LETTER : Free market in labour divides society without creating the job s we need

Sir: Labour market deregulation and trade and investment liberalisation should not be considered a magic solution to unemployment (Business, 2 April).

G7 countries may well have something to learn from countries such as Chile, where this approach has been tried for more than a decade.

Chile's "flexible" labour market has failed to deliver growth with equity, or to promote greater social integration. Unemployment has finally fallen in recent years, but job creation has largely taken place in low-paid, low-quality jobs, creating a new class of working poor. Official unemployment figures fail to include a large number of women who work irregularly through the year.

Flexible working practices have spread, allowing companies to bypass government legislation, eroding collective bargaining rights and undermining the traditional obligations of employers to workers. As a result, despite rapid growth and a recent reduction in poverty, 43 per cent of salaried workers earn less than the minimum required to cover their basic needs, according to recent research commissioned by Oxfam. This has contributed to the growing number of women and children entering the workforce.

As well as contributing to social disintegration and tensions, this strategy is economically inefficient. The pursuit of a cheap and flexible labour market is strangling moves to a higher value added export strategy based on technological innovation or improved product quality, which is necessary if Chile is to sustain its export expansion in the longer term.

Ruth Mayne

Policy Adviser

Oxfam UK and Ireland