New versus Established Democracies
Jose Aleman
6
coverage, and contract negotiation.
<Figure 1>
Changes in labor contracts and the diversification of the types of contracts have
been the main objectives of many labor reforms introduced recently in several
countries.
19
The indefinite contract has been increasingly replaced by contracts with
less stability and lower commitments. Chief among them has been the introduction of
atypical contracts that favor hiring for fixed periods to promote employment of special
groups, like the young or subcontract labor, or to encourage training practices. In
addition, firing practices have been eased by increasing the number of allowances made
for layoffs and by reducing the obligations of employers to separated workers. Finally,
employers have been granted greater flexibility in how they distribute the hours and
days of work so that they can better adapt to fluctuations in demand. The expected long-
term result is an increased level of employment, but the usual short-run impact is an
expansion of unemployment and job turnover. Another downside to these changes is the
reduced incentive for employers and employees alike to invest in training.
A second major trend is a decentralization of collective bargaining to the firm
level. This practice allows enterprises to negotiate wages closer to productivity
conditions and economic possibilities. Decentralizing wage negotiations has been
accompanied by a rise in wage flexibility, linking remunerations to enterprise
competitiveness. The process of decentralization, however, is not limited to new
democracies. While gradual, the move away from centralized forms of collective
bargaining has been experienced around the world, even in traditionally macro
19
Tokman 2002, p. 178.
Convention