Introduction

Through the mid-2000s, observers of labor markets in Latin America generally agreed that performance in recent decades had been disappointing, for some, in fact, “perhaps the greatest disappointment of the new development strategy” (Berg et al. 2006, 1). This disappointment is not restricted to social scientists, as public opinion surveys “confirm that employment is people's primary concern in almost all countries” (Pagés, Pierre, and Scarpetta 2009, 1). Employment levels picked up during the 2000s, but often in low productivity activities or what a World Bank study called “growthless jobs” (Pagés et al. 2009, 2).

However, the diagnoses and resulting policy prescriptions for how to fix labor markets vary greatly. For the International Labour Organization (ILO), for example, a core problem is informality, which accounts for about half of all employment and half of new jobs created in the 2000s. A central policy recommendation is therefore for more and better enforcement as well as “social dialogue” among representatives of workers, employers, and the government (ILO 2006, 12, 19; see also IDB 2003, 118, 277). Others, in contrast, blame rigidity and over-regulation of labor markets and its “many undesirable side effects,” and call for deregulation and more flexibility (World Bank 2004a, 35, 37–38). Another group focuses on comparatively low levels of education and skills. These studies usually recommend greater investment in education as well as additional policies to reform training institutes (IDB 2003, 276), to expose firms to greater competition (de Ferranti et al. 2003, 9), or promote diffusion of information on the high returns to education (Menezes-Filho 2003, 143).