When measuring per capita income in all countries of the world, only formal jobs, not precarious or informal jobs, enter the statistics, which if added obviously would bring the figures down to not-so-optimistic numbers. An example of this is the state of California in the United States, one of the highest per capita incomes in the world, but also with fairly high rates of work informality; Mexicans and Latinos generally emigrate to that state, as it is a thriving production center known for its many employment opportunities. Similar situation occurs in major European powers, with respect to African and Asian immigrants.
The phenomenon that occurs as a result of what is described has two consequences of concern, on the one hand companies and traders develop at the expense of workers, and on the other hand, the State no longer receives resources through labour taxes, which could be used in social aid or promotion of the middle class. Social and labour market distortion is therefore evident, with serious problems of remunerative and distributive justice detonating.
This reflects that, contrary to what might be thought, labour informality is not synonymous with underdeveloped country, but should be associated rather with a lack of the State in labour regulation and employment conditions.
Chile does not escape this global problem, and it has also seen it grow in recent times, because of its status as an economic benchmark in the region. We have all witnessed the considerable increase in immigrants who have come to our country, mainly from South America and North America (Haiti). In general, it can be seen that large companies have treated (relative to Chileans) these foreigners who have been interested in participating in the national labour market, having them in formality from the beginning.
Rather, the problem arises in small and medium-sized enterprises, which see attractive the recruitment of workers at a lower cost (being profitable still taking the risks), which in the short and medium term is also suitable for the foreign worker. Chilean workers also enter this dynamic, but to a lesser extent, with some high points such as private home employees and small trade.
For an appropriate commentary on labour informality and its remedies, we must broadly consider three types of workers, who have lately been in the eye of the hurricane: (a) self-employed; (b) workers in a grey area between independence and subordination and dependency; and (c), dependent workers who are kept informal by their employers.
The first group of workers is perhaps the most complex in terms of the treatment of public policies and their insertion into formality, as they are often subsistence work. The Municipality of Santiago, in the past, did a good job at this point (order in the location of traders in the city and payment of reasonable patents), an issue that in the wake of the social crisis and the pandemic by COVID-19 had a significant setback. Coordination between central government and municipalities is essential in these situations, for the contribution of these small traders in the economic development and well-being of the city.
The second group of workers generally does not present a problem from the point of view of tax collection, since by providing fee ballots, or other equivalent tax documents, they end up paying taxes similar to those of a dependent worker (second category of income tax). However, they can be harmed from the point of view of their planned and health contributions, a question redeemed today by the recent ruling of the Juzgado de Letras del Trabajo de Concepción, which declared as a worker dependent a rider of the company Pedidos Ya, condemning paying remuneration, planned contributions, holidays and increases for dismissal.
The solution at this point, regardless of the employment qualification that can be done of the work in question (which will depend very much on the case), and so as not to over-make employment, except at times when jobs are difficult to achieve, is to create special legal statutes for such services, so that these workers or service providers are covered in certain relevant minimum aspects (accidentit is from work and insurance of disability and survival, for example), but regardless of that regulation an excessive cost to employment, its maintenance and termination, which will eventually make disappear these forms of work that are the livelihood today for thousands of Chileans.
There is currently a bill setting out basic guarantees to people who provide services through digital platforms (Newsletter 13.496-13). Certainly the legislative technique will be important, but regulation is urgently needed, which can be balanced, safeguarding the basic interests of employers and workers, and which gives legal certainty to the various actors.
The last group of workers is the one who decides to take the risk of not having social security simply in exchange for a job. The employer also does not have many incentives to comply with the tax or labor law, because of the cost that the latter has, to which we must add the amounts not less to be paid in case of dismissal for the needs of the company or eviction.
Some of the public policies recommended to increase formality are tax adequacy to facilitate compliance in the payment of taxes, incentives for formalization (which in our country translate into avoiding fines of the Directorate of Labour), means of deduction of taxes to micro and small enterprises; awareness-raising campaigns; and increase auditing. Another essential issue is not to further increase the cost of hiring, for example, now that our country is discussing increasing the retirement contribution (which will happen sooner or later), it does not seem appropriate that in the case of micro and small businesses it is the employer who assumes that cost. Probably the consequence of this will be the increase in labour informality.
In short, the formalization of work activity will not be achieved with the threat of assuming the consequences of sanctioning laws, which so far seems to agree in many cases, but with incentives and proposed measures of the authority.
The content poured into this opinion column is the sole responsibility of its author, and does not necessarily reflect the editorial line or position of El Mostrador.
