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Correa Takes on Market Forces with Slew of Employment Prohibitions

By: Adriana Peralta - @AdriPeraltaM - Nov 18, 2014, 2:22 pm
Rafael Correa aims for his government to reduce the gap between the highest and lowest-paid workers in Ecuador
Rafael Correa aims for his government to reduce the gap between the highest and lowest-paid workers in Ecuador. (Rafael Correa)

EspañolOn Saturday, Ecuadorian President Rafael Correa announced a set of wide-ranging reforms to the country’s Labor Code. The proposal seeks a so-called modernization of the wage system, “democratization” of trade union representation, and a universal social-security system.

“This is about placing the dignity of the human being and his work above capital and the market,” said the president.

Correa made the announcement during an event held by the ruling PAIS Alliance party in the southwestern city of Guayaquil. During the event, Correa presented the newly created United Workers Trade Union Federation (CUT), an organization established by the ruling party to unite public and private workers.


Thank you to my country! What a marvelous demonstration of community spirit, support, and conviction for our Revolution! A never-ending embrace.

Correa’s public speech took the place of his regularly scheduled radio and television broadcast. During the presentation, the president gave an overview of the labor reforms introduced during his administration, including ending the subcontracting of labor and the non-compensated dismissal of employees who have been under contract for more than two years. He also highlighted his policy of rewarding a year’s salary to employees who have been fired based on race, sexual orientation, age, or disability.

“The demands of workers have been acted on like never before, because we are the government of the worker,” said Correa.

Five-Point Reform

Correa submitted the five-point reform proposal to the president of the National Assembly, Gabriela Rivadeneira.


Get to know the social security and labor reform proposal.

The first point deals with strengthening job security, eliminating labor contracts in which a worker can be fired without compensation, as well as fixed-term contracts that do not provide employees with long-term job stability. The proposal also prohibits the firing of pregnant women and union leaders.

The second point establishes limits on the wage gap between the employees of a given company: the highest-paid employee can earn no more than 20 times the lowest-paid employee. If an employee’s salary exceeds this limit, the excess amount must be given to the government in the form of a social security payment. If the payment is delayed, it will result in a fine for the company.

Correa is also proposing reforms that deal with the so-called modernization of the wage system. The government will allow both public and private sector workers to request their end-of-year bonus be instead distributed throughout the year as part of their monthly salary.

Furthermore, Correa aims to “democratize” private businesses, requiring that all employees be involved in the selection of the company’s board of directors through a secret ballot.

The fifth and final point of Correa’s proposed reforms mandates universal social security coverage. The objective is to extend coverage to 1.5 million domestic workers. Depending on each family’s finances, the government would pay up to 90 percent of a household’s health-care costs.

The law would also allow mothers to a receive a pension if they become disabled or if their husbands pass away, and would also provide life insurance payments to their children if they are orphaned.

Productive Sector Concerned

Luis Poveda, a representative of the Workers in the National Wage Council, believes Correa’s reforms could lead to fewer jobs and reduced wage incentives. He told local newspaper El Comercio that the elimination of fixed-term contracts will reduce young people’s access to these positions. “This will be harmful to young people who aspire to gain productive employment.”

Richard Martínez, executive president of the Chamber of Industry and Production, agreed with Poveda that the elimination of the fixed-term contracts is detrimental to younger workers who tend to spend a few years trying out different types of jobs.

In an interview with Ecuavisa, Martínez added that trying to close the salary gap will remove the incentive to study abroad for many Ecuadorians. He argues that this will place an artificial limit on progressive wage increases and eliminate monetary incentives for the professional class.

Reelection on the Table

During his labor-reform speech, President Correa also mentioned the constitutional amendments currently before the National Assembly, placing particular emphasis on the issue of indefinite reelection. If the amendments are approved, Correa would be allowed to run for a fourth presidential term.

Although the president has previously spoken out against the prospect of indefinite reelection, he now considers it part of his “citizens revolution.”

“I never wanted the amendment for the reelection, but we should be aware of the historical moment in which we live,” said Correa.

On October 31, the Constitutional Court of Ecuador ruled that the National Assembly could vote on the indefinite reelection amendments. The opposition party hoped the issue would instead be put on a national referendum, since the ruling PAIS Alliance holds a controlling majority in the assembly.

Translated by Alex Clark-Youngblood. Edited by Guillermo Jimenez.

Adriana Peralta Adriana Peralta

Adriana Peralta is a freedom advocate from El Salvador and a @CREO_org board member. She is a PanAm Post reporter and blogger, a 2005 Ruta Quetzal scholar, a trained engineer, and an SMC University masters student in political economy. She is also a Pink Floyd fan. Follow @AdriPeraltaM.