Some time has passed since the urgent need to improve pensions and the labor market entered the public debate. We ask ourselves, what is the greatest challenge? A deep pension reform that requires broad consensus. What has happened? The enactment of very popular laws that today complicate business management and, as a side effect, affect workers themselves.

While it can be said that legal change is key to cultural change, it is hard to understand why so many labor laws on various topics are being passed simultaneously without any noticeable analysis by specialists of the combined impact that the implementation of these new regulations will have. On the contrary, it could be said that they are simply being approved because it is expected or well-regarded to do so.

From inflationary perspectives and the impact of the 40-hour law, to the challenge of balancing the cost of labor with the growing productivity of technological capital, many of these regulations have been successfully implemented in developed countries, mainly in Europe. However, we must consider that these are societies where cultural change had already occurred, or was in progress, making their adaptation easier.

So we ask ourselves, are these reforms effective? Do they really benefit workers? What is the real impact on our economy?

In a context where 44% of Congress’ bills are focused on labor issues and various studies indicate that the 40-hour law and the increase in the minimum wage to $500,000 could raise companies’ wage costs by up to 25%, the creation of new jobs has weakened. This has resulted in the economy generating more informal than formal jobs, as the increase in hiring costs is becoming considerable.

According to a report from the Labor Informality Observatory of the Santiago Chamber of Commerce, based on the National Employment Survey of the National Statistics Institute (INE), the total number of informal workers exceeded 2.5 million people in January of this year, the highest level in 4 years, translating to an informality rate of 27.6%. Formal employment, meanwhile, grew by only 2.5% in the same period, well below informal employment.

If we only analyze the 40-hour law, we see that companies have yet to define such simple matters as which positions it can be applied to. Many workers, even those who did not previously record their hours, now must do so.

Although it may sound like a good idea, this should have been planned in advance, considering the country’s reality, businesses, and especially SMEs.

Today, labor productivity becomes a key challenge for companies, considering that the implementation of the 40-hour law could lead to a decrease in productivity per worker of up to 7%. Surveys indicate that 75% of workers believe that the reduction of working hours will improve their quality of life, with more time for personal activities, which could translate into increased job satisfaction and better talent retention in the long term.

The immediate future does not look promising, especially for small and medium-sized enterprises (SMEs) that, due to their structure, find it harder to adapt to so many regulatory changes. Today, they must comply with some whose boundaries are still unclear, such as the Karin Law. Although this law aims at workers’ peace of mind and well-being, its imprecise definitions and lack of clarity for implementation can bring serious problems and financial consequences for businesses.

Change does not always mean improvement, but to improve, we must change, as Winston Churchill said at the beginning of the 20th century. To this, we could add that not all changes need to come at once, just to make a minister or a government more popular.

By Catalina Pardo, Manager at Apparcel Uriarte Abogados

Link to the article: https://www.diarioestrategia.cl/texto-diario/mostrar/5009155/reformas-laborales-favor-trabajadores