The employment situation in Latin America and the Caribbean: Crisis in the labour markets and countercyclical responses

As predicted in the first bulletin, produced jointly by the Economic Commission for Latin America and the Caribbean (ECLAC) and the International Labour Organization (ILO), the impact of the economic crisis continued to be felt in Latin America and the Caribbean during the second quarter of 2009. Regional exports of goods and services contracted in response to sluggish demand on international markets, while remittances and foreign direct investment flows continued to fall, credit lost its buoyancy and the total wage bill diminished, owing mainly to job losses. As a result, the growth forecasts of many countries had to be adjusted downwards. Since the end of 2008, the countries of the region had started to implement countercyclical policies —albeit with significant differences— in an effort to use public spending to counter flagging investment and consumer-spending levels and boost aggregate demand. In this second bulletin, ECLAC and ILO show how the impact of the crisis has deepened in labour markets in the region in the first half of the year and examine existing options and the outcome of public-infrastructure and emergency employment programmes designed to mitigate the impact of the crisis on the labour market. The unemployment rate has risen in practically all countries compared with the previous year and this situation worsened further in the second quarter, when urban unemployment exceeded the rate of the corresponding period in 2008 by 1 percentage point (to stand at 8.5%, up from 7.5%), while in the first quarter, the variation was 0.6 of a percentage point. Labour indicators also point to an increase in informality, a decline in employment with social protection and a decrease in full-time employment. Labour-market trends observed in the first half-year, together with the forecast for a 1.9% decline in regional GDP in 2009, suggest that the average annual rate of urban unemployment in the region will be close to 8.5%. This forecast is slightly less pessimistic than the estimate given in the first bulletin; this is attributable to the fall in the participation rate in the first half-year to levels that are expected to remain low for the rest of the year. Without this reduction in the labour supply, due largely to the “discouragement effect”, the annual average urban unemployment rate would stand at between 8.8% and 8.9%. Thus, the open urban unemployment figure would increase by 2.5 million and if the “discouraged job-seekers” are included, then the number of additional persons not finding a niche in the urban labour market would climb to 3.2 million. In the region, as in the rest of the world, there are signs that the crisis may have reached bottom in the middle of the year. In many countries, production levels have ceased their decline and there are indications of an incipient recovery leading to cautious optimism that there may be a moderate upturn in labour markets in the fourth quarter. The pace of recovery will vary from one country to the next and is expected to be gradual at best. Even with the return to a growth path, there should be no illusion that the labour problems will immediately disappear. First, the recovery in employment is expected to lag behind the upturn in economic activity. Second, since economic growth is likely to remain moderate in the short term and well below the rates recorded between late 2003 and mid-2008, demand for labour and consequently the generation of good-quality jobs will continue to be weak. Thus, countries should not relax their efforts to defend and create decent jobs, but rather should take steps to improve the effectiveness and efficiency of available instruments. In this way, the region will be in a better position not only to confront the challenges of economic recovery, but also to strengthen the foundations for social inclusion and for advancing under more favourable conditions towards fulfilment of the Millennium Development Goals.

The employment situation in Latin America and the Caribbean: Crisis and the labour market

Since the financial and economic crisis began to affect the real economy and spread throughout the world, the region’s economies have been faced with a situation where data on employment and labour reflect the real stories of millions of women and men for whom the future has become uncertain. When these problems began to appear, the International Labour Organization (ILO) warned that the world faced a global employment crisis whose consequences could lead to a social recession. As the Economic Commission for Latin America and the Caribbean (ECLAC) has pointed out, the outbreak of the crisis put an end to a five-year period of sustained growth and falling unemployment. As early as the second half of 2008, the figures began to reflect slowing economic growth, while a downward slide began in the labour market. This initial bulletin, produced jointly by ECLAC and ILO, seeks to review the ways in which the crisis is affecting the region’s labour markets. Amidst a situation characterized by shocks and uncertainty, governments and social partners must have the inputs needed for designing public policies to increase the population’s levels of employment and well-being. It is planned to produce two further bulletins by January 2010, in order to measure the impact of the crisis on employment and provide an input to the process of defining the best public policies to reverse its consequences. The bulletin reviews the most recent available indicators and analyses them in order to establish trends and detect variations. It provides statistics for the first quarter, estimates for the rest of 2009, and a review of policies announced by the Governments. In 2008, the last year of the growth cycle, the region’s urban unemployment stood at 7.5%. According to economic growth forecasts for 2009, the average annual urban unemployment rate for the region will increase to between 8.7% and 9.1%; in other words, between 2.8 million and 3.9 million additional people will swell the ranks of the unemployed. Data for the first quarter of 2009 already confirm that the crisis is hitting employment in the region. Compared with the first quarter of 2008, the urban unemployment rate was up by 0.6 percentage points, representing over a million people.Work will continue until September 2009 on the preparation of a new report on the employment situation, using data updated to the first half of 2009. This will provide a picture of the region’s employment situation, so that growth and employment projections can be adjusted for 2009 as a whole. Strategies for dealing with the crisis must have jobs and income protection as their central goals. Policies are moving in that direction in Latin America and the Caribbean and, if they are effective, an even greater worsening of the situation may be avoided. Labour produces wealth, generates consumption, keeps economies functioning and is a key factor in seeking out the way to more sustainable and equitable growth once the crisis is past.

Aspects of recent developments in the Latin American and Caribbean labour markets

This article presents three stylized facts that characterized the evolution of labour markets in Latin America and the Caribbean in the period 2003-2012 and represented breaks from previous trends. It is argued that these changes have to do with the economic and production context and the political and institutional framework. We show how the magnitude and patterns of economic growth impact on the nature of job creation, especially on shifts within and between economic sectors and the various segments of different productivity levels. We emphasize how changes in labour institutions have contributed to the evolution of labour indicators and, lastly, look at recent advances and persistent weaknesses in labour performance, as well as a number of risks to the continuity of recent favourable labour trends.

Employment Situation in Latin America and the Caribbean: Universal social protection in labour markets with high levels of informality

The Employment Situation in Latin America and the Caribbean is a twice-yearly report prepared jointly by the Economic Development Division of the Economic Commission for Latin America and the Caribbean (ECLAC) and the Office for the Southern Cone of Latin America of the International Labour Organization (ILO).

Informality and labour market segmentation: the case of Argentina

The document evaluates the presence of segmentation in the Argentinean labour market. The analysis is centred on the comparison of the earnings of formal and informal workers. Two different approaches to the definition of informality are used. The existence of a formal premium is tested using dynamic data and semiparametric techniques. The period analysed is 1996-2006 for all urban surveyed areas. Our results support the segmentation hypothesis for the Argentine urban labour market: workers with similar probabilities of entering/exiting across sectors obtain different earnings.