Labour flexibilization: A research about its social effects for the colombian case

Abstract

This paper discuses some of the adverse effects that could be generated in terms of poverty and income distribution from the labour flexibilization in Colombia. Based on a partial equilibrium analysis for the urban labour market, it argues that successive reductions in the real wage may decrease unemployment but, at the expense of increases in poverty and inequality of income distribution. The author concludes that the number of jobs to be generated through the Colombian labour reform of 2002 will not mean a substantial reduction of the unemployment rote; contrary to the government forecasts on this matter, the labour reform has the potential not only of extending the recessive phase of the business cycle, but also of deteriorating urban poverty and inequality indicators.