Labour market policies and regulations in Argentina, Brazil and Mexico: Programmes and impacts

ADRIANA MARSHALL (GOLDSCHVARTZ)

Employment Strategy Papers

International Labour Organization

Lugar: Ginebra; Año: 2004 p. 1 - 53

1811-1319

In Latin America the 1990s were characterized by drastic changes in the economic growth model, as the economic strategy based on import substitution for the domestic market was finally abandoned in most countries, to be replaced by economic liberalization. Reforms and their economic and labour market outcomes showed strong parallelism across countries, as it had earlier happened, first, in the period of inward-oriented import-substitution industrialization and, then, in the decade that followed the debt crisis of the early 1980s. Economic strategies of the 1990s were aimed at the liberalization of international trade and financial flows, fiscal discipline and price stabilization, and the transformation of the state and its role as employer through privatization. Reforms were often accompanied by either short lived or long lasting domestic currency appreciation that, combined with the opening up to imports, restructured the economy in general and the manufacturing sector in particular, generally with negative employment effects. According to the views of multilateral financial institutions and mainstream experts, economic liberalization in Latin American countries required labour policy reforms, many of which had also been demanded by employers. Flexibilization of constraints, including trade union intervention, on employer decisions on the use of labour and labour cost reductions were among the reforms deemed necessary for the success of the new economic model. These “labour reforms” were expected to improve external competitiveness and employment performance. While several Latin American governments followed these recommendations, under different modalities and with variable intensity, others did not. The nature and scope of labour reforms were affected by the importance assigned by governments to labour cost cuts as a mechanism to adjust to the countries’ international repositioning, how influential opponent trade unions and political parties were, how intense pressure of employer and international financial institutions in favour of the proposed changes was, and the nature and degree of protection guaranteed to workers by the pre-existing laws. The adverse labour market outcomes of the implemented economic reforms, namely growth of excess labour and intensification of labour market competition, and the consequent increase in the incidence of poverty, in turn called for state intervention via employment and income maintenance programmes, i.e. for forms of state intervention that in many countries of the Latin American region had no or little precedents. These new programmes were to be modelled, in part, by the well developed European passive and active labour market policies. In this report I examine some aspects of the labour policies implemented together with or after economic liberalization in Argentina, Brazil and Mexico, and the employment and unemployment compensation programmes existing in these countries in the early 2000s, as well as certain of their labour market effects. In the case of labour policy, the emphasis is placed on employment protection reforms and on trends in non wage labour costs. These three countries applied basically similar economic reforms, although each one had distinct aspects and different rhythms of implementation. Their labour policies and labour market programmes were less uniform. The report is organized as follows. First, the labour market intervention model underlying labour reforms, or reform projects, and labour market programmes in the three countries, as well as the debates around their labour market effects, are succinctly presented (Section I). In the next section (II), I discuss selected labour regulations in the three countries, first, as they had been in the 1980s, i.e. prior to the reforms implemented from the 1990s in two of them, and then, the reforms undertaken in Argentina and Brazil, and some reform proposals in Mexico; finally, I examine some of their labour market outcomes. Labour market programmes are examined in Section III; I describe the programmes in the early 2000s, with some references to precedents, considering cash transfers to the unemployed, and diverse types of employment creation programmes, with and without training components; then I compare their levels of expenditure, coverage and labour market impacts. The final section presents some concluding comments.