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The author analyzes the economic policy behind changes in job market regulations. He says that the best reform is a radical one that directly eliminates the distortions existing on the market. Yet he recognizes that this is not easy because the political costs are high and, in the short term, the unemployment rate could rise as a result of the huge distortions that would require a significant adjustment in employment that is by no means automatic.
He argues that this situation is what explains the different European strategies to fight unemployment. He sees some positive aspects in them, but is skeptical about their real impact on unemployment or their contributions to improving market productivity, largely because they still limit the opportunities that the unemployed have to compete under arm’s length conditions with the employed. Until this situation changes, it will be indicative of distortions that will keep unemployment rates high and job opportunities limited. This discussion is relevant to the debate ongoing in regard to the Chilean job market.