Of labor policies and jobs 18/04/2022

It is true that the Ministry of Labor is not responsible for creating jobs, but it is also true that it can destroy jobs through labor policies that make it difficult to match workers to jobs and prevent the economy from leveraging the labor force at hand.

One of these destructive policies has been the labor segmentation policy (dividing the labor market into separate segments that are distinguished by different characteristics and behavioral rules), which had been a favorite of almost all recent labor ministers.

One of the main features of the labor market vagaries observed over the past 50 years throughout the world relates to labor market segmentation. If it exists, it should be based on educational attainment or skill endowments. It should not be based on nationality, gender, sector, and legal status.

Studies since the 1970s have addressed, with a variety of tools and theorems, the many negative effects of segmentation. The negative economic and social impacts of the latter segmentation types are numerous: wage gaps among segments, variances in access to training and social security, different working conditions and tenure; restricted access to jobs; absence of promotion to better jobs; lower productivity; higher unemployment; employment instability; and greater informality. Many of these are present in the labor market in Jordan.

In Jordan, the creation or the expansion of a new segment in the labor market is done without any serious study of the economic or social impact. And while economic reform efforts under the purview of the IMF have focused on removing distortions (segmentation) in the tax system, discord and mayhem in the labor market continue unabated through distortionary segmentation policies.

In fact, a former minister of labor boasted (as have others) that by closing certain professions to foreign workers he was creating jobs for Jordanians, which was a bogus claim at many levels, as unemployment continued to rise even after.

It is not necessarily true that Jordanians would want to or are able to replace the guest workers in some of the closed segments. Research has shown that Jordanians seek working conditions that provide regular and timely payment, compensation for overtime work, predictable working hours, and jobs that require skills rather than manual labor.

Impromptu closure of sectors makes it difficult for employers to guarantee one-year, full-time work contracts for foreign workers, which encourages the growth of the informal sector.

A formally segmented market makes it difficult for labor to move across markets, and thus increases the cost and reducing the productivity of labor. Segmentation by driving away guest workers from certain professions also leads to increasing costs for producers at a time when the high costs of energy, high-interest rates, transportation, and taxes (direct and indirect) stifled businesses in Jordan and chipped away at their competitiveness — the loss of around 3,000 industrial companies in three years is ample testimony to this.

“Insanity: doing the same thing over and over again and expecting different results,” Einstein once said, Labor market policies have been unchanged for decades, and the unemployment rates have not ebbed. but increased to previously unseen heights. Is it not time to change your thinking?

https://www.jordannews.jo/Section-36/Opinion/Of-labor-policies-and-jobs-15742