Regulation, worker protection and active labour-market policies in Latin America

Job creation continues to be a priority in economic policy because the wellbeing of families depends on the quantity and quality of jobs available. In 2004-2008, Latin America recorded its highest economic growth in 40 years, which has had a positive impact on job creation, in contrast to the minimal improvements in both job numbers and quality posted during periods of slow economic growth. Economic growth is not, however, the only factor that shapes these two aspects of employment. The three pillars of the institutional framework for labour, namely, the regulations governing individual and collective employment relations, unemployment protection and active labour-market policies, also play a key role inasmuch as they affect the dynamics and characteristics of labour supply, the quantity and quality of the jobs created, the efficiency of job-placement and contracting processes, and the conditions and prospects of the unemployed.The debate about labour institutions, in both academic and political circles, revolves not around their importance, which is not in doubt, but about how to optimize their design, and two main positions in this regard have emerged. On the one hand, there are those who maintain that the institutional framework should be based solely on market mechanisms as the use of other instruments distorts the workings of the labour market and diminishes its efficiency and hence its performance in terms of equity. On the other hand, there are those who claim that for the labour market to operate fairly and in a sustainable manner, mechanisms need to be set up to protect workers against the structural inequalities that exist between the stakeholders.The discussion has become more heated as the forces of globalization exert increasing pressure on countries' systemic competitiveness, forcing them to make adjustments to their labour institutions. Several questions have been raised, including: whether the regulations on individual and collective employment relations enable companies to respond and adapt adequately to changes in the market; whether they promote long-term growth and competitiveness strategies and whether they favour a fair distribution of the results of economic growth and generate individual career development opportunities in the labour market. Policymakers also need to ask whether the mechanisms to protect workers against job losses are fair and effectively promote reinsertion into the labour market. Active labour-market policies need to be examined to determine if they help people who have particular problems finding a job become more employable. Finally, thought needs to be given to whether the three pillars of the institutional framework for labour today foster a steady increase in productivity and contribute to the smooth functioning of the labour market.In the last few decades, efforts have been made to improve labour institutions in Latin America. The various reforms carried out reflect the different views held on the topic. In some cases, measures have aimed to increase the efficiency of labour institutions and stressed the importance of establishing more flexible labour markets. Other measures have been geared towards consolidating workers' rights and protecting the more vulnerable sectors. Various instruments have also been combined to improve the efficiency and the equity of labour institutions at the same time.Despite the progress made in some areas, the strengthening of labour institutions has not been properly integrated into a long-term development strategy or as part of a sustainable development project driven by the increasing incorporation of innovation and more highly skilled human resources.The debate on how to improve labour institutions is hampered by two flawed and interrelated visions: one is a short-term approach that focuses on immediate gains, such as those obtained from reducing labour costs, without considering the advantages of having a skilled workforce and labour relations that make it possible to steadily improve productivity as part of a competitive strategy for ensuring the country's sustainable development over the long term; and the other is a zero-sum approach, in which labour relations are primarily conflictive and the potential benefits of cooperation between labour and employers are ignored.It is in this context that the concept of flexicurity is analysed. The flexicurity model, which was first adopted in several European countries, spearheaded by Denmark, combines flexible labour markets with high levels of unemployment protection and active labour-market policies that ensure efficient reinsertion into the labour market and favourable conditions for workers. Moreover, flexicurity is implemented in tandem with an economic growth strategy that relies on the workforce becoming increasingly skilled. The model consequently has a large lifelong training component.Obviously, it will not be possible to adopt flexicurity in exactly the same way in Latin America as it was implemented in the European Union, where it has become the main axis of labour policy; however, the lessons learned by the European countries could prove useful to the region. These include the need to adapt labour institutions to a more dynamic and volatile socio-economic context, the importance of negotiating reforms so that the institutions are sustainable over time, and the advantages of having an overall vision of how the different components of the institutional framework for labour fit in with the country's long-term development strategy.The socio-labour situation varies considerably across the region, and each country's reality, as well as the idiosyncrasies of its processes for social and political dialogue, need to be carefully analysed when identifying priorities and policy instruments or specifying objectives for strategies to improve labour institutions.This book is intended to contribute to this process. It summarizes the main outcomes of the project entitled "Labour Markets, workers' Protection and Lifelong Learning of the Labour Force in a Global Economy: Latin American and Caribbean Experiences and Perspectives" undertaken by ECLAC with cooperation from the Government of Denmark.In the first chapter, Jürgen Weller summarizes the recent changes in the three pillars of the labour institutions of Latin America and analyses the challenges that improving those institutions entails. In the following chapter, Henning Jorgensen explains the features of the Danish flexicurity model and analyses its relevance for Latin America. Subsequently, Adrián Goldin, José Paulo Chahad, Mario Velásquez, Clemente Ruiz Durán and Jorge Toyama discuss the changes and challenges associated with flexicurity in the labour markets of Argentina, Brazil, Chile, Mexico and Peru, respectively. In the last chapter, Víctor Tokman examines the informality that, to a greater or lesser extent, characterizes the region's labour markets and represents one of the main structural obstacles to the implementation of the flexicurity model in Latin America. This analysis culminates with an assessment of the options for formalizing the labour markets as a precondition for constructing more integrated and cohesive economies and societies in the region. Our hope is that these contributions will further the complex, but necessary, debate on this important issue.Alicia BárcenaExecutive SecretaryEconomic Commission for Latin Americaand the Caribbean (ECLAC)