management training programs through the Work Improvements in Small Enterprise (WISE) and the Global Compact.

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30 HUMAN CAPITAL INVESTMENT WISE focuses on helping small business owners with practical issues re- lated to health and safety, such as labeling chemicals, storing materials, and so on. The program links these workplace improvements with productivity improvements. In 2001 the ILO began work on the Global Compact, an initiative to develop management training activities related to the core international labor standards. Urminsky described the various modules of the program, including making the case to adopt the standards, clarifying the meaning of the principles, and translating them to practice. The "Why should you care?" module makes the moral and business case to motivate enterprises to implement the standards. A second module clarifies the meaning of the standards. A needs assessment by the ILO identified a lack of knowledge among managers about the meaning of the rights in practical application. Urminsky used discrimination as an example. Many managers had a nar- row conception of discrimination and considered it only in terms of gender and not in terms of ethnic or political discrimination. Urminsky explained that the "principles to practice" module presents case studies to help man- agers use action planning tools to design solutions for real problems. The problems might include building good faith with a trade union in a bar- gaining situation or dealing with child labor in different industries. Often one of the first steps in the training is to help participants un- derstand the differences between national law and international standards. As Urminsky noted, it is difficult to get training participants to overcome a traditional focus on national law, which does not necessarily reflect the international standard completely, and to get them to see the bigger pic- ture. Urminsky explained the ILO's strategy for working with national em- ployer groups or industry associations to build their capacity to offer train- ing. The ILO does this for two reasons: First, it is not cost-effective for the ILO to train individual companies. Second, the employer organizations are often more trusted in a country. The ILO trains the organization to use the materials, teach the courses, and market them on a cost basis. Urminsky noted promising signs that these organizations will be able to provide on- going services on a for-fee basis to enterprises but it is too early to see any course offerings on a sustainable basis yet. Another lesson learned about sustainability is that it takes time to develop capacity, usually a year or two. In addition to organizations, the ILO has worked with managers and west- ern multinationals in the development of the courses. Urminsky noted the importance of including union and, if possible, civil society representation

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IMPACTS OF EDUCATIONAND TRAINING 31 to build trust and to establish better relations within the union and NGO movements for the program. This collaboration enables stakeholders to learn about rights from the same starting point. Wolfgang von Richthofen of the ILO described the importance of la- bor inspection in terms of a "large-scale convergence of interests" that pro- motes social dialogue. Von Richthofen said that workers have a fundamen- tal interest in maintaining and enhancing employability, which is affected by compliance with standards. Managers have an interest in improving competitiveness, and von Richthofen believes that compliance with labor standards contributes to competitiveness by leading to higher pro- ductivity, better worker motivation, fewer accidents, and so on. Govern- ments have an interest in seeing their labor laws enforced. Because of this convergence of interests, labor inspection is conducive to social dialogue, whereas the issue of labor standards as a starting point for social dialogue can be more difficult. Former Soviet Union countries, for example, which have little history of social dialogue, tend to get bogged down in issues like privatization when the subject of labor standards is introduced. Von Richthofen described three types of labor inspection systems. High-performance systems have a great deal of resources devoted to build- ing capacity to monitor compliance and enforce labor legislation. These systems have training and human resource development units and recog- nize the importance of training as a strategic tool to drive organizations. Developing countries, on the other hand, have systems that are under- resourced, with staff who are poorly qualified and undermotivated. These systems operate devoid of training and resources. The transition economies of Central and Eastern Europe represent an intermediary level. Here, the terms of reference under the former economic systems required restructur- ing. The previous labor inspection systems were split among industries, with each one having its own control apparatuses. The ILO program, aimed at structural reform, provided training to labor inspectors on communica- tion, conflict resolution, and social skills that had not been required in the old system. In this kind of system, an educated labor inspectorate had to be retrained for new work skills. With any of these systems, the ILO first conducts a needs assessment before establishing a training program. An inspection system's audit process provides the means for a systems analysis. The findings are then reported to the country's government, with the recommendation that the findings be discussed at a national high-level policy meeting in the tripartite context. At the policy meeting, labor inspection policy is formulated to set priori-

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32 HUMAN CAPITAL INVESTMENT ties, optimize resource use, and identify qualifications needed for inspec- tion specialists to implement the new policy. Von Richthofen noted, "The advantage of starting with a policy is that you then know what you want to train against." The training content focuses on labor inspection systems development in addition to core international labor standards. In this ho- listic approach, the ILO identifies structural deficits and imparts training to improve the organization as a whole. Von Richthofen used the African Regional Labour Administration Centre (ARIAC) as an example of how the ILO builds local capacity to provide labor inspection training. Located in Harare, Zimbabwe, ARLAC is an independent intergovernmental agency that provides training for gov- ernment inspectors from the region. Von Richthofen described it as "one of the rare institutions in Africa that is effectively funded from contributions by the African member states." The ILO also provides significant funding contributions. In terms of cost, a typical 25-person, two-week training course for mid-level and senior labor inspectors at ARLAC is $40,000 to $45,000 U.S. dollars. This training occurs in the context of systems with extremely tight resources. Von Richthofen commented on the results of labor inspection train- ing. He cited success stories from South Africa, Vietnam, Kenya, Bulgaria, and Mongolia. Concrete results show that training, capacity building, and social infrastructure development focused on labor inspection systems sig- nificantly increase the rate of compliance. Barriers to the flow of training exist, and they can inhibit capacity building. Von Richthofen said that the lack of political will is a serious problem. He stressed the monumental problems facing inspection systems, including lack of consistency and resources, the bad image and high turn- over, and the lack of social dialogue. On the positive side, however, there are countries expressing political will through the ratification of the core conventions and the ILO's labor inspection instruments, including Conventions 81 and 129 and the proto- col to Convention 81. Funding agencies have a better understanding and interest in building on existing institutions for greater sustainability. Im- proved methodologies and concepts have coincided with a more program- matic approach to strengthening labor inspection and recognizing its im- portance in achieving compliance with international labor standards.

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IMPACTS OFEDUCATIONAND TRAINING AUDIENCE DISCUSSION 33 Responding to comments about the lack of political will and resources, Mo Raj an, formerly of Levi Strauss and a member of the CMILS, asked why there isn't greater collaboration among stakeholder groups to run more cost-effective programs and to engage in a dialogue about a common agenda. Michael Urminsky responded that the way international institu- tions are structured creates competition for donor funding but collabora- tion does exist. His own work includes exploring collaborations with differ- ent institutions, including the World Bank, the OECD, and academic institutions such as business schools. Con Richthofen stated that since the reorganization of the ILO into four major sectors social protection, social rights, social dialogue, and employment interprogram cooperation has improved significantly. Audience members further engaged speakers in a discussion of how political climates in countries impact noncompliance. Charlotte Roe of the U.S. State Department noted that Elliot Schrage's four categories of non- compliance omitted system problems. For example, in Chile under Pinochet's regime, she said, the political situation made compliance impos- sible although worker movements helped bring about change. Schrage of- fered Reebok's experience in China as a counterexample; Reebok has had some success in encouraging elections in facilities where it is a dominant customer. Schrage encouraged the CMILS to look at case studies where labor standards compliance promoted competitive advantage. According to Schrage, the private sector in emerging markets is very suspicious of worker organizations: "What we have found is that when worker organizations and factory managers actually end up sitting down and talking, it is surprising how much common ground they find.'' He said that ignorance about the impacts of compliance on productivity and profit suggests the need for further research into competitive advantage. Alberto Paloni of the University of Glasgow noted that, on the other hand, non- compliance might give a competitive advantage to countries that compete in a globalized economy on the basis of low wages. This advantage is an- other reason for noncompliance that has not been emphasized enough but remains an important factor to consider. In a follow-up comment, von Richthofen mentioned that the ILO is considering developing studies of how much noncompliance costs em- ployers.

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34 HUMAN CAPITAL INVESTMENT We have many reasons to believe that the permanent graft that employers have to pay to get away with Enoncompliance], the low productivity, the poor quality, and many, many other factors ... add up to a higher common cost against the very reasonably com- pliant. In his closing comments, Schrage said that one of the biggest lessons learned from initiatives such as those discussed in this workshop is that very careful consideration should be given to the consequences of imple- mented programs. The initiative to eliminate child labor from soccer ball production in Pakistan, for example, was successful in achieving certain objectives (reducing child labor) but there were unintended negative con- sequences associated with the program as well. Michaela Meehan said that some of the children removed from soccer ball production went into brick production, where working conditions are worse. In light of these experi- ences with mixed success, Schrage reiterated that considerable attention should be given to thinking through consequences in the implementation of programs.