Economic impact of the labor legislation in Venezuela

On May 7th of 2012, Organic Law on Work, male workers and female workers -Ley Organica del Trabajo, los Trabajadores y Trabajadores (LOTTT)- was published in Official Gazette of the Degree with Rank, Value and Force in Venezuela. The aim of this law is "to protect the work as a social fact and guarantee the labor rights, creators of the produced social wealth and the leading subjects of the processes of education and work to achieve the aims of the democratic state and social rights and justice...". To achieve these aims changes were established that apparently benefit the employees and place them in a better situation, in respect to the 1997 law, and on the benefits of the entrepreneur. In this sense, the aim of the present article is to analyze the economic impacts that this law has had on both the employee and the entrepreneur, using a review of the literature and journals. It was observed that the most significant changes were in the reduction of the workday, the calculation and the retroactivity of the social benefits, the elimination of outsourcing, and other less significant changes such as, pre and postnatal period extension, the calculation of the overtime, the elimination of the outstanding performance bonus, among others. It was shown, without any doubt, that this law is highly punitive for the entrepreneurs and very protective for the employees. All these came along with a decrease in the Economically Active Population (PEA), with a decrease in the gross domestic product and, thus, productivity. And now with the highest levels of inflation in Latin America, this is an unflattering landscape for companies in Venezuela. (C) 2015, Konrad Lorenz University Foundation. Published by Elsevier Espana, S.L.U.