GOOD JOBS WANTEDGOOD JOBS WANTED: : Labor Markets in América LatinaLabor Markets in América Latina
Inter-American Development Bank
Inter-American Development BankInter-American Development Bank
2004 Economic and Social Progress Report2004 Economic and Social Progress Report
SOMETHING IS WRONG…SOMETHING IS WRONG…
Unemployment has reached the level Unemployment has reached the level of the crisis of the 1980sof the crisis of the 1980sUrban unemployment in Latin America
Unemployment rate GDP growth rate
5
6
7
8
9
10
11
19
80
19
81
19
82
19
83
19
84
19
85
19
86
19
87
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
-4
-3
-2
-1
0
1
2
3
4
5
6
Median unemployment rate
Median GDP growth rate
Slow Growth in WagesSlow Growth in WagesPercentage change in real wages, 1990s
-6 -4 -2 0 2 4 6 8
Latin America average
Guatemala
Peru
El Salvador
Brazil
Chile
Panama
Costa Rica
Colombia
Ecuador
Paraguay
Argentina
Honduras
Uruguay
Dominican Rep.
Bolivia
Mexico
Nicaragua
Venezuela
One in Two Workers EarnsOne in Two Workers Earns “Poverty Wages” “Poverty Wages”Percentage of workers age 15-65 earning less than PPP $1 an hour
Late 1990s, national data
0 10 20 30 40 50 60 70 80 90
Honduras
Nicaragua
Paraguay
El Salvador
Bolivia
Peru
Guatemala
Brazil
Ecuador
Colombia
Dominican Rep.
Costa Rica
Uruguay
Mexico
Chile
Panama
Venezuela
Argentina
Unemployment, Low Wages and Job InstabilityUnemployment, Low Wages and Job InstabilityAre the Main Problems for Latin AmericansAre the Main Problems for Latin Americans
Most pressing problems in the country
0% 5% 10% 15% 20% 25%
Unemployment
Corruption
Poverty
Delinquency/insecurity
Job instability
Low wages
Terrorism/political violence
Poor quality education
Inflation
Lack of opportunities for youth
Drug abuse
Human rights violations
Health problems
Drug trafficking
Housing problems
Transportation
Environment
Racial discrimination
LESSONSLESSONS
1. Growth in the supply of labor1. Growth in the supply of laboris not the cause of worsening labor is not the cause of worsening labor market conditions....market conditions.......it is a source of economic growth...it is a source of economic growth
2. Liberalization and privatization2. Liberalization and privatizationare not the cause of unemployment are not the cause of unemployment or other labor market problemsor other labor market problems
3. The labor market in the region 3. The labor market in the region has adjusted through wages...has adjusted through wages... .... .... but that seems to be changingbut that seems to be changing
...which explains ...which explains the growth in unemploymentthe growth in unemployment
in some countriesin some countries
4. The problem is not technology4. The problem is not technology..........but lack of technology....but lack of technology
Technology does not cause Technology does not cause loss of jobs... loss of jobs...
...lack of technology...lack of technologyleads to low growthleads to low growth
in employment and wages in employment and wages
5. Many workers are poor, 5. Many workers are poor, but focusing on informal work but focusing on informal work is misleadingis misleading
It is more useful to increase It is more useful to increase productivity and social productivity and social
security coverage security coverage
6. Improving educational 6. Improving educational performance is a necessary performance is a necessary condition...condition....... .... but it is not sufficientbut it is not sufficient for reducing povertyfor reducing poverty
Education significantly improves earnings,Education significantly improves earnings,but many educated workers are poorbut many educated workers are poor
Percentage of workers who have completed secondary education and earn less than PPP $1 an hour
0 10 20 30 40 50 60 70 80
Honduras
Bolivia
Nicaragua
El Salvador
Dominican Rep.
Ecuador
Colombia
Brazil
Panama
Costa Rica
Uruguay
Chile
Mexico
Venezuela
7. Job churning is very high7. Job churning is very high: : One in four jobs is created One in four jobs is created or destroyed each yearor destroyed each year
Job churning results Job churning results in productivity growth in productivity growth
but has costsbut has costsfor workersfor workers
Problem:Problem:How to preserve the engineHow to preserve the engine
of economic growth and protect the of economic growth and protect the earnings and well-being of workersearnings and well-being of workers
8. The current system of regulation 8. The current system of regulation and protection does not solve and protection does not solve this problemthis problem
Labor Laws in Latin America Labor Laws in Latin America Are Too Rigid...Are Too Rigid...
Job protection index (0-1)
0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8
Latin America and the Caribbean Eastern Europe and Central Asia
Middle East and North Africa Continental Europe Sub-Saharan Africa
East Asia and the Pacific Islands South Asia
English-speaking developed countriesMexico
PeruBrazil
PanamaEcuador
VenezuelaColombia
BoliviaArgentina
Dominican Rep.Chile
JamaicaUruguay
...and Do Not Cover the Majority...and Do Not Cover the Majority 56% of workers in the region are not covered 56% of workers in the region are not covered
by labor regulationsby labor regulationsPercentage of salaried workers without social security benefits
0 10 20 30 40 50 60 70 80
Nicaragua 2001
Peru 2000
Bolivia 1999
Dominican Rep. 1998
El Salvador 1998
Venezuela 1998
Argentina 2001
Brazil 1999
Mexico 1999
Colombia 1999
Chile 1998
Costa Rica 2000
RECOMMENDATIONSRECOMMENDATIONS
Regulate to increase Regulate to increase productivity, not to reduceproductivity, not to reducejob churningjob churning
Help workers find good jobsHelp workers find good jobs
Ensure incomeEnsure incomefor unemployedfor unemployed workerworkerss
CreCreateate incent incentivesives for training for training and adultand adult educa educattiioonn
Strengthen the Labor MinistriesStrengthen the Labor Ministriesso that...so that...
The laws will be enforceableThe laws will be enforceable ...and evasion will be punished...and evasion will be punished
The ministries can evaluate which The ministries can evaluate which policies work and which need to be policies work and which need to be changedchanged
2004 Economic and Social Progress Report2004 Economic and Social Progress Report
Inter-American Development BankInter-American Development Bank
www.iadb.orgwww.iadb.org
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