GOOD JOBS WANTED : Labor Markets in América Latina GOOD JOBS WANTED : Labor Markets in América Latina Inter-American Development Bank Inter-American Development Bank 2004 Economic and Social Progress Report

SOMETHING IS WRONG…

Unemployment has reached the level of the crisis of the 1980s Urban unemployment in Latin America Unemployment rateGDP growth rate Median unemployment rate Median GDP growth rate

Slow Growth in Wages Percentage change in real wages, 1990s 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 Earns “Poverty Wages” Percentage of workers age earning less than PPP $1 an hour Late 1990s, national data 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 Instability Are 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

LESSONS

1. Growth in the supply of labor is not the cause of worsening labor market conditions it is a source of economic growth

2. Liberalization and privatization are not the cause of unemployment or other labor market problems

3. The labor market in the region has adjusted through wages but that seems to be changing

...which explains the growth in unemployment in some countries

4. The problem is not technology but lack of technology

Technology does not cause loss of jobs...

...lack of technology leads to low growth in employment and wages...lack of technology leads to low growth in employment and wages

5. Many workers are poor, but focusing on informal work is misleading

It is more useful to increase productivity and social security coverage

6. Improving educational performance is a necessary condition but it is not sufficient for reducing poverty

Education significantly improves earnings, but many educated workers are poor Percentage of workers who have completed secondary education and earn less than PPP $1 an hour Honduras Bolivia Nicaragua El Salvador Dominican Rep. Ecuador Colombia Brazil Panama Costa Rica Uruguay Chile Mexico Venezuela

7. Job churning is very high : One in four jobs is created or destroyed each year

Job churning results in productivity growth but has costs for workers

Problem: How to preserve the engine of economic growth and protect the earnings and well-being of workers

8. The current system of regulation and protection does not solve this problem

Labor Laws in Latin America Are Too Rigid... Job protection index (0-1) 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 countries Mexico Peru Brazil Panama Ecuador Venezuela Colombia Bolivia Argentina Dominican Rep. Chile Jamaica Uruguay

...and Do Not Cover the Majority 56% of workers in the region are not covered by labor regulations Percentage of salaried workers without social security benefits Nicaragua 2001 Peru 2000 Bolivia 1999 Dominican Rep El Salvador 1998 Venezuela 1998 Argentina 2001 Brazil 1999 Mexico 1999 Colombia 1999 Chile 1998 Costa Rica 2000

RECOMMENDATIONS

Regulate to increase productivity, not to reduce job churning

Help workers find good jobs

Ensure income for unemployed workers

Create incentives for training and adult education

Strengthen the Labor Ministries so that... < The laws will be enforceable <...and evasion will be punished < The ministries can evaluate which policies work and which need to be changed

2004 Economic and Social Progress Report Inter-American Development Bank