Economic Globalisation and Convergence in Labour Market Regulation: An Empirical Assessment

Abstract

A major question for the comparative analysis of industrial relations and labour market institutions has been the extent to which labour laws in different countries have converged or diverged over time. A second question is whether any convergence between labour law systems is associated with economic globalisation. Using a new measure of the ‘protective strength’ of a country’s labour market regulation (the Longitudinal Labour Regulation Index), this study compares the evolution of labour laws in six countries (Australia, France, Germany, India, the United Kingdom and the United States) for the period 1970 to 2005. We assess whether there has been a convergence in the protective strength of labour market regulation between these countries or ongoing divergences between them. In particular, we test whether there is evidence of ‘formal’ or ‘functional’ convergence, ‘weak’ or ‘strong’ convergence, ‘simple’ or ‘bipolar’ convergence, and whether convergence is associated with globalisation and economic integration between the countries included in our study. Our analyses show that over the period from 1970 to the mid-1980s the protective strength of labour laws of different countries actually diverge, but began to converge thereafter. Although we find evidence of both formal and functional convergence during this later period, this propensity has been weak, and tended to a pattern of ‘bipolar convergence’. At the same time, the data do not indicate that any of these processes of convergence were associated with ‘Americanisation’ of labour law, or a race to the bottom.

Keywords: labour law, convergence, globalization

JEL Classification: F02, F14, F15, K31, P51