Flexibility and Labor Reform

Abstract

In an open economy—subject to uncontrollable and unpredictable changes in the international prices of its exportable goods—labor flexibility (and anything that helps a firm adapt) is advisable because it allows the economy to adjust and optimize the use of its resources. While workers fear uncertainty and change, it is evident that unions tend to evaluate policies according to the degree of protection they afford their members—those who are employed—and seldom consider the situation of the unemployed or the long-term consequences that greater labor rigidity will bring. Continue reading...