Latin America’s push to work less solves wrong problem

Latin America is considering shorter working hours. As noble as the goal of improving working conditions may be, however, the region’s governments also run the risk of deepening its serious labour informality and low productivity. Colombia and Chile have already passed legislation cutting the legal working day to 42 and 40 hours per week respectively. Now lawmakers in Brazil under President Luiz Inacio Lula da Silva, Mexico and Argentina, the region’s three largest economies, are mulling different proposals to reduce statutory working hours (44 hours per week in Brazil and 48 hours per week in the other two cases). Collectively, they are pursuing relief in a region known for a heavy — but relatively unproductive — workload.

If you are a worker within the formal sector, these policies make sense: Societies are dedicating less time to work and more to leisure and family; some of these proposals, such as a constitutional amendment presented in Brazil’s congress eliminating the six-day working schedule (known as escala 6x1), seek to update antiquated legislations. Technology has introduced more flexibility in the labor market, and a shortened workweek has been shown to improve employee focus and health while yielding work-life balance benefits. What’s more, in practice workers already tend to dedicate less time to their jobs — from 37 to 44 hours per week on average for the region’s top economies — than the legal limit, so the new legislation is only catching up with the real world.

Yet despite all these good reasons, laws that focus on the legal number of working hours take aim at the wrong problem: The region’s poor economic performance is intrinsically linked to its longstanding productivity and informality issues. If governments want to boost incomes, those obstacles are what policymakers should be obsessively trying to reduce. For starters, proposals that force employers to pay the same salary for less working time are poised to increase labor costs, which will especially hurt family businesses and small companies. Take Brazil’s case: The amendment advancing in the lower house reduces the working week to 36 hours spread across four days (with three rest days). All other things being equal, that will mean an increase in per hour labor costs of about a fifth, resulting in faster inflation, particularly given the tightness of the labor market. Worst, it could push more workers into the informal market — or prevent new employees from entering the formal world.

As important as the legal working framework is, legislators need to pay more attention to the realities of their economies: About half of the region’s jobs are of poor quality in the shadow market, a ratio that hasn’t improved in the past decade. Workload reductions won’t help the huge universe of employees who won’t be protected by these laws; instead, they will likely increase the gap between formal and informal workers. Call me a cynic, but you could argue that these initiatives are designed for political gain because their impact is more immediate and visible. Implementing sustainable policies that actually decrease informality and expand the number of workers protected by legal provisions is a complex process that could take years or decades.

The same can be said about the region’s longstanding productivity issue: Latin America and the Caribbean appear close to the bottom in both the level of labor productivity per person employed and the recent evolution of this metric, which the World Bank says has grown just about 1% per year on average since 1990 (and has plateaued in the last decade). Seen that way, the quest to produce more while working less may well be the biggest of Latin America’s many economic challenges. And its solution is even more urgent when you consider the region’s looming fertility problem. Contrary to some of the despicable stereotypes out there, local workers in Latin America aren’t to blame for the region’s bad aggregate productivity levels. Most Latin Americans I know are hard workers who want to progress; moreover, they aren’t directly responsible for the inadequate education, healthcare, or transportation services they receive. It’s up to governments and companies to invest more in training their staff while adopting new technologies including artificial intelligence. Simplifying bureaucracy, promoting competition, reducing insecurity and corruption and diversifying the production base would do wonders to make workers and the broad economy more productive.

Latin America is the most urbanised region in the developing world, so making cities more livable is also crucial to boost these figures.At the end of the day, improving productivity is like getting fit: It seems elusive, but we all know what it takes. The real difficulty is to put everything in place and make the great effort required to succeed. What you can’t do is to try to create prosperity by law, as some of these working-hour initiatives pretend.

Followers of this column know I am a staunch optimist about Latin America’s potential. But permit me to offer this somber forecast: If the region doesn’t fix its perennial low productivity problem, 20 years from now we will be facing the same consequences and discussing the same obvious solutions. That would be — productivity pun intended — a massive waste of time.