Labor Market Reform: Continuity Despite Change

Picture: Daniel Fleming

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One of the most pressing issues in Latin America today is the reform of labor markets. Nearly every government in the region has proclaimed its desire to get more people into work, in better jobs with better salaries, and ultimately with greater productivity and thus greater growth for the economy as a whole. Yet, levels of underemployment and informal employment have remained stubbornly high, and even the best intentioned efforts seem unable to carry out lasting, economy-wide reforms. The region’s labor codes stand as a barrier to fuller inclusion in the labor market.

Why have reform efforts faltered? The answer lies in the political underpinnings of labor market policy. The laws governing labor relations in Latin America are far from neutral regulations or technical measures; they are the product (and ongoing source) of political divisions that segment citizens into a dualized labor market, marked by highly protected formal sector workers and unregistered and unprotected informal sector workers. Indeed, policymakers and scholars will find themselves befuddled if they ignore the larger political function of labor regulation, which has served as the glue holding union members together and providing them the stability and security to organize collectively.

In Continuity Despite Change: The Politics of Labor Regulation in Latin America, I trace out the history of labor market regulation in Latin America, arguing that policy has been shaped – and constrained – by two critical factors: the skill levels of workers and the organizational capacity of labor unions. Workers with greater education or skills proper to strategic industries have been able to demand stronger protections against dismissal, higher wages, and greater non-wage benefits, while highly organized unions have been able to build linkages with dominant political parties, and thus seek to preserve the status quo.

Nevertheless, globalization – as well as some incremental reforms undertaken mainly in the 1990s – have weakened labor protections for workers in several sectors, and have reduced the ranks of union members and their subsequent electoral importance. High job rotation has increased the precariousness of employment in the formal sector, and thus has led many who previously felt secure to feel a shared bond with workers in the informal sector. My recent work on reforms to social security suggests that a new political coalition may be forming in support of non-contributory social protection, made up of newly vulnerable formal sector workers and the traditionally excluded informal sector. If this trend continues, it could well open up new possibilities for more inclusive and productive reforms in Latin America.

*Matthew E. Carnes is an associate professor of government at Georgetown University. He earned his Ph.D. in political science from Stanford University, and he has held fellowships at the Kellogg Institute for International Studies at the University of Notre Dame and the Hoover Institution at Stanford University. His research examines the evolution of labor policy and social welfare policies in Latin America over the last century. His most recent book is Continuity Despite Change: The Politics of Labor Regulation in Latin America (Stanford University, 2014).

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