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PROMOTING SUSTAINABLE COMPLIANCE : STYLES OF LABOR INSPECTION AND COMPLIANCE OUTCOMES IN BRAZIL

PROMOTING SUSTAINABLE COMPLIANCE : STYLES OF LABOR INSPECTION AND COMPLIANCE OUTCOMES IN BRAZIL. Roberto Pires Massachusetts Institute of Technology – DUSP/MIT rpires@mit.edu Just Supply Chains May 16-17, 2008 Stanford University.

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PROMOTING SUSTAINABLE COMPLIANCE : STYLES OF LABOR INSPECTION AND COMPLIANCE OUTCOMES IN BRAZIL

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  1. PROMOTING SUSTAINABLE COMPLIANCE: STYLES OF LABOR INSPECTION AND COMPLIANCEOUTCOMES IN BRAZIL Roberto Pires Massachusetts Institute of Technology – DUSP/MIT rpires@mit.edu Just Supply Chains May 16-17, 2008 Stanford University

  2. National Labor Regulations: reforming vs. implementing the law • Brazil: heavily regulated labor market, textbook example of how labor regulation negatively affects economic development • External and internal pressures for legal reform, but no significant change in the last 20 years • Nevertheless, working conditions have improved significantly in many sectors (even under modest and stable economic growth – 2.5%): Graph 1 – The Net Flow of Registered Workers by Five‐Year Period (1985‐2005) Source: Almeida, 2007

  3. National Labor Regulations: reforming vs. implementing the law • The way regulation is implemented (who? And how?): styles, strategies, practices… • Local level analysis: understand the variation in inspection practices (patterns of behavior) and how they are causally linked to compliance outcomes • Fieldwork (6 months): 24 cases, different sectors, different states… to isolate the effect of practices…

  4. Compliance Outcomes • Non-compliance: The intervention of inspectors does not result in significant increase in firms’ compliance with the law. • Compliance: The intervention is successful at immediately bringing firms to compliance with the law, but does not create favorable conditions for firms to remain in compliance. Compliance leads to decreasing competitiveness and productivity. • Sustainable Compliance: Labor inspectors not only bring firms into compliance but also create legal and/or technical solutions which work as positive incentives for firms to remain in compliance with the law. Compliance enhances firms’ competitiveness and productivity.

  5. …linking inspection practices to compliance outcomes Variation in styles/practices of inspection: • Punishment • Education / assistance • Combination of both: • Sanctions are necessary but not sufficient to promote positive change (i.e. upgrading); • Technical/legal assistance is not enough to signal the need for change in business practices.

  6. Examples / Cases • auto-parts industry - Belo Horizonte, MG • Negative involvement of main company/buyer • petrochemical industry – Camaçari, BA • Active involvement of main companies/buyers Other cases involving wage and hour regulations…

  7. Conclusion • Understanding how inspection practices affect business operation is useful for both state and non-state monitoring/inspection… • Problem-solving dialogues between regulators and regulated: combination of coercion and assistance

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