2003 OECD Economic Surveys: Chile 2003

image of OECD Economic Surveys: Chile 2003

This 2003 edition of OECD's periodic review of Chile's economy includes special features on financial markets, labour markets and social policies and product market policies.

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A Dual Labour Market Can Hamper Growth

A return to higher economic growth in Chile is likely to be constrained by the segmented labour market. The functioning of the formal market is hindered by the limit of one year for fixed-term contracts, the high severance payments for employers, and strict and cumbersome rules for dismissal for those with indefinite contracts. Enterprises have reacted to these rigidities by widespread and increasing recourse to outsourcing and informality. These non-standard jobs are insecure and provide little incentive for employers and employees to invest in skill improvement. Other characteristics of the Chilean labour market are the low participation rate of the young and women, which is partly related to a shortage of part-time jobs, and the lack of centralised tripartite negotiations and dialogue, as well as decentralised bargaining between employers and employees...

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