MercoPress. South Atlantic News Agency

Former IMF official recommends labor flexibility in Chile

Krueger denounced Chile's current “ethical salary” debate

Anne Krueger, the former number two official in the International Monetary Fund (IMF), recommended greater labor flexibility for Chile's labor market on Monday. The economist also took a hard stance against arguments for an “ethical salary” for Chile's wage owners, a subject of much debate today in Chile.

Krueger made her comments at an event organized by Chile's National Agriculture Society (SNA) in Santiago. During her speech, Krueger underscored her view that Chile must make labor reforms in order to have economic growth. Specifically, she said, Chile needs more labor flexibility. "In Chile there is a high cost to fire someone. This reality is not at all profitable and it prevents businesses from investing in areas of higher productivity," Krueger explained, citing Germany as an example of a country which has grown significantly since implementing such policies. Meanwhile, Krueger denounced Chile's current "ethical salary" debate. She argued that a higher minimum wage, if implemented, would generate higher unemployment. "It is feasible to pay an ethical salary, but it is not recommendable. It makes employers focus too much on the mechanization of labor and only hire the most skilled workers available. Consequently, such a salary would create high unemployment for people with less education." Kreuger was referring to comments made by Catholic Church Bishop Mons. Alejandro Goic. Two weeks ago, Goic called upon Chile's leaders to seek an "ethical wage" for Chile's working population. Goic had just helped negotiate a contract deal for subcontracted workers at the state-owned Codelco mining company, and said he had taken the pulse of growing working class resentment against Chile's clan-like business community. By: Matt Malinowski (Santiago Times)