The claim is that if there were more labor flexibility, which would come from dropping senority requirements and making it easier to fire workers, then companies would be more willing to invest and hire to produce and that labor would be free to move to its most efficient use, and the result would be that more workers would be hired, there would be fewer workers employed in the informal sector, and GDP would be higher.
The argument is that the rigidities keep employers from hiring workers so there are more workers forced to work in the informal sector with no legislative protections, etc. Thus, if restrictions were dropped in the formal sector more firms would hire, workers would be better off, and so would the economy. In reality, they are seeking to make the formal sector more like the informal sector, thereby reducing the size of the informal sector without having to improve conditions for workers. In a case study for Mexico, the World Bank calls for a massive change in Mexican labor law to do away with seniority, union involvement in layoffs, more freedom for firms to fire workers, etc. with the argument that this will then encourage companies to hire more workers and boost efficiency and overall worker well-being. Marty On Thu, 21 Jul 2005, Charles Brown wrote: > From: Martin Hart-Landsberg > > -clip-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. > > ^^^ > CB: Is the IMF claiming that if employers were given more freedom to fire > workers and/or hire irregular workers, then poverty would be reduced or that > GDP performance would be better ? >
