Key to growth is to overhaul the labor law of Puerto Rico
There were two members of the financial oversight board of Puerto Rico who agreed on Thursday along with a panel of some other experts that the future growth of Puerto Rico is dependent on various factors and the overhaul of the local labor laws is a primary factor in the future growth of Puerto Rico.
The discussion took place at the Heritage Foundation in the Washington city which is considered as the American conservative moment’s bastion. On the other side, the debate regarding elimination of job protections is continued by the legislature of the territory. The current job protections require an essential court hearing or a specific paid severance if any employee has to be fired.
The deadline for the legislature to change the labor laws is June 30. Otherwise, a previously certified plan will be imposed by the oversight board which will eliminate the paid leave and mandatory sickness days and the required Christmas bonuses.
Puerto Rico is considering to institute same labor laws as used in most of the states. Moreover, Puerto Rico is also thinking to add some restrictive laws for getting the food stamps and introducing an earned income tax credit in order to motivate work.
The panelists emphasized the fact that the labor laws of Puerto Rico are currently the strictest and most restrictive than any other state on mainland. This is causing the residents to leave Puerto Rico and seek better economic and financial opportunities.
Competitive labor market will be able to produce more jobs for Puerto Rico and they have to convince the people of this territory.
Oversight Board member Andrew Biggs, who is also a resident scholar at the American Enterprise Institute is of the view that the economists have predicted that if the reforms are adopted, then almost 1% of annual economic growth will be enhanced.
Biggs said in an interview that these labor law reforms are not only essential and beneficial for the creditors but also for the island as a whole. If there will be no economic growth, then the territory will be left with no funds for paying to the creditors.
The chairman of Oversight Board, Jose Carrion, said that it was very difficult to keep up with the existing labor requirements. He said that as an employer, he abides by the law knowing that they will not help Puerto Rico in being competitive to the other states like Florida and as a reason of this, the island is losing its population fast.
For instance, the employers of Puerto Rico are required to provide laborers who work for 8 hours to get the next 24 hours off. This means that if a restaurant worker takes an evening shift, then he will be exempted from work the next morning. There are many such policies that hinder the economic growth.
On the mainland, the labor force participation rate is 63%. However, on Puerto Rico, the participation rate is really low lying at only 38%.
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