Who Opposes Labor Regulation? Explaining Variation in Employers’ Opinions.

Private-sector firms play a central role in political struggles over labor law, yet few studies have explored manager’s heterogeneous perceptions of labor regulation.  Which managers find labor regulation an obstacle? We argue that two opposing sets of variables account for variation in employers’ views of labor regulation.  On one side, competitive pressures, especially from firms that do not have to comply with strict standards, make employers more likely to resist regulations.  On the other side, employers’ reliance on more advanced management practices, such as employing more skilled and permanent workers, makes them less likely to perceive regulations as an obstacle.  From this argument, we derive a series of hypotheses regarding the relationship between employer opinions and trade, FDI, “high road” human resource practices, and competition from the informal sector.  We test these hypotheses using micro-data collected by the World Bank from over 16,000 manufacturing establishments in 67 low- and middle-income countries. By showing how distinct employers react to the different regulatory burdens that they face, this paper opens new avenues of inquiry for scholars interested in the politics of regulation.