Friday, March 02, 2012

Labor Markets reforms: What really matters with it?

From the general equilibrium point of view, markets works propely when they are flexible enough to allow its equilibrium.Mosts of labor market reform, work toward that direction given the fact that unemployment is considered a disequilibrium.
The current global economic do not necesarily is founded on that premises.Unemployment might be part of a search process.Of course this search is the result of job expectations.If there is not such expectations, people just get out of that search process, and out of the labor force as well.
The point is that labor market reforms, usually take into account the first approach.It deals with lower entry cost to the firm, throughout lower exit cost.The lower this exit cost, the higher the chance of hiring someone.But it does not consider the training qualification variable.Firms need labor whichs is complementary with capital.It is not just any kind of labor. The better qualified the labor is, the more effective such a reforms might be.
But as usual, that qualification is not good enough, thus it might be insuficient to solve the problem a labor reform only focused in the entry cost.
Labor market reforms should incliude the training factor,just because people and firm search for training match and training qualification respectively, which can sustain labor services flow with high productivity. No matter the low cost of hiring , firm will not get into its productive or management process, people not qualified for it.Therefore, some complementary incentives to improve on the job training ,works in the right direction.