Financial crises and labor: Does tight money loosen labor rights?


Despite copious research on financial crises, many of their effects remain poorly understood. In this study, we examine how financial crises affect collective labor rights. We posit that the economic effects of these crises likely undermine the protection of collective labor rights. To test these propositions, we examine the impact of financial crises on collective labor rights in 46 developing countries from 1985 through 2002. We find that crises are detrimental to labor rights practices while having no significant effect on labor rights laws, and that their effect persists for up to five years after the crisis subsides. Our analysis thus suggests that financial crises pose a challenge to supporters of labor rights, as they are pivotal events that call into question the balance that exists between the state, capital, and labor, and that labor loses power in both the short and medium terms.

Publication Title

World Development