The Limits of Labor Legislation Reforms: Rigidity, Growth, and Employment in Brazil (1995–2010)

Abstract

The literature addressing market dynamics typically assumes that reforming labor legislation has a direct impact on economic performance, the configuration of labor markets, and the strength of labor organizations. Within this literature one prevalent school of thought advocates flexibilizing labor laws as the key to creating economic prosperity, enhancing labor productivity, increasing formal sector employment, and successfully fighting poverty and socioeconomic inequality. I test these assumptions by analyzing the case of Brazil between 1995 and 2010. My findings suggest that reforms seeking to flexibilize the Brazilian labor code do not significantly change the country's labor market or economy. I propose that transformations in international economic contexts as well as differing policy orientations of successive Brazilian federal governments may hold more explanatory power in accounting for labor market changes during this time period.