Public Policy's Vicious Cycle: Addressing Symptoms, Not Root Causes

A commentary by Macarena García, senior economist at Libertad y Desarrollo, likens public policy to a medical scenario where treatments for side effects create new problems, ultimately diverting focus from the original ailment. This analogy is applied to labor market regulations, such as high minimum wages and costly employment obligations, which can inadvertently reduce formal hiring and increase informality. The proposed solution to these issues often involves adding more subsidies or exceptions, further complicating the policy landscape instead of addressing the core problem.

The article highlights a growing concern in developed countries regarding higher education students lacking essential skills for complex jobs. Examples include significant deficits in preparation at institutions like the University of California, where professors must teach secondary-level content. Furthermore, a notable percentage of tertiary students perform at a basic level in advanced tests, and the widespread use of AI for assignments masks a real deficit in learning. This educational gap is not confined to developed nations; in Chile, OECD results indicate that a majority of adults have low proficiency in mathematical reasoning and reading comprehension, with very few demonstrating the ability to handle complex information or generate high added value.

García argues that these skill gaps directly impact economic productivity and wages, as labor productivity relies on cognitive abilities like problem-solving and adaptability. She contends that accumulating more regulations to counteract previous ones is ineffective. Instead, the fundamental issue of human capital formation must be addressed through substantial improvements in education quality and workers' cognitive skills. Without this foundational improvement, policy efforts will continue to treat symptoms rather than the underlying disease of inadequate workforce preparedness.