A FEW THOUGHTS ON ECONOMIC POLICIES AND EMPLOYMENT RENATO BAUMANN

4 REASONS FOR CONCERN ABOUT GROWTH AND EQUITY 1) 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 ABOUT GROWTH AND 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)

CHALLENGES 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 ECONOMIC GROWTH IS NOT SUFFICIENT TO GRANT EQUALITY: THERE IS A NEED FOR POLICIES THAT PROVIDE CONVERGENCE BETWEEN LABOR SUPPLY AND DEMAND

TYPES OF LABOR POLICIES

MINIMUM 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 UNEMPLOYED 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 APPROACHES 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 SEGMENTATION 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 FLEXIBILITY 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 PROTECTION 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 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