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Box 4 Social case for labourregulationThe social case for labour market regulationsemanates, fi rst and foremost, from the principlethat labour is not a commodity. The distinction liesin the human aspect of labour. As such, its behaviouris affected by the work environment and by theincentives that are given. While machines operateaccording to technical specifications, labour has tobe motivated based on what they care about. Theyare contracted to perform a certain job and are paidwhen they complete the job. The completion of thecontract is not as straightforward as it would be fornon-human means of production as this requiresa complex range of information on both sides andincentives to ensure compliance. 42ship has been the cornerstone around whichlabour law, collective bargaining agreements andsocial security systems are framed. Whatever itsprecise definition in different national contexts,the employment relationship has represented ‘auniversal notion which creates a link between aperson, called the employee (frequently referredto as the ‘worker’) with another person, calledthe employer to whom she or he provides labouror services under certain conditions in return forremuneration.’ 40Despite the long-standing and wide-spreadcommitment to labour rights, a large majorityof workers are excluded from labour rights andsocial protection. Thus, informality and povertyis not only a market failure, it is also a failure ofpublic policies. Several factors, in the form ofhistoric traditions, structural failures and conflictingpolitical interests, help explain the persistenceand growth of informality.• One explanation is the history of labour lawand regulation. Labour rights were historicallydesigned with the presumption of a formalemployment relationship thus excluding thosewithout a formal employment relationship.• Another explanation is a lack of confidencein laws and law enforcement. Some politicalregimes have further undermined publicconfidence due to poor governance, causingmany enterprises to operate in the informaleconomy.• A third explanation is a lack of public policyattention. Governments, employers, and workers— the three social partners in the ILOstandard-setting systems — have focused onthe formal economy and the formal organisedlabour force. The informal sector and informalemployment have been studied and discussedsince the 1970s. A first discussion of theinformal sector took place at the InternationalLabour Conference in 1991 and subsequentlythe International Labour Conference reachedpolicy conclusions regarding informal employmentin 2002. 41• Another factor is weak and poorly-designedenforcement mechanisms. Countries that haveimproved the design and reach of their enforcementmechanisms to match the circumstancesof workers and units in the informaleconomy have been able to reduce informality.The relationship between informal employmentand poverty had not, until recently, received theattention they deserve, much less reached the topof the development policy agenda. The interestto bring about reform is quite new and the reformstrategies, discussed by the ILO, World Bank, theinternational trade union movement and others,and the efforts to develop feasible solutions bycountries with large informal economies, are stillin their early stages of development.148