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Friday, November 1, 2013

Good intentions, bad law. Mandatory Benefit Regulations for Maids in Ecuador. November 2013.

The minimum wage is a classic example of a good intention and a bad idea.
In 2006 when I started to visit Ecuador, almost every middle class family had full time maid. In my friend's apartment building, in the mornings, people were leaving for work and their maids were coming (en masse) to watch over their children, to clean, cook, etc.
Now middle class cannot afford to have maids full time and even part time. They are afraid to have maids, because maids can ruin them financially/legally. Government gave maids these power. So what we have here: maids are unemployed, middle class are left without essential service.
Above, I stated anecdotal evidence, here is link to research

Labor Market Effects of Mandatory Benefit Regulations for Maids in Ecuador
main points from this research
quote
Motivation
• Maids: occupation with one of the lowest salaries and no social security benefits.
• Government intervention:
– In 2008 , started the enforcement of employer (generally, head of households) social security mandate.
– In 2010, decreed maids should receive no least than the minimum wage.
• However, potential negative impacts on the intended beneficiaries (maids). See Figure 1.
• Spillover effects on female employers.
• Relevant to other developing countries/labor groups.
end of quote

Result of government intervention according to this research:
quote
Hypotheses (maids):
COVERAGE (UP)
LABOR MARKET OUTCOMES: wages(DOWN) , employment: probabilities(DOWN) , hours(DOWN)
end of quote


Part one: Good intentions, bad law. Medical malpractice in Ecuador. October 2013.
http://dayinquito.blogspot.com/2013/10/good-intentions-bad-law-part-one.html
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