"Labour market flexibility, employment and inequality: lessons from Chi" by Paul W. Posner
 

Political Science

Labour market flexibility, employment and inequality: lessons from Chile

Document Type

Article

Abstract

Flexibility proponents assert that rigid Latin American labour markets impede economic expansion and job growth; they advocate reforming labour codes through increased flexibility. Critics argue that heightened labour flexibility exacerbates inequality without expanding employment. From this perspective, precarious employment and inequality are remedied by strengthening labour’s bargaining power. Chile’s maintenance of flexible labour reforms adopted during the dictatorship make it appropriate for evaluating these competing perspectives. Based on flexibility proponents’ predictions, we should expect increased formal sector employment over time, particularly among the least skilled Chilean workers, as well as reduced wage inequality. Yet, the rate of unemployment among least skilled workers in Chile remains essentially unchanged since the democratic transition as does income inequality. These conditions persist despite a high degree of labour market flexibility. Thus, Chile’s continued adherence to a flexibilised labour market should be understood not in terms of its capacity to reduce inequality or generate employment. Rather, it should be understood as the product of several interrelated factors: (1) the business sector’s ability to protect its interests; (2) the Concertación’s conscious limitation of threats to the business sector’s interests and (3) the weakness of organised labour, resulting from the perpetuation of the Pinochet-era labour regime.

Publication Title

New Political Economy

Publication Date

3-4-2017

Volume

22

Issue

2

First Page

237

Last Page

256

ISSN

1356-3467

DOI

10.1080/13563467.2016.1216534

Keywords

Chile, employment, income inequality, labour flexibility, union bargaining power

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