Wednesday 9 June 2010

On labour laws change


Portugal has a over 10% unemployment rate. Far away from Spain but above the US - for example. And, disturbingly, with a higher unemployment rate at younger levels. And, thus, at higher education first-job seekers. Labour laws are at the cornerstone of the problem, generating lower productivity.


Portuguese Labour laws protect already existing employment. Simplifying (hugely simplifying it), in Portugal, if someone has a job it is very unlikely it will lose it. Laws protect one, as it can only be fired if its role is extinguished or by proven incompetence - extremely hard to prove. If one gets fired, it can appeal to court and (as the Law protects the weakest part involved) is reintegrated in its role until the issue is solved (and it usually takes years).


So, for someone with a mild ambition, the incentive for skills and competences updatement and evolution is fairly poor. And we are in a over-dynamic world, that has nothing to do with the one we lived 10 years ago - it is only necessary to think about the mobile internet, profusion of social online integration, widespread and self generated information and content, SAP management,... This has implications over the skills and competences that are required to perform a job. So, it you don't update yourself systematically, then, your relative productivity and competitiveness fall behind. You start producing less than people who have fresh knowledge and skills - this has nothing to do with age, but yes with the evolution of ones competences. I have no doubt that an experienced person that strives to keep up to date is at least as valuable as a younger one - actually, I personally think that is more valuable, because of experience they have earned. But, in Portugal, there is a large number of persons whose jobs requirements have changed - they need to do it differently, with new skills - and never understood it. That is one of the reasons Portugal's productivity is at least 20% below Germany's.


The new skills and competences that companies require are often in the job market. They are the younger unemployed persons, looking eagerly for a job, despite holding degrees on specific areas. The companies need those fresh competences. The problem is the roles they need them for are already taken by persons that are not able to do the position anymore in an increasingly competitive World. And that can't be fired. Hence, 2 problems root here: high unemployment rate (specially at younger job seekers) and low productivity of the Portuguese economy.


Therefore, yes! A higher flexibilisation of Labour Laws is needed. I must say I don't like the american or chinese model of firing people in a day! I think is barbarian and inhumane. But I would like to see a Portuguese Labour Law that promoted quicker adjustments to market reality and that would allow and increase companies productivity. And that means that it would be necessary to ease on firing and hiring employees. And believe me, this is utterly necessary and crucial for Portuguese economy recovery!


3 clarification notes:


- This is as true for the "blue collar" Labour force as for the "white collar" one. It doesn't make much sense to have persons responsible for thousands of persons literally screwing up companies results through bad management and receiving huge compensations for getting fired. It happens specially at public companies (but not only) and this legislation is one of the reasons.


- I don't like "recibos verdes". I think they are a negative weight on the economy as they don't promote employees evolution and safety. The problem still lies on the 'hardness' of firing and hiring Labour Law. These issues must be dealt together.


- Companies and Unions should promote employees competence and skills evolution. There are European funds available for that. Get use of them. Sorry - get good use of them! Promote productivity! And stop using funds as salary complements!


http://economia.publico.pt/Noticia/governo-admite-aperfeicoar-lei-laboral-mas-pouco-mais_1441174

Life conditions pressire

The below new is no surprise. It is part of the life-conditions improvement trend we will see in China in the next years. As labour becomes richer and more informed and instructed, it will necessarily demand higher living standards, that are more aligned with its higher productivity. And you know, that will drive labour cost up in China, closing the gap vs western labour. It's the economy!