A FEW THOUGHTS ON ECONOMIC POLICIES AND EMPLOYMENT

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A FEW THOUGHTS ON ECONOMIC POLICIES AND EMPLOYMENT

• RENATO BAUMANN

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4 REASONS FOR CONCERN ABOUT GROWTH AND EQUITY

• 1) Reducing inequality is a pre-condition for
  achieving sustainable economic growth (ECLAC)
• 2) UN Millenium Goal commitment to reduce
  extreme poverty level to half its share of the
  total population as observed in 1990

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4 REASONS FOR CONCERN ABOUT GROWTH AND EQUITY
(cont.)

• 3) Efforts to improve equity should concentrate
  on fighting poverty and inequality among
  generations (ECLAC)
• 4) Efforts therefore should concentrate on the 4
  main channels for transmitting inequality
  education, employment, wealth distribution and
  demographic growth (ECLAC)

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CHALLENGES

• New labor relations in the globalized world
  impose new features to employment and wage
  policies, demanding higher mobility and
  qualification of workers
• B) ECLAC estimates that equilibrium in the labor
  market requires a sustained annual GDP growth
  rate of 4 for the region as a whole. A 6 GDP
  growth rate would be required to additionally
  close the technological gap in relation to OECD
  countries

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BUT ECONOMIC GROWTH IS NOT SUFFICIENT TO GRANT
EQUALITY THERE IS A NEED FOR POLICIES THAT
PROVIDE CONVERGENCE BETWEEN LABOR SUPPLY AND
DEMAND
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TYPES OF LABOR POLICIES
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MINIMUM WAGE

• Minimum wage policies are required to compensate
  for the asymmetries in the negotiating power of
  the various groups of workers
• But their (potentially) negative impacts on the
  demand for labor and the incentive for informal
  jobs must be reduced

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POLICIES FOR UNEMPLOYED WORKERS

• Governments must provide mechanisms to fight the
  vulnerability resulting from periods of high
  unemployment
• Common measures are unemployment insurance,
  emergency programs, special training programs and
  basic social protection

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AVOID SHORTSIGHTED APPROACHES

• Efforts must be made to help unemployed people in
  the long run, via special training programs or
  incentives to firms that offer on the job
  training

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FIGHT LABOR MARKET SEGMENTATION

• There should be free access to the labor market,
  ending market segmentation and eliminating
  barriers to specific groups
• It is essential to have programs to improve the
  qualification and easiness of access by young
  workers
• Special programs should be created for groups
  that are largely excluded from the market, such
  as ethnic minorities

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LABOR HIRING FLEXIBILITY

• It is needed to facilitate adjustments to
  constantly changing technologies, as well as to
  meet the needs of restructuring productive
  sectors
• But is not sufficient to reverse the effects of
  macroeconomic policies on the labor market, as
  they might worsen the quality of jobs

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DEVELOPING PROTECTION SCHEMES

• More flexible hiring systems must be accompanied
  by protection schemes
• There is a need of agreement among employers and
  workers, so as to provide alternative types of
  hiring flexibility and to stimulate the
  adaptation to technological changes and to
  business cycles

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MORE IS NEEDED

• Output growth and adequate labor policies might
  not be sufficient to fight poverty
• It is essential to know and to adapt the
  institutions, the regulation and the practices in
  the three basic markets that affect the poor a)
  the labor market, b) the capital market and c)
  the market for the commercialization of their
  production