Their key characteristic is an acceleration in the destruction of unviable jobs and the creation of new ones. The process is often accompanied by macroeconomic decline and by a sharp drop in the demand for labor nationwide. In the short term workers often feel the pain as real wages fall, unemployment rises, and employment shifts into informal activities. In Argentina, Bolivia, Chile, and Mexico real wages fell by a third or more before recovering. But in China and Ghana wages rose during the adjustment process, and unemployment remained low.
Economic reform can create opportunities for some workers but have wrenching effects on others.
Even the best-designed reforms produce gainers and losers in the short term. In contrast, Belarus and Venezuela have faltered and suffered declines or stagnation in wages and employment. Where initial conditions allow gradual job destruction without jeopardizing the reform that is needed to generate new jobs, gradualism makes sense. China exemplifies the truth of this proposition, but that country enjoyed a large margin for job expansion, first in agriculture and then in quasi-private industry, which could help finance the cost of the relatively inefficient state sector. In most other countries either macroeconomic imbalance or the costs of inefficient sectors make gradualism a nonstarter.