Inequality and Economic Inclusion

Understanding inequality: Promoting equity

  • Year: 2009
  • Organisation: TIPS
  • Publication Author(s): Paul Benjamin; Nicole Yazbek
  • Countries and Regions: South Africa

According to the International Labour Organisation (ILO) a third of the global workforce is either unemployed or underemployed barely eking out a living through informal work; selfemployment or as wage workers involved in precarious employment. International competitive pressures have led to a restructuring of organizations toward decentralized production networks and employment relationships. A significant global trend over the past two decades has been for firms to depart from the practice of offering long-term stable employment with large scale in-house factory production, and to adopt instead a ‘free agency’ or flexible model of employment, in which an increasing number of employees are classified as temporary. These workers fall outside the scope of legal protection afforded to workers engaged in standard forms of employment. They are either completely excluded from, or on the fringes of, social security protection and receive less favourable benefits than those workers recognized as employees and are accordingly vulnerable to exploitation and deepening poverty.

The Report of the Commission on Legal Empowerment of the Poor has identified the exclusion of the world’s poor from the rule of law as one of the main factors contributing to poverty and inequality in the world. The Commission argues that in affluent countries people are more likely to enjoy access to justice and other rights as workers, businesspeople, and owners of property. Wealth creation in these countries rests upon various legal protections, norms, and instruments governing matters such as property rights and labour contracts and workers associations. However, the legal underpinnings of entrepreneurship, employment, and market interaction are often taken for granted when countries adopt development strategies to overcome inequality and poverty despite the fact that most poor people do not benefit from legal protection and the opportunities it affords.

The Commission concludes that the spread of rule of law counteracts the exploitation of vulnerable participants in the informal economy and compliments other developmental initiatives such as investing more in education, public services, and infrastructure.

The Commission has developed a comprehensive agenda for legal empowerment encompassing four crucial pillars that it has identified as central in national and international efforts to increase protection and opportunities for the poor. These are access to justice and the rule of law, property rights, labour rights and business rights.

The Commission envisages labour regulation. Labour rights should create opportunities for all workers to obtain decent work regardless of whether they work in the formal or informal economy. This approach is in line with the ILO Decent Work Agenda.