More than 26 million unemployed in Latin America and the Caribbean: the need for new engines of growth

José Manuel Salazar-Xirinachs
is Regional Director of the ILO for Latin America and the Caribbean

In 2017, labour markets in Latin America and the Caribbean are marked by a new increase in unemployment and worsening working conditions. As the year progresses, the indicators and forecasts confirm that the labour situation is becoming more worrisome. The latest forecasts already announce a weak economic recovery this year after last year’s contraction. This slow economic growth, of barely 1.1 per cent for Latin America and the Caribbean, will not be enough to change the negative trends in the world of work.

After a sharp increase of 1.5 percentage points in the regional average rate of unemployment in 2016, it is predicted that in 2017 unemployment will rise again. The latest ECLAC-ILO report on regional employment, which comes out twice a year, has just forecast that the urban unemployment rate will rise to 9.2 percent this year, an increase of 0.3 percentage points.

The situation is the same when we observe the behavior of total employment (urban and rural). The ILO Regional Office’s “Labor Overview” report estimated that with a weak growth rate, average total unemployment will rise by at least 0.3 percentage points to 8.4 percent. We are facing the highest unemployment rates in a decade.

Talking about “percentages” sometimes does not give a full idea of what the levels of unemployment mean. These rates indicate that by the end of 2016 at least 25 million men and women were looking for work without success, and that in 2017 there will be an additional 1.3 million unemployed. That is, there will be over 26 million unemployed.

Of course, the unemployment scenario is heterogeneous in the region. In some countries the unemployment rate has even declined. It is also true that some countries have more weight than others when the average rate is calculated, like Brazil, with about 40 per cent of the regional labour force. But it is also true that the average reflects a generalized trend: in 2016 there were increases in the unemployment rate in 15 of the 21 countries with data.

The situation is dramatic for young people who are often hit hardest by crises or slowdowns. Estimates at the end of last year put youth unemployment at a high level of 18.3 percent, after a sharp increase of 3.2 percentage points. This is almost one in five young people of working age.

However, unemployment is only one part of this story. The “Labor Overview” shows a decrease in the share of wage employment and an increase in own-account employment, common indicators of an increase in informal employment, which according to the most recent data affects around 134 million workers, nearly 47 percent of occupied workers.

Undoubtedly, informal employment can be linked to much of the malaise of Latin American and Caribbean societies, since it generally involves poor working conditions, instability, low incomes and lack of protection and rights, which are closely related to low productivity, poverty and inequality.

Other sources of malaise emerge from frustrations of the middle class, who see how their expectations for the improvement of living standards are being stalled or threatened. And there is also a strip of “vulnerable middle class” that goes in and out of poverty with economic cycles.

At the same time, in several countries in the region there are already discussions regarding new forms of occupation and production that are causing disruptions in labor markets, including the emergence of a new class of self-employed workers, a large proportion of whom are forced to accept lower incomes and rights, or even when the income is higher, the job comes without social benefits, whether it is driving a taxi, designing a logo, or a myriad of activities that are now done freelancing.

This scenario poses multiple challenges for countries. In the immediate future, the need to develop policies or strategies specific to labor markets in order to mitigate the negative effects of low growth on the quantity and quality of employment.

But the lesson that should be drawn from this mediocre growth and its corresponding employment crisis, is the need to address long-standing structural challenges with new policies.

This complex scenario must lead governments, employers, workers and societies as a whole to change the traditional conversation and to open the way for a new generation of productive development policies, based on public private alliances and sound institutions for social dialogue that will allow the development of competitiveness, productivity and human talent. The region will not be able to ignite the true engines of sustained, inclusive and sustainable economic growth with the generation of more and better jobs without innovative and vigorous collective action in this area.

It is clear that while we are still facing many deficiencies and tasks that we should have resolved in the 20th century, we now have to take on the challenges of the 21st century as well: exponential technological revolutions, population aging, climate change, persistence of Inequality, increasing migration, and new production models in the context of globalization.

In conclusion, poor performance in labor markets in recent years cannot be fundamentally reversed without great efforts in productive development, innovation and human talent. Or to put this another way, to achieve a better future of work we need a better future of production and productivity.

For Spanish version of this blog, read here.

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