Kirsten
Sehnbruch
"From the Quantity of Employment to the Quality of Employment: An Application
of Amartya Sen’s Capability Approach to the Chilean Labor
Market"
February
9, 2004 |
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Kirsten
Sehnbruch, a visiting scholar at the Center
for Latin American Studies this spring, talks about
the Chilean labor market on February 9. Dr. Sehnbruch,
who spent five years in Chile on her research, argued
that the simple unemployment rate is inadequate
to fully capture the state of the labor market, and
a more comprehensive measure is needed which includes
wages, training and other measures of the quality
of jobs.
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The Importance of Formal Contracts in the Chilean Labor Market
Tammy Elwell, Undergraduate Program in Political Economy
Chile
is often viewed as a model for development because its market
liberalization has led to high growth rates and a reduction
in poverty. In particular, Chile’s flexible labor market
is credited with contributing to lowered unemployment rates
and economic growth. However, according to Kirsten Sehnbruch,
who has spent the past five years researching the labor market
in Chile, only half of Chilean workers hold formal, open-ended
contracts and are therefore protected by legislation.
For
her dissertation, Sehnbruch applied the “Capability
Approach” developed by Nobel Laureate Amartya Sen to the
Chilean labor market. This approach emphasizes measuring individual
capabilities as well as commodities. During her lecture, Sehnbruch
explained how economic policy, such as privatization and economic
growth, as well as social policy, such as benefits, impact well-being
through jobs.
At the beginning of her lecture, Sehnbruch identified the root
problems behind the Chilean labor market as poverty and low productivity
employment. Chile is characterized by low budgetary investment
in employment, spending only 0.03 percent of GDP on the labor
market. Chile is also characterized by a large informal sector,
including street vendors and others who work without labor contracts.
During the 1998-99 crisis in Chile, spurred by the Asian economic
crisis, unemployment doubled, and the proportion of jobs generated
with formal, open-ended contracts halved.
Sehnbruch stressed the importance of formal, written contracts
because without them, Chilean workers are not obliged to contribute
to the pension and health systems. Therefore, social security
and individual well-being are largely dependent on the type of
job a person has. In her lecture, Sehnbruch criticized the application
of econometric models to analyze labor market developments. For
example, models used by the World Bank and other international
organizations are often based on limited information. In addition,
Sehnbruch cited a lack of general empirical research on the labor
market and the impact of labor policy on individual well-being.
Sehnbruch
found very little reliable data on employment mobility in Chile.
The most important employment
surveys in Chile are:
the study of the Instituto Nacional Estadística (INE),
conducted by the University of Chile in Santiago; and the national
household survey Caracterización Socioeconomica Nacional
(CASEN). For example, according to the ENCLA employment survey,
zero Chilean workers were reported without contracts, which is
clearly not the case.
Therefore, while incorporating some information and methodology
from existing employment surveys in Chile, Sehnbruch commissioned
her own extensive research, involving interviews with members
of 947 households reported in her survey. Her results showed
that 50 percent of workers in Chile held formal contracts, meaning
they were protected by legislation. These findings demonstrate
the importance of the contract on individual well-being, considering
any laws regarding pension or health will only impact workers
with formal contracts.
While Chile has experienced economic growth and a reduction
in poverty, it still depends on a large informal sector. Therefore,
although Chile may be held as a model to the developing world,
there are serious shortcomings within the Chilean labor market
considering many Chilean workers do not hold formal contracts
Kirsten Sehnbruch recently completed her Ph.D. on the Chilean
labor market at Cambridge University. She is now a visiting scholar
at CLAS. She spoke on February 9, 2004.
