Four Instruments of Labour Policy: Canadian and Latin American Experiences

Both Canada and the countries of Latin America are in the midst of major choices and changes in the area of labour markets and related social policy. The decisions they make are or will be of potentially major significance for several reasons. First, important policy reforms are being implemented or are under consideration because of the belief, shared by many economists, that a number of existing or previous labour market institutions have been counterproductive and/or fiscally too expensive, and that greater labour market flexibility is important in today’s world of fast-changing technology. Second, many labour market outcomes—levels of unemployment, wage trends and levels of inequality, have been unsatisfactory over the last couple of decades in both developed countries (including Canada) and in many developing countries, including those of Latin America. Nearly everyone is concerned about something, either the labour market outcomes or the institutions. Some blame the institutions for what is bad about the outcomes; others feel that the reforms being proposed will make the outcomes even worse, and thus argue that those reforms are pushing the system in the wrong direction. Hard evidence on which to base professional judgments is scarce.