Decent work or no work policies? – Third

On December 7, 1975, in an interview with Richard Heffner in The Open Mind, Milton Friedman, a Nobel Prize-winning economist, stated that “One of the great mistakes is to judge policies and programs by their intentions rather than their results.”

This declaration becomes especially important in today’s Chile, where we must choose who will be the next president of Chile, and where the programs presented by the contending candidates for the presidency present substantial differences economically.

In relation to the labor market, Gabriel Boric’s program seeks to protect workers through his “Decent Work” proposals, among which are the increase in the minimum wage to $ 500 thousand, the decrease in working hours from 45 hours to 40 hours a week and collective bargaining by branch, among others.

His intention is certainly to improve the conditions of the workers of our country through increasing regulations, avoiding – in this way – that employers, making use of their greater bargaining power, abuse or exploit workers. However, in the face of increased regulations, it should always be remembered that economic theory suggests that the vast majority of regulations are counterproductive and end up hurting the people they are trying to help. In other words, with very good intentions, they end up generating disastrous and contrary results.

Indeed, and just to begin with, the labor market regulations proposed by Boric will generate significant increases in the company cost of hiring workers, a rise in costs that will end up bankrupting a large part of the SMEs in our country, in addition to increasing the replacement of employment by machinery in large companies, and decrease the profitability of investment projects, which will lead to less investment in our country, reducing future job creation.

In summary, Boric’s “decent work” program will become the “NO WORK” program, since its measures will end up generating a smaller formal labor market, with all the rest of the labor market unemployed, or in the informal sector, without health and without pensions; in addition to limiting the growth rate of the economy, making the pie to be distributed smaller.

It seems that all the international experience is not enough to make certain political groups understand that the best pro-employment policy is a vigorous growth of the economy, which generates that the growth in the demand for workers is greater than its supply. In this case, the labor regulations are the same, since the bargaining power is totally in the hands of the worker and therefore it is he who sets the working conditions.

When there is a shortage of workers (shortage relative to demand), it is the worker who decides when, how and why to work, and companies have no choice but to offer the best possible conditions to their workers, both to attract them to work and to keep them.

A vigorous economic growth, then, is the best labor policy, in addition to allowing the reduction of poverty and increasing opportunities for all citizens. Sadly, Boric’s program – with the best of intentions – will only shrink the cake, and those who have little will end up with even less.

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Decent work or no work policies? – Third