Economic globalization and convergence in labor market regulation: an empirical assessment

Abstract

A major question for the comparative analysis of industrial relations and labor market institutions has been the extent to which labor laws in different countries have converged or diverged over time. A second question is whether any convergence between labor law systems is associated with economic globalization. Using a new measure of the “protective strength” of a country’s labor market regulation (the Longitudinal Labor Regulation Index), this study compares the evolution of labor 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 labor 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 globalization 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 labor laws actually diverged, 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 toward a pattern of “bipolar convergence.” At the same time, the data do not indicate that any of these processes of convergence were associated with an “Americanization” of labor law, or a race to the bottom.