As Puerto Rico braces for a debt default on August 1 and is being dubbed as “America’s Greece,” it is also staring at a long list of all that went wrong over the last 40 years or more. Best known for its tourism attractions of beaches, waterfalls and rain forests, the Caribbean island finds itself paying for decades of ill-designed labor laws and ineffective institutional mechanisms, among other constraints. Puerto Rico badly needs bankruptcy protection to contain the chaos that its default could bring about, along with longer-term structural reforms on multiple fronts, experts tell Knowledge at Wharton. Employers find Puerto Rico’s minimum wage of $7.25 an hour uncompetitive, which discourages job creation in the formal sector. Liberal welfare programs also discourage people from taking jobs in the formal sector. Instead, they seek employment within the informal sector, where workers stay below the radar of labor statisticians and tax collectors. The phasing-out in 2005 of tax incentives for U.S.…