Discussant Comments to Informality: Exit and Exclusion

1
Discussant Comments to Informality Exit and
Exclusion

• OECD Development Centre
• Paris, 2 July, 2007
• Janine Berg
• Economic and Labour Market Analysis Department
• International Labour Office, Geneva

2
Why has informality grown in Latin America?

• Report argues that it is a combination of Exit
  and Exclusion. A weak state that has failed to
  deliver to its citizenry.
• Too much emphasis on burdensome labour laws --
  are they really so burdensome? Is the evidence so
  compelling?
• Too little attention paid to poor macro and meso
  policies (over appreciated exchange rates, hasty
  liberalization)

3
GDP growth has slowed
4
Reasons for Exit Poor state benefits or low
wages?
Country Microenterprise worker Self-employed (low-skilled) Labour Force Avg.
Argentina 67.0 77.8 100.0
Brazil 51.2 62.5 100.0
Chile 43.4 95.7 100.0
Guatemala 59.1 85.8 100.0
Mexico 50.3 66.2 100.0
Nicaragua 58.7 87.7 100.0
Source Gasparini, 2003.
5
Real minimum wage in Mexico (1990-2005)

• Weak bargaining, fall in wage share

6
Labour Market Reforms in Latin America in the
1990s

• Primarily aimed at deregulation flexibility not
  flexicurity
• Introduction of temporary contracts, sometimes
  exempt of social security or severance (AR, BR,
  PE, CO, EC)
• Flexible working time (AR, BR, CO, DR, PE)
• Severance pay (increased scope for dismissal CH,
  PE reduction AR, CO increase AR, CH, PE)
• Exemptions for SMEs (AR, BR, CO, PA)
• Minimum wages have fallen or stagnated in 12 out
  of 20 LAC countries

7
Will we reduce informality by reducing their
protections?
Women employed in a fish cannery, Argentina, 1995.
8
Understanding Labour Law

• Why it exists?
• To correct asymmetry in bargaining
• Statutory rights
• Process rights (voice)
• How it evolves
• Changes in the world of work require constant
  re-regulation of labour laws not deregulation.
• Importance of social dialogue for designing
  adequate policies.

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Conclusions

• Re-regulate labour market, dont deregulate
• Introduce part-time contracts, work sharing
  arrangements
• Improve access of workers to formal jobs
• Importance of enforcement
• Introduce UI to eventually replace severance pay
• Flexicurity not flexibility
• Importance of meso and macro policies, including
  an appropriate trade and investment policy

10
Gracias!

• berg_at_ilo.org