Center for Latin American and Caribbean Studies

This paper applies the capability approach to the case of the Chilean labor market. It highlights the fact that the only information related to the labor market which the development literature usually considers is the unemployment rate, and sometimes wage levels. Applying the capability approach to the labor market, however, obliges us to take a broader view of the functionings that work can provide. Although having a job and thus earning an income is clearly the most important factor for the individual, other issues related to the characteristics of this job should also be taken into account as they are equally capable of generating capabilities and functionings for the individual, especially if one takes a longer term view.

The paper presents a methodology for measuring the quality of employment, a concept which so far has lacked definition and application in the literature. It takes the view that the usual consideration of the labor markets by means of the unemployment statistics is as simplistic an analysis as looking at the level of a country’s development by only considering its GNP per capita ratio. Inspired by the UNDP’s work on the Human Development Index, the paper therefore proposes a methodology for creating a composite index of various labor market indicators, which together will provide a more broadly based view of the labor market, and provide a better account of the capabilities and functionings that employment generates. It demonstrates the uses of such an indicator for the purposes of public policy making by showing its application to the Chilean labor market, in particular by highlighted specific cases where the indicator would highlight problem issues which are not currently being addressed by public policy.