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Is the Global Competitiveness Index by the World Economic Forum a reliable tool for the design of labor market policies? Evidence from Latin American countries

Celia P. Vera
Celia P. Vera
 and 
Silvio Rendon
Silvio Rendon
   | Dec 31, 2023
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Published Online: Dec 31, 2023
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Received: Sep 20, 2022
DOI: https://doi.org/10.2478/izajolp-2023-0008
Keywords
© 2023 Celia P. Vera et al., published by Sciendo
This work is licensed under the Creative Commons Attribution 4.0 International License.

Figure 1

Evolution of the GCI score for LAC, 2007–2017. GCI, Global Competitiveness Index; LAC, Latin American and Caribbean countries.Source: World Economic Forum. The Global Competitiveness Index dataset 2007–2017.
Evolution of the GCI score for LAC, 2007–2017. GCI, Global Competitiveness Index; LAC, Latin American and Caribbean countries.Source: World Economic Forum. The Global Competitiveness Index dataset 2007–2017.

Figure 2

Evolution of competitiveness in LAC across the 12 pillars. LAC, Latin American and Caribbean countries.Notes: Only Hispanic LAC countries are considered.Source: World Economic Forum. The Global Competitiveness Index dataset 2007–2017.
Evolution of competitiveness in LAC across the 12 pillars. LAC, Latin American and Caribbean countries.Notes: Only Hispanic LAC countries are considered.Source: World Economic Forum. The Global Competitiveness Index dataset 2007–2017.

Figure 3

Evolution of labor market performance in the selected countries, 2007–2017.Notes: The series subjective is an arithmetic average of the indicators’ scores obtained with business leaders’ opinions.Source: World Economic Forum. The Global Competitiveness Index dataset 2007–2017.
Evolution of labor market performance in the selected countries, 2007–2017.Notes: The series subjective is an arithmetic average of the indicators’ scores obtained with business leaders’ opinions.Source: World Economic Forum. The Global Competitiveness Index dataset 2007–2017.

Figure A1

GCI score range, 2017–2019. LAC, Latin American and the Caribbean countries.Notes: Score in 2017 is a backcast edition with methodology GCI 4.0.Source: Data for 2018 come from The Global Competitiveness Index (GCI) data set 4.0 2018, and data for 2019 come from the World Bank GCI 4.0: Global Competitiveness Index 4.0.
GCI score range, 2017–2019. LAC, Latin American and the Caribbean countries.Notes: Score in 2017 is a backcast edition with methodology GCI 4.0.Source: Data for 2018 come from The Global Competitiveness Index (GCI) data set 4.0 2018, and data for 2019 come from the World Bank GCI 4.0: Global Competitiveness Index 4.0.

Distribution of the GCI indicators by the data source (%)

Pillar Executive Opinion Survey International organization
(soft data) (hard data)
1: Institutions 50 50
2: Infrastructure 42 58
3: ICT adoption 0 100
4: Macroeconomic stability 0 100
5: Health 0 100
6: Skills 67 33
7: Product market 50 50
8: Labor market 67 33
9: Financial system 33 67
10: Market size 0 100
11: Business dynamism 50 50
12: Innovation capability 40 60
Total 45 55

GCI scores and countries’ ranks in the labor market pillar for the selected countries, 2018

LAC Peru Colombia Dominican Republic Mexico Brazil
Score* Rank** Score Rank Score Rank Score Rank Score Rank Score Rank
Objective data
Female participation in labor force 59.1 4 56.9 82 66.9 67 100 3 44.6 89 77.3 49
Labor tax rate 85.5 5 95.8 34 85.3 83 85.3 83 75.6 112 55.3 137
Redundancy costs 57.5 6 84.5 40 73.6 71 53.8 110 62.5 99 76.2 66
Workers’ rights 68.8 3 70.1 71 57.7 110 84.5 28 56.7 112 66 88
Subjective data
Active labor market policies 23.8 7 17.9 126 30.5 92 19 120 25.3 109 27.6 105
Cooperation in labor–employer relations 52.2 6 50.7 102 55.8 69 56.7 63 57 61 46.6 117
Ease of hiring foreign labor 54.7 2 52.5 63 51.2 71 53 60 55.3 48 40.6 122
Flexibility of wage determination 59.9 7 76.3 16 62.5 85 59 103 68.6 55 51.9 124
Hiring and firing practices 35.4 7 31.5 128 38.7 109 39.3 108 40.2 105 20.8 138
Internal labor mobility 60.6 2 65.6 24 64.4 33 68 17 66.4 22 29.2 138
Pay and productivity 40.6 6 42.5 96 42.5 97 42.3 98 45.1 82 39.5 113
Reliance on professional management 50.6 5 51.1 81 51.6 78 48.2 91 53.8 67 56.7 58
Pillar 8: Labor market 55.3 4 58.8 72 57.9 80 61.6 51 54.4 100 51 114

The Survey and the country: percentage of firms with <100 workers in the selected countries, 2008–2019

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Peru The Survey 2 9 12 16 – – – – – – – –
The country 98.4 98.4 98.3 98.3 98.3 98.5 98.4 98.4 98.4 98.0 99.1 98.4
1–10 98.2 98.2 98.1 98.1 98.0 98.4 98.2 98.2 98.2 97.8 99.0 98.2
11–100 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.1 0.2
Colombia The Survey 52 43 43 49 – – – – – – – –
The country a – – – 99.7 99.6 99.6 99.6 99.5 99.5 99.6 99.6 99.6
1–10 – – – 94.5 93.6 92.9 92.7 92.3 92.2 93.0 92.7 92.7
11–100 – – – 5.2 6.0 6.7 6.8 7.2 7.4 6.7 6.9 6.9
Mexico The Survey 15 25 33 38 – – – – – – – –
The country – 99.5 99.4 99.5 99.5 99.5 99.4 99.4 99.4 99.4 99.3 99.3
1–10 – 94.96 93.92 93.80 93.75 94.09 93.84 93.78 93.69 93.58 93.57 93.48
11–100 – 4.53 5.50 5.66 5.70 5.41 5.52 5.61 5.70 5.81 5.76 5.83
Dominican Republic The Survey 49 46 1 26 – – – – – – – –
The country b – 95.4 96.5 96.9 96.3 95.3 – – 97.2 97.2 97.3 98.1
1–10 – 66.4 70.1 71.5 69.9 70.6 – 74.1 73.9 74.3 76.0
11–100 – 29.0 26.4 25.4 26.3 24.7 – – 23.1 23.3 23.0 22.1
Brazil The Survey 4 20 23 22 – – – – – – – –
The country c 99.1 99.2 99.1 99.1 99.1 99.1 99.1 99.1 99.0 99.0 98.9 99.2
1–10 88.9 88.9 88.8 88.1 87.9 87.9 87.1 86.7 86.6 86.1 85.3 87.9
11–100 10.2 10.2 10.3 11.0 11.2 11.2 12.0 12.3 12.5 12.9 13.6 11.3

Questionnaire of the Survey’s labor market pillar

Indicator Question (“In your country...”) Answer
1. Hiring and firing practices To what extent do regulations allow for the flexible hiring and firing of workers?

1 = not at all

7= to a great extent
2. Cooperation in labor–employer relations How do you characterize labor–employer relations?

1=generally confrontational

7= generally cooperative
3. Flexibility of wage determination How are wages generally set?

1= by a centralized bargaining process

7= by each company
4. Active labor policies To what extent do labor market policies help unemployed people to reskill and find new employment?

1= not at all

7= to a great extent
5. Ease of hiring foreign labor How restrictive are regulations related to the hiring of foreign labor?

1= highly restrictive

7= not restrictive at all
6. Internal labor mobility To what extent do people move to other parts of the country for professional reasons?

1= not at all

7= to a great extent
7. Reliance on professional management Who holds senior management positions in companies?

1=usually relatives and friends without regard to merit

7= mostly professional managers chosen for merit
8. Pay and productivity To what extent is pay related to employee productivity?

1= not at all

7= to a great extent

GCI labor market scores in 2007 and 2017

Overall Subjective
2007 2017 ∆ 2007 2017 ∆
Peru 4.12 4.27 0.32 4.31 3.89 –2.87
Colombia 4.25 3.98 –0.58 4.56 3.73 3.12
Dominican Republic 4.13 3.62 –1.19 4.73 3.56 2.14
Mexico 4.09 3.77 –0.74 4.56 3.92 1.82
Brazil 3.96 3.68 –0.65 3.98 3.36 2.35

Formalization policies in the selected countries

Peru Colombia Dominican Republic Mexico Brazil
Regulatory environment Deregulation in hiring and dismissal

1990s: Elimination of job security regulation; introduction of temporary contracts; reduction in severance payments; expansion of training and subcontracting schemes; weakening of collective bargaining institutions

2002: Supreme Court rules in favor of the reinstatement of workers dismissed unfairly

1990s: Elimination of the minimum term and extension of the maximum term of fixed-term contracts; introduction of temporary contracts; integrated wages; reduction in the cost of dismissing workers with indefinite contracts; expansion of training and subcontracting

2002: Increase in the maximum working day by 4 hours; reduction in severance payments

2010, 2012: Reduction of direct cost of hiring workers

2013: Social security contributions linked to weeks effectively worked

 1990s: Increase in the cost of dismissal

2012: Introduction of temporary contracts;

2012: Introduction of temporary contracts; reduction in hiring and firing costs

 1988: Increase in the minimum overtime pre-mium, in value of paid vacations, in cost of dismissing workers and in payroll taxes
Special employment regimes

2000, 2006: Agricultural promotion regime

2003, 2008, 2013: Micro and small enterprises employment regime
Incentives to formalize employment Reduction in social security contributions for youth

2010: Social security contributions for youth are discounted from income tax

2016: Exemption of the contribution to the family compensation fund during the first year of employment for youth

 2010: Subsidies for hiring youth who have never held a formal job 2000: Subsidies for the hiring of young interns
Reduction in social security contributions for microentrepreneurs and/or SMEs 2014: Social Security Incorporation Regime (RISS)

1999: New law for SMEs

2008: Law on Individual Entrepreneurs (IME)
Simplification of business registration for entrepreneurs 2016: Exemption for the mercantile registry and the first renovation for young entrepreneur companies 2016: Law on Entrepreneurship
Boost enterprise registration and creation Simplified taxation regimes for MSEs and microentrepreneurs

2003, 2008, 2013: Promotion and formalization of Micro and Small Enterprises Act

2003: New Simplified Single Regime (RUS)

2004: Special Income Tax Regime (RER)

2000: Micro, Small and Medium Enterprise Law

2016: Simplified Tax Regime (Monotributo)

2007: Tax Simplification Procedure (PST)

2019: Simplified Tax Regime (RST)

 2014: Fiscal Incorporation Regime (RIF)

1984: Microenterprise Statute

1988: New Federal Constitution, Art. 179

1996, 2006: Simplified Taxation System (SIMPLES)

2008: Law on Individual Entrepreneurs (IME)
Single windows for enterprises 2007: Electronic payroll system 2006: Planilla Integrada de Liquidacion de Aportes (PILA) 2014: eSocial
Simplification of business registration business

2008: Only business license required to operate

2012: Anti-Red Tape Decree legalization

 2002: Rapid business start-up system (SARE) 2006: National Network for the Simplification of Registration and Legalization of Companies and Business (REDESIM)

Evolution of WEF’s sampling guidelines and Survey sample size for the selected countries, 2008–2019

Year Sample frame lists Definition of firm size Average number of respondents Number of respondents in the selected countries
Peru Colombia Dominican Republic Mexico Brazil
(2) (3) (4) (5) (6) (7) (8) (9)
2008 SMEs; large enterprises Country-specific 91 84 128 61 73 180
2009 SMEs; large enterprises Country-specific 95 89 235 61 154 181
2010 SMEs; large enterprises Country-specific 98 86 195 43 94 168
2011 SMEs; large enterprises Country-specific 98 88 137 54 354 185
2012 SMEs; large enterprises Country-specific 100 83 286 91 278 143
2013 SMEs; large enterprises Country-specific 94.7 85 204 56 320 98
2014 SMEs; large enterprises Country-specific 92.8 85 162 62 340 114
2015 SMEs; large enterprises Country-specific 98.6 91 162 77 311 197
2016 SMEs; large enterprises Country-specific 102.8 88 158 78 304 128
2017 Micro and large enterprises, SMEs <10, 11 −250, >251 95.9 90 134 54 291 103
2018 SMEs; large enterprises ≤249; >250 92.25 98 113 59 208 118
2019 SMEs; large enterprises ≤249; >250 97.5 112 117 61 161 231
eISSN:
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