Flexible Bureaucracies in Labor Market Regulation

Abstract

This paper compares and contrasts the U.S. and French systems of labor market regulation. The U.S. system is specialized: Regulating authority is dispersed among a host of different agencies each with a relatively narrow jurisdiction, and as a result with responsibility for a very limited domain. Authority is further divided between the federal and the state governments. The French system is a unified or general system: A single agency is responsible for the enforcement of the whole labor code. As a result, the French system is a street-level bureaucracy in which considerable power and authority rests with the line agents, the work inspectors themselves. The structure of the system (quite paradoxically in the light of the centralization generally attributed to the French state) gives the inspectors virtually complete autonomy in the geographic area to which they are assigned. As a result, and contrary to the contrast generally drawn between civil law and common law countries, at least in the literature of economics, the French system is considerably more flexible and able to adjust to variations in economic and social conditions across the territory but also over time than is the U.S. system. The contrast is of broader importance because the French system was adopted by Spain (and Italy) and from there spread to Latin America, where the issue of labor standards enforcement has become central to bilateral trade treaties with the United States. The paper goes on to discuss the various managerial issues posed by the two systems and the problems of reconciling their contrasting dynamics in a unified global trading regime. The Problem: The Need for Flexibility in a Regulatory Framework This paper is addressed to the problem of labor market flexibility. The problem arises most immediately in the context of the revival of labor market regulation and a renewed effort to enforce labor standards which have been allowed to atrophy over the course of time. The revival is part of a broader reaction against the neo-liberal agenda and the Washington Consensus, an approach to public policy which places almost exclusive reliance on the competitive market and simulated market mechanisms. The reaction is especially intense in Latin America, but it is actually very widespread. And the skepticism about market-based solutions has been reinforced by the current crisis which has drawn even the United States, the intellectual fountainhead of the old Consensus, into active intervention not only to limit and control the impact of the market, but actually to guide its operation. Even before the crisis, however, virtually every major country-with the notable exceptions of Mexico and the United States-had increased the resources and personnel devoted to labor inspection in the course of the last five years. In labor market policy, however, the reaction is taking place without addressing the basic problem to which the Washington Consensus was itself a response: The inflexibility and rigidity of governmental regulations and the way in which th...

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