A FEW THOUGHTS ON A FEW THOUGHTS ON ECONOMIC POLICIES ECONOMIC POLICIES AND EMPLOYMENTAND EMPLOYMENT

RENATO BAUMANNRENATO BAUMANN

4 REASONS FOR CONCERN 4 REASONS FOR CONCERN ABOUT GROWTH AND ABOUT GROWTH AND

EQUITYEQUITY1) 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

4 REASONS FOR CONCERN 4 REASONS FOR CONCERN ABOUT GROWTH AND ABOUT GROWTH AND

EQUITY (cont.)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)

CHALLENGESCHALLENGES

A) 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

BUT BUT ECONOMIC GROWTH IS NOT ECONOMIC GROWTH IS NOT

SUFFICIENT TO GRANT SUFFICIENT TO GRANT EQUALITY: THERE IS A NEED EQUALITY: THERE IS A NEED

FOR POLICIES THAT FOR POLICIES THAT PROVIDE CONVERGENCE PROVIDE CONVERGENCE BETWEEN LABOR SUPPLY BETWEEN LABOR SUPPLY

AND DEMANDAND DEMAND

TYPES OF LABOR TYPES OF LABOR POLICIESPOLICIES

MINIMUM WAGEMINIMUM 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

POLICIES FOR POLICIES FOR UNEMPLOYED WORKERSUNEMPLOYED 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

AVOID SHORTSIGHTED AVOID SHORTSIGHTED APPROACHESAPPROACHES

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`

FIGHT LABOR MARKET FIGHT LABOR MARKET SEGMENTATIONSEGMENTATION

• 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

LABOR HIRING LABOR HIRING FLEXIBILITYFLEXIBILITY

• 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

DEVELOPING DEVELOPING PROTECTION SCHEMESPROTECTION 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

MORE IS NEEDEDMORE 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