Employment in Latin America recovers, but with informality

In Latin America and the Caribbean there has been a significant recovery of employment after the Covid-19 pandemic, but their labor markets in the near future may be marked by increased unemployment, informality and the number of poor workers, indicates a new ILO study.

Claudia Coenjaerts, regional director of the International Labor Organization (ILO), said when presenting the report that “the creation of formal employment will be key to face a scenario of less economic dynamism and loss of purchasing power” seen in Latin America and the Caribbean.

Low economic growth, high inflation and a global crisis aggravated by the war in Ukraine affect both the quantity and quality of jobs generated by the region, and could prolong the strong impact of the pandemic crisis.

According to the most recent data, from the first quarter of 2022, the average unemployment rate in the region is 7.9%the employment rate (percentage ratio between the employed population and the number of people of working age) of 57.2%, and the labor force participation rate of 62.1%.

They are almost the levels of the first quarter of 2019, used to make the comparison with the situation that existed before the pandemic.

“The recovery of regional rates is positive news after the devastating impact of covid-19, but greater informality and an increase in the number of poor workers are shaping up as great challenges for the labor markets of Latin America and the Caribbean in 2022,” said Coenjaerts.

The report specifies that the lack of economic dynamism began to be noticed at the beginning of 2022 with signs of reversal in labor indicators average for the region, which had been improving for several months.

On the other hand, the ILO highlights that behind the averages there are national realities that show a way to go in terms of recovery.

In 10 of 14 countries with data, the employment rate in the first quarter of 2022 had not yet recovered the values ​​registered in the same period of 2019.

On the other hand, only in three of the 14 countries had the economic participation rate in the first quarter of 2022 recovered the levels of the first quarter of 2019.

Also, Between 50 and 80% of the jobs generated in the recovery process have been in informal conditions.

This has caused the regional informality rate, which fell at the beginning of the pandemic crisis when numerous jobs were destroyed, to return to pre-pandemic levels of 50%.

“This means that one of every two employed persons is in informal conditions in the region. They are unstable jobs, generally with low income, without protection or labor rights”, explained the labor economist of the regional office and author of the report, Roxana Maurizio.

Economic difficulties could determine an increase in informality, according to the ILO analysis.

Another factor of concern is high inflation, which has significant impacts on labor markets.

Prices began to increase in 2021, but are under upward pressure due to the effects of the war, which impact the availability of food and energy, and this directly affects the level of real labor income.

Mauricio said that “The loss of purchasing power of labor income is what gives rise to the so-called ‘working poor phenomenon’, which means that people can live in poverty even if they have a job, even a formal job”.

“Although this is not new in a region with high informality, its incidence can rise significantly,” he warned.

Facing this scenario, the countries of the region should focus on promoting the creation of more formal jobs, with coordination with active policies, professional training, and sectoral policies, highlighted the ILO.

He also considered essential the strengthening of labor institutions, in particular, the minimum wage and collective bargaining, in a framework of social dialogue.

“In crisis scenarios, social dialogue between governments, employers and workers makes it possible to adopt and apply policies that respond to the challenges of the real economy with greater possibilities of success”, concluded Coenjaerts.