Skip to main content Accessibility help
×
Home
  • Print publication year: 2010
  • Online publication date: June 2012

3.1 - Labor market reforms: an alternative view

Summary

The challenge and its solutions

Chapter 3 provides policy proposals to “the challenge [of] seizing the benefits from globalization, cognizant of the difficulties imposed by the need to adjust.” While this challenge is very general, the chapter then narrows it down and explains that the challenge is one of “[creating] employment … and [providing] social security in the LAC region.” The chapter proposes to re-regulate labor markets and provides three different solutions to this challenge. The solutions provided are very diverse and range from replacing social security taxes and dismissal costs with individual accounts to replacing the minimum wage with an income tax credit. All these solutions have in common that they respond to the challenge of keeping income security for workers but reducing inefficiencies in the labor market and, in particular, reducing employers' disincentives to hire. This challenge should be stated more clearly in the chapter.

The chapter proposes three specific responses to the challenge of keeping income security while reducing inefficiencies in the labor market. First, the chapter proposes to replace the current pay-as-you-go (PAYG) social security system, which exists in most LAC countries and around the world, with a fully-funded social security system. Second, it proposes to replace severance payments, which are paid to workers upon dismissal, with a system of severance payments savings accounts (SPSA).

Related content

Powered by UNSILO
Bibliography
Attanasio, Orazio, Adriana, Kugler, and Meghir, Costas, 2008. “Training Disadvantaged Youth in Latin America: Evidence from a Randomized Trial.” NBER Working Paper 13935
Autor, David, Kerr, William, and Kugler, Adriana, 2007. “Do Employment Protections Reduce Productivity? Evidence from US States.” Economic Journal 117: F189–F217
Bell, Linda, 1997. “The Impact of Minimum Wages in Mexico and Colombia.” Journal of Labor Economics 15(3): S103–S135
Bentolila, Samuel and Bertola, Giuseppe, 1990. “Firing Cost and Labor Demand: How Bad is Eurosclerosis?Review of Economic Studies 57(3): 381–402
Eslava, Marcela, Haltiwanger, John, Kugler, Adriana, and Kugler, Maurice, 2004. “The Effect of Structural Reforms on Productivity and Profitability Enhancing Reallocation: Evidence from Colombia.” Journal of Development Economics 75(2): 333–71
Eslava, Marcela, Haltiwanger, John, Kugler, Adriana, and Kugler, Maurice, 2009. “Factor Adjustments after Deregulation: Panel Evidence from Colombian Plants.” Review of Economics and Statistics, forthcoming
Gruber, Jonathan, 1997. “The Incidence of Payroll Taxation: Evidence from Chile.” Journal of Labor Economics 15(3): S72–S101
Gruber, Jonathan and Krueger, Alan, 1991. “The Incidence of Mandated Employer-Provided Insurance: Lessons from Workers' Compensation Insurance.” In Bradford, D., ed., Tax Policy and the Economy 5. Cambridge, MA: MIT Press
Haltiwanger, John, Kugler, Adriana, Kugler, Maurice, Micco, Alejandro, and Pages, Carmen, 2004. “Effects of Trade on Job Reallocation: Evidence from Latin America.” Journal of Policy Reform 7(4): 201–18
Hamermesh, Daniel, 1993. Labor Demand. Princeton, NJ: Princeton University Press
Hopenhayn, Hugo and Rogerson, Richard, 1993. “Job Turnover and Policy Evaluation: A General Equilibrium Analysis.” Journal of Political Economy 101(5): 915–38
Adriana, Kugler, 2004. “The Effect of Job Security Regulations on Labor Market Flexibility: Evidence from the Colombian Labor Market Reform.” In Heckman, J. and Pages, C., eds., Law and Employment: Lessons from Latin America and the Caribbean. Chicago: University of Chicago Press
Adriana, Kugler, 2005. “Wage-Shifting Effects of Severance Payments Savings Accounts in Colombia.” Journal of Public Economics 89(2–3): 487–500
Kugler, Adriana and Kugler, Maurice, 2009. “The Labor Market Effects of Payroll Taxes in Developing Countries: Evidence from Colombia.” Economic Development and Cultural Change 52(2): 335–58
Lazear, Edward, 1990. “Job Security Provisions and Employment.” Quarterly Journal of Economics 105(3): 699–726
Maloney, William and Nuñez, Jairo, 2004. “Measuring the Impact of Minimum Wages: Evidence from Latin America.” in chapter 1 in Heckman, J. and Pages, C., eds., Law and Employment in Latin America and the Caribbean. Chicago: University of Chicago Press