Having overcome my fear of asparagus .... What you say Jim is true in terms of creating a higher paid elite and a secondary informal market. But the rigidities have to come from a system where workers are powerful enough to resist layoffs and outcontracting and the like. It is hard for me to believe that Mexican workers have this kind of labor market protection, especially given that average wages for the formal sector are in decline. Of course the notion that if employers were given more freedom to fire workers and/or hire irregular workers then employment would rise, investment would rise and productivity and competitiveness would rise is itself dependent on so many assumptions as to make it a silly thought.
Significantly in Korea, where about 55 percent of the labor force is now irregular, South Korean firms have largely stopped buying new equipment for their South Korean operations. Before the crisis, the yearly growth rate of investment in machinery in the manufacturing sector was regularly over 20 percent. It fell to 0 percent in 1999, 0.5 percent in 2000, and then -5.9 percent in 2001 and -4.9 percent in 2002. While the rate of investment turned positive in 2003 and 2004, the recovery has been quite modest, 0.6 percent and 3.2 percent respectively. To put this trend in perspective, South Korean manufacturing companies spent a total of 74.4 trillion won in new equipment and plants in 2004, which was 4.3 percent less than the 77.7 trillion won they spent in 1996. One consequence is that employment in manufacturing is now on the decline. Of course Korean foreign direct investment in China is soaring. Marty On Wed, 20 Jul 2005, Jim Devine wrote: > On 7/20/05, Martin Hart-Landsberg wrote: > > Just to be clear, I am not advocating promoting the destruction of labor > > movements or labor laws, not am I confused or surprised by the IMF push to > > create a labor market most conducive to profits. > > no one was casting asparagus at you, Marty! > > > However, what interests > > me is that the IMF and its supporting cast have been busy developing > > indices of labor rigidity and correlating them with growth. These indices > > seems strange to me. For example, it is hard to imagine that Mexico has a > > rigid labor market when way more than half of workers work in the informal > > labor market and most unions work closely with the owners. So, I was > > looking to learn if there were people or articles that critically examined > > this line of attack. > > I haven't seen the recent literature. But the IMF index makes some > sense. In a simple model, such as the Harris-Todaro model of > rural/urban migration, the higher wages are in the urban sector, the > more unemployment there is, all else constant, as rural people move to > the city in hopes of getting a job there. (It's the hopes that > encourage the move, since there really aren't enough jobs.) In the > original story, rural/urban migration led to _open_ unemployment, but > most economists would say nowadays that this is so-called "hidden > unemployment" in the form of the informal sector. Also, emphasis is > put on the _rigidity_ of urban wages (and benefits). So you see > rigidity in the "urban" sector (which might include mine workers, > elite agricultural workers, etc.) _causes_ the informal sector to be > large.Lots of protection for the "insiders" causes misery for the > "outsiders." I would guess that the IMF is measuring only the > rigidity in the elite/urban (insider) labor market. > > Of course, instead of equalizing labor conditions upward, the IMF > wants to equalize them downward. And they start with a oversimplified > model of labor-power markets, one that ignores, for example, "push" > factors in the rural/outsider sectors (such as the forced > commercialization of agriculture, what used to be called primitive > accumulation). > -- > Jim Devine > "Science is the belief in the ignorance of the experts" -- Richard Feynman >
