At the end of November, the Minister of Finance, Ignacio Briones, and that of Labor and Social Welfare, María José Zaldívar, led the first meeting of the Consortium of Universities against informal labour in Chile. The consortium is formed by 18 academics from different universities, who, within six months, will seek to present proposals to reduce labor informality.
This is a joint effort between the Executive and the academic world that promises to be productive, reclaiming thus investment and growth through public policies oriented at improving labor market conditions in the medium and long run.
Benjamín Villena, MIPP researcher, Academic at the Diego Portales University and director of the SABE project (System for the Analysis of Job Exchanges) is one of the participants of the Consortium. He commented that the first objective of this group is to construct a diagnosis on informality in Chile and its causes, in order to generate policy recommendations that adequately respond to that diagnosis.
• Why is it important that labor issues are answered by the academic world, and that the Government links them to public policy? Do you have any prior experience with such collaborations?
The academic world has the analytical capacity and the research experience that allows for the generation of an enhanced view of this problem. The scope of informality transcends the labor market and its effects can be seen, for example, in the area of pensions, and in general, the ability of governments to effectively reach the most vulnerable groups. It is a good signal that the Government summons people who have dedicated themselves to pushing the frontier of knowledge on a given topic, especially in times and situations in which some public policy decisions are based on unreasonable and simplistic arguments. In addition to this Commission, I am also part of a similar team of experts convened by the Senate, called “The Future of Labour, the Future of the Economy and New Technologies.”
• What is the contribution you hope to bring to the table? What will your angle be?
I believe that my fundamental contribution would be to put to the service of this group my knowledge of job search theory, as well as provide access to data from employment surveys and job search portals on the Internet, for the purpose of measuring and trying to understand the dynamics of employment informality in Chile. Appropriate policy responses are very different when informality is a transitory phenomenon in a person’s career path, than a rather permanent situation of certain groups of workers. It seems to me that evidence on this issue in Chile is not so clear.
• How much has the pandemic affected labor informality?
What has been observed in the data from the employment surveys is that labor informality has decreased during this period, possibly because these are jobs with lower productivity and with little possibility of teleworking, and, therefore, much more vulnerable to the pandemic. This loss of informal jobs is naturally not good news. It leads us to think that informality per se is not something that we would always want to reduce in every event. Informal jobs may be a springboard to formal jobs. This is part of the empirical evidence that we lack in order to be able to design better public policies in this area.
Using the INE definition of informality, which is in turn based on the International Labor Organization (ILO), the level of informality prior to the pandemic in Chile was around 28% of total employment. This number is relatively low by Latin American standards, but quite high by OECD standards. Informal workers in Chile tend to be more often women, the young, or the elderly, and with a low educational level. But this is purely descriptive. Obviously, a much more complete characterization is necessary in order to understand the phenomenon and, above all, to make appropriate policy recommendations.
• In terms of recommendations, what do you think the Government and public policy makers should do to reduce informality, under the present context and in the medium and long run?
A priori, one would think that the existing labor informality rate is too high; however, the situation experienced as a result of the pandemic makes us wonder if it would indeed be desirable to reduce it so much, given the type of workers we have in the Chilean economy. It is very different to reduce informality in countries with high human capital, than in countries with a lower level, such as Chile. In this context, an informal job can be a temporary lifeline or a stepping stone to a more productive and stable formal job. In the long run, policies that promote an increase in human capital in Chile, especially in the area of quality education and training, are the main tools to promote a reduction in informality. In the short and medium run, it is not clear that we should treat temporary informality as something necessarily negative, especially in the context of the current situation.
More information here
MIPP Chile 2024