OIT - Why social dialogue is necessary for sustainable economic development

X Why social dialogue is necessary for sustainable economic development: Exploring peak-level social dialogue in alternative scenarios Author / Damian Grimshaw

July / 2026 ILO Working Paper 177© International Labour Organization 2026 Attribution 4.0 International (CC BY 4.0) This work is licensed under the Creative Commons Attribution 4.0 International. See: https:// creativecommons.org/licenses/by/4.0/. The user is allowed to reuse, share (copy and redistribute), adapt (remix, transform and build upon the original work) as detailed in the licence. The user must clearly credit the ILO as the source of the material and indicate if changes were made to the original content. Use of the emblem, name and logo of the ILO is not permitted in connection with translations, adaptations or other derivative works. Attribution – The user must indicate if changes were made and must cite the work as follows: Grimshaw, D. Why social dialogue is necessary for sustainable economic development:: Exploring peak-level social dialogue in alternative scenarios. ILO Working Paper 177. Geneva: International Labour Office, 2026.© ILO. Translations – In case of a translation of this work, the following disclaimer must be added along with the attribution: This is a translation of a copyrighted work of the International Labour Organization (ILO). This translation has not been prepared, reviewed or endorsed by the ILO and should not be considered an official ILO translation. The ILO disclaims all responsibility for its content and accuracy. Responsibility rests solely with the author(s) of the translation. Adaptations – In case of an adaptation of this work, the following disclaimer must be added along with the attribution: This is an adaptation of a copyrighted work of the International Labour Organization (ILO). This adaptation has not been prepared, reviewed or endorsed by the ILO and should

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Authorization for publication: Lieve Verboven, Head, LABGOV ILO Working Papers can be found at: www.ilo.org/research-and-publications/working-papers Suggested citation: Grimshaw, D. 2026. Why social dialogue is necessary for sustainable economic development:: Exploring peak-level social dialogue in alternative scenarios, ILO Working Paper 177 (Geneva,

ILO). https://doi.org/10.54394/0003361301 ILO Working Paper 177 Abstract This paper argues that social dialogue is a necessary instrument for delivering sustainable economic development and social progress for all. It played a key role in shaping countries’ responses to the financial crisis of 2008–09 and the COVID-19 pandemic. It is also instrumental in operationalizing just transitions, combating inequalities, strengthening respect for international labour standards and responding to the cost-of-living crisis in developed and developing countries. Nevertheless, the structures and resources for social dialogue are underdeveloped in many countries and there is limited appreciation of its role in fostering sustainable economic development and social progress. Drawing on a range of theoretical and empirical contributions, the paper explores the role of peak-level social dialogue (PLSD) in shaping sustainable economic development. PLSD is defined as institutional processes that bring together representatives of government and social partners (employers’ associations and trade unions) at the national and sectoral levels. The paper provides evidence for its foundational and transformative benefits, aligned with the UN’s 2030 Agenda for Sustainable Development. Then, using scenario analysis, it distinguishes the role PLSD plays

(employers’ associations and trade unions) at the national and sectoral levels. The paper provides evidence for its foundational and transformative benefits, aligned with the UN’s 2030 Agenda for Sustainable Development. Then, using scenario analysis, it distinguishes the role PLSD plays under diverse approaches to economic development (short-termist versus long-termist; non-inclusive versus inclusive). The paper contributes to knowledge about the economic and political conditions most likely to enable PLSD to deliver sustainable economic development and social progress for all. About the authors Damian Grimshaw is Professor of Employment Studies at King’s College London. His published work covers international comparisons of low-wage labour markets, outsourcing, precarious work and gender inequality. He was Director of Research at the ILO during 2018 and 2019 and continues to provide specialist research. He currently leads ESRC research projects on digitalization, AI and skill changes.02 ILO Working Paper 177 Abstract 01 About the authors 01 Acronyms 07 Executive Summary 08 X Introduction 10 X 1 Peak-level social dialogue: Principles, actors and types 12 1.1 The principles 12 1.2 The actors 13 1.3 The types 13 X 2 The benefits of peak-level social dialogue 15 2.1 Foundational benefits 15 2.1.1 Labour peace and societal cohesion 15 2.1.2 Good governance and democracy 16 2.2 Transformative benefits 16 2.2.1 Sustainable productivity growth 16 2.2.2 Just transitions 17 2.2.3 Combating unjust inequalities 18 X 3 An SDG approach for economic development and social progress: Deriving four alternative scenarios 20 3.1 Time horizons: short-termist versus long-termist approaches 20 3.2 Inclusive versus non-inclusive approaches 21 3.3 Four scenarios of economic development and social progress 22 3.3.1 Unsustainable development 23

four alternative scenarios 20 3.1 Time horizons: short-termist versus long-termist approaches 20 3.2 Inclusive versus non-inclusive approaches 21 3.3 Four scenarios of economic development and social progress 22 3.3.1 Unsustainable development 23 3.3.2 Captive development 23 3.3.3 Open development 24 3.3.4 Sustainable development 25 X 4 Scenario analysis of the role and consequences of PLSD 27 4.1 Unsustainable development 29 4.1.1 What does PLSD look like? 29 4.1.2 What role can PLSD play? 29 Table of contents03 ILO Working Paper 177 4.2 Captive development 32 4.2.1 What does PLSD look like? 32 4.2.2 What role can PLSD play? 33 4.3 Open development 36 4.3.1 What does PLSD look like? 36 4.3.2 What role can PLSD play? 36 4.4 Sustainable development 39 4.4.1 What does PLSD look like? 39 4.4.2 What role can PLSD play? 39 X 5 Discussion: PLSD for sustainable economic development and social progress 44 5.1. PLSD for decent work and full employment 44 5.2. PLSD for a fair income distribution 45 5.3. PLSD to navigate just transitions 46 5.4. PLSD for social justice 47 X Conclusion 49 References 5004 ILO Working Paper 177 List of Figures Figure 1. The foundational and transformative benefits of PLSD 15 Figure 2. Four scenarios of economic development and social progress 22 Figure 3. The effects of social dialogue on economic development: Contingencies and feedList of Figures Figure 1. The foundational and transformative benefits of PLSD 15 Figure 2. Four scenarios of economic development and social progress 22 Figure 3. The effects of social dialogue on economic development: Contingencies and feedback effects 27 Figure 4. Mapping peak-level social dialogue as a force for change using scenario analysis 2805 ILO Working Paper 177 List of Tables Table 1. The principles of social dialogue 12 Table 2. Examples of peak-level social dialogue 1406 ILO Working Paper 177 List of Boxes Box 1. Agents of just transition or defending the status quo? 30 Box 2. How PLSD can leverage wider concerns for labour compliance in the global apparel sector 31 Box 3. Tripartite PLSD in liberal market economies during the COVID-19 pandemic 32 Box 4. Precarious work and worker protests for more inclusive development and decent work 34 Box 5. Improving knowledge of the workplace impact of digitalization 35 Box 6. Social dialogue to improve family support in developing countries 37 Box 7. The problem of absent collective voice: Precarious factory work and sexual harassment in Uganda 38 Box 8. Using minimum wage policy to reduce poverty and address high inflation in Argentina 41 Box 9. Improving social protection measures during the COVID-19 crisis through PLSD 4207 ILO Working Paper 177

Acronyms AI artificial intelligence CSR corporate social responsibility EDI equality, diversity and inclusion GDP gross domestic product OECD Organisation for Economic Co-operation and Development PLSD peak-level social dialogue SDG Sustainable Development Goal SME small and medium-sized enterprise UN United Nations08 ILO Working Paper 177 Executive Summary Countries around the world are facing the stagflation effects of global conflict, the worsening consequences of a global climate crisis and the enduring challenge of combating poverty, inequalities and social injustice. The United Nations (UN) has warned that the COVID-19 pandemic had a major adverse impact, “undermining decades of development efforts” (UN 2021a). Similarly, the ILO confirms that “the international community today is almost as far from reaching the targets of SDG 8 as it was in 2015” (ILO 2023a).1 Current global events increase the urgency of reinvigorating the 2030 Agenda for Sustainable Development. Nevertheless, there is hope that centres around the value of social dialogue in shaping and guiding countries’ capacity to move towards more sustainable development. Social dialogue refers to forms of negotiation, consultation and information exchange between, or among, representatives of employers’ and workers’ organizations and governments on employment issues, as well as broader economic and social policy (ILO 2018a). During the COVID-19 pandemic, governments, businesses and trade unions took decisive and coordinated actions to support business, jobs and people’s income; in doing so, many countries expanded social protection and strengthened workers’ rights (ILO 2021a, 2023b; Nölke 2022). Social dialogue is also instrumental in enabling countries to operationalize just transitions2 to a digital economy and a green economy. Examples include tripartite policy initiatives to redirect industrial and technology policies, sector-level collective agreements for skill investment, and active labour market programmes (ILO 2018a, 2021b; Molina Romo 2022). Efforts to address inequalities and combat poverty through social dialogue have also been reinvigorated during the ongoing cost-of-living crisis. Measures include sustaintive agreements for skill investment, and active labour market programmes (ILO 2018a, 2021b; Molina Romo 2022). Efforts to address inequalities and combat poverty through social dialogue have also been reinvigorated during the ongoing cost-of-living crisis. Measures include sustaining the real value of statutory or negotiated minimum wages, uprating social transfers to poor households, reducing gender inequality and raising tax revenues from capital gains and high earners (ECLAC and ILO 2022; Eurofound 2022; ILO 2023c; OECD 2022). And yet, the world as a whole remains far away from the transformation required to meet the UN’s SDGs by 2030. The UN is voicing increasingly urgent warnings: “It is time to sound the alarm. At the midpoint on our way to 2030, the Sustainable Development Goals are in deep trouble. An assessment of the around 140 targets for which trend data is available shows that about half of these targets are moderately or severely off track; and over 30 per cent have either seen no movement or regressed below the 2015 baseline.” (UNDESA 2023, 4). This paper argues that social dialogue is a necessary foundation for the required transformation and a critical instrument for the delivery of social justice (ILO 2023d). Before doing so, however, we need to acknowledge, and respond to, two major fault-lines. Firstly, the structures and institutions of social dialogue are underdeveloped. There remain far too many countries and sectors where social dialogue either is absent or lacks the necessary legal, institutional and financial support. In particular, countries or sectors with a large informal economy can not reap its maximum potential (Premchander et al, unpublished; Schmidt et al. 2023). Secondly, there is a disconnect between social dialogue and certain characteristics of economic development. This paper develops the argument that short-termist and non-inclusive approaches 1 UNDESA, “SDG 8: Promote sustained, Inclusive and Sustainable Economic Growth, Full and Productive Employment and Decent Work For All”.

Secondly, there is a disconnect between social dialogue and certain characteristics of economic development. This paper develops the argument that short-termist and non-inclusive approaches 1 UNDESA, “SDG 8: Promote sustained, Inclusive and Sustainable Economic Growth, Full and Productive Employment and Decent Work For All”. 2 The ILO’s policy guidelines for a just transition (ILO 2015) are referenced in SDG 13, which calls on governments and other stakeholders to take “urgent measures to combat climate change and its impacts”.09 ILO Working Paper 177 to economic development are especially obstructive. When countries pursue short-termist policies to boost economic growth with limited attention to improving equalities, much of the positive transformative potential of social dialogue may be stymied. Meanwhile, under an alternative long-termist and inclusive approach, it is more likely to be realized (Grimshaw and Hayter 2020). These preliminary insights point to the need to understand more clearly how the positive effects of social dialogue are mediated by specific features of economic development and social progress. To advance our understanding, this paper focuses on peak-level social dialogue (PLSD). PLSD is defined as an institutional arrangement that brings together representatives of government and the social partners (employers’ and workers’ organizations) at the national and sectoral levels. Like all forms of social dialogue, PLSD can involve negotiation, consulation and information exchange on issues relating to labour, economic and social policy. It may also involve bipartite processes, limited to the social partners, notably for reaching sectoral collective agreements. PLSD therefore excludes mechanisms at the enterprise level and the international level, although there are, of course, interactions and interdependencies. There is value in defining and applying the concept of PLSD for the argument developed in this paper because it brings to light the power of social dialogue as a coordinating and conflict-resolution mechanism at the national level, in conjunction with nation-wide policies and practices (from governments, trade unions and employers) shaping economic development and social progress. Applying a scenario analysis to the international empirical evidence, this paper substantiates

of social dialogue as a coordinating and conflict-resolution mechanism at the national level, in conjunction with nation-wide policies and practices (from governments, trade unions and employers) shaping economic development and social progress. Applying a scenario analysis to the international empirical evidence, this paper substantiates the following argument. The positive potential of PLSD is hindered in contexts where short-termism and/or non-inclusiveness characterize a country’s approach to economic development. Instead, a virtuous cycle between the institutions of social dialogue and sustainable economic development is more likely in a scenario oriented around principles of long-termism and inclusiveness. Nevertheless, PLSD exerts a positive change function in all four scenarios and tends to direct change towards greater long-termism and inclusiveness, representing a countervailing and positive force for transformation. The paper also draws attention to potential risks in all four scenarios associated with the institutions, structures and strategies of social dialogue, requiring actors to continuously repurpose strategy and structure in order to prevent deficits in governance, legitimacy and accountability. Overall, the paper contributes to knowledge about the role PLSD plays under diverse scenarios of economic development and the conditions most likely to enable it to promote sustained social progress and social justice.3 3 This Working Paper was drafted in 2023 and served as a core technical input for the ILO’s Social Dialogue Report 2024 (ILO 2024). Sections 1, 2 and 3 (and associated tables and figures) are also to be found in Chapter 1 of the Social Dialogue Report 2024, co-authored by this author. Section 5 also provides a summary of issues that framed the design for Chapters 2 to 5 of the report.10 ILO Working Paper 177 X Introduction Countries around the world are facing the stagflation effects of global conflict, the worsening consequences of a global climate crisis and the enduring challenge of combating poverty, inequalities and social injustice. The United Nations (UN) has warned that the COVID-19 pandemic had a major adverse impact, “undermining decades of development efforts” (UN 2021a). Similarly,

consequences of a global climate crisis and the enduring challenge of combating poverty, inequalities and social injustice. The United Nations (UN) has warned that the COVID-19 pandemic had a major adverse impact, “undermining decades of development efforts” (UN 2021a). Similarly, the ILO confirms that “the international community today is almost as far from reaching the targets of SDG 8 as it was in 2015” (ILO 2023a).4 Current global events increase the urgency of reinvigorating the 2030 Agenda for Sustainable Development. Nevertheless, there is hope that centres around the value of social dialogue in shaping and guiding countries’ capacity to move towards more sustainable development. Social dialogue refers to forms of negotiation, consultation and information exchange between, or among, representatives of employers’ and workers’ organizations and governments on employment issues, as well as broader economic and social policy (ILO 2018a). During the COVID-19 pandemic, governments, businesses and trade unions took decisive and coordinated actions to support business, jobs and people’s income; in doing so, many countries expanded social protection and strengthened workers’ rights (ILO 2021a, 2023b; Nölke 2022). Social dialogue is also instrumental in enabling countries to operationalize just transitions5 to a digital economy and a green economy. Examples include tripartite policy initiatives to redirect industrial and technology policies, sector-level collective agreements for skill investment, and active labour market programmes (ILO 2018a, 2021b; Molina Romo 2022). Efforts to address inequalities and combat poverty through social dialogue have also been reinvigorated during the ongoing cost-of-living crisis. Measures include sustaining the real value of statutory or negotiated minimum wages, uprating social transfers to poor households, reducing gender inequality and raising tax revenues from capital gains and high earners (ECLAC and ILO 2022; Eurofound 2022; ILO 2023c; OECD 2022). And yet, the world as a whole remains far away from the transformation required to meet the

households, reducing gender inequality and raising tax revenues from capital gains and high earners (ECLAC and ILO 2022; Eurofound 2022; ILO 2023c; OECD 2022). And yet, the world as a whole remains far away from the transformation required to meet the UN’s SDGs by 2030. The UN is voicing increasingly urgent warnings:  “It is time to sound the alarm. At the midpoint on our way to 2030, the Sustainable Development Goals are in deep trouble. An assessment of the around 140 targets for which trend data is available shows that about half of these targets are moderately or severely off track; and over 30 per cent have either seen no movement or regressed below the 2015 baseline.” (UNDESA 2023, 4). This paper argues that social dialogue is a necessary foundation for the required transformation and a critical instrument for the delivery of social justice (ILO 2023d). Before doing so, however, we need to acknowledge, and respond to, two major fault-lines. Firstly, the structures and institutions of social dialogue are underdeveloped. There remain far too many countries and sectors where social dialogue either is absent or lacks the necessary legal, institutional and financial support. In particular, countries or sectors with a large informal economy can not reap its maximum potential (Premchander et al, unpublished; Schmidt et al. 4 UNDESA, “SDG 8: Promote sustained, Inclusive and Sustainable Economic Growth, Full and Productive Employment and Decent Work For All”. 5 The ILO’s policy guidelines for a just transition (ILO 2015) are referenced in SDG 13, which calls on governments and other stakeholders to take “urgent measures to combat climate change and its impacts”.11 ILO Working Paper 177

2023). Secondly, there is a disconnect between social dialogue and certain characteristics of economic development. This paper develops the argument that short-termist and non-inclusive approaches to economic development are especially obstructive. When countries pursue short-termist policies to boost economic growth with limited attention to improving equalities, much of the positive transformative potential of social dialogue may be stymied. Meanwhile, under an alternative long-termist and inclusive approach, it is more likely to be realized (Grimshaw and Hayter 2020). These preliminary insights point to the need to understand more clearly how the positive effects of social dialogue are mediated by specific features of economic development and social progress. To advance our understanding, this paper focuses on peak-level social dialogue (PLSD). PLSD is defined as an institutional arrangement that brings together representatives of government and the social partners (employers’ and workers’ organizations) at the national and sectoral levels. Like all forms of social dialogue, PLSD can involve negotiation, consulation and information exchange on issues relating to labour, economic and social policy. It may also involve bipartite processes, limited to the social partners, notably for reaching sectoral collective agreements. PLSD therefore excludes mechanisms at the enterprise level and the international level, although there are, of course, interactions and interdependencies. There is value in defining and applying the concept of PLSD for the argument developed in this paper because it brings to light the power of social dialogue as a coordinating and conflict-resolution mechanism at the national level, in conjunction with nation-wide policies and practices (from governments, trade unions and employers) shaping economic development and social progress. Applying a scenario analysis to the international empirical evidence, this paper substantiates the following argument. The positive potential of PLSD is hindered in contexts where short-termism and/or non-inclusiveness characterize a country’s approach to economic development. Instead, a virtuous cycle between the institutions of social dialogue and sustainable economic development is more likely in a scenario oriented around principles of long-termism and inclusiveness. Nevertheless, PLSD exerts a positive change function in all four scenarios and tends to

Instead, a virtuous cycle between the institutions of social dialogue and sustainable economic development is more likely in a scenario oriented around principles of long-termism and inclusiveness. Nevertheless, PLSD exerts a positive change function in all four scenarios and tends to direct change towards greater long-termism and inclusiveness, representing a countervailing and positive force for transformation. The paper also draws attention to potential risks in all four scenarios associated with the institutions, structures and strategies of social dialogue, requiring actors to continuously repurpose strategy and structure in order to prevent deficits in governance, legitimacy and accountability. Overall, the paper contributes to knowledge about the role PLSD plays under diverse scenarios of economic development and the conditions most likely to enable it to promote sustained social progress and social justice.6 6 This Working Paper was drafted in 2023 and served as a core technical input for the ILO’s Social Dialogue Report 2024 (ILO 2024). Sections 1, 2 and 3 (and associated tables and figures) are also to be found in Chapter 1 of the Social Dialogue Report 2024, co-authored by this author. Section 5 also provides a summary of issues that framed the design for Chapters 2 to 5 of the report.12 ILO Working Paper 177 X 1 Peak-level social dialogue: Principles, actors and types

1.1 The principles The principles of PLSD align with the general principles of social dialogue (table 1). The first consists of a pluralist conceptualization of capitalist governance (Kaufman 2000). This acknowledges the competing interests among employers, workers and government, and requires “negotiated accommodation” of the varied political and economic trade-offs (Hassel 2006). The second principle of participative representation ensures there is a legitimate and representative voice for employers and workers (Scharpf 1999). This requires social partners to develop a broad and solidaristic base to prevent problems of insider bias and/or the under-representation of particular sectors, occupations or workforce groups, including workers in the informal economy. The means of achieving effective participative representation, as the ILO has consistently argued,

broad and solidaristic base to prevent problems of insider bias and/or the under-representation of particular sectors, occupations or workforce groups, including workers in the informal economy. The means of achieving effective participative representation, as the ILO has consistently argued, is through the third principle of social dialogue: the provision of fundamental rights and freedoms, especially freedom of association (to form and join an employers’ association or a union) and the effective recognition of the right to collective bargaining. Combined, the second and third principles underpin the legitimacy of social dialogue as a mechanism for contributing to economic and political governance in society. A fourth principle, accountability, requires parties to make credible binding commitments. Such commitments comprise of freedoms to hold those in authority to account and agreed due process to resolve or address possible conflict or disputes. X Table 1. The principles of social dialogue Principle Theme Details Pluralist Governance Recognize the diverse viewpoints and interests of tripartite actors Dialogue takes multiple forms with varying degrees of embeddedness of social partners in arenas of decision-making Participative representation Legitimacy Democratic representation of tripartite actors in social dialogue Inclusive representation Capacity of social partners to engage effectively with their members to convey their needs and priorities Fundamental principles and rights at work Legitimacy Freedom of association Effective recognition of the right to collective bargaining Accountability Credible binding commitments May be legally binding or reliant on informal custom and practice Requires certain prescribed freedoms to hold those in authority to account Due process in case of conflict or dispute13 ILO Working Paper 177 1.2 The actors The tripartite actors are the two social partners – employers’ and workers’ organizations – and government. Effective social dialogue requires the participation of actors who have the capacity to engage in decision-making. Moreover, social partner