How can Latin America increase productivity without affecting the quality of employment?
The economic expansion that took place in the first decade of the 21st Century brought about considerable improvements in Latin American and Caribbean labor markets, including a reduction in unemployment and a significant increase in wages. The formality of employment, however, did not change significantly, reaching only 27% for women and 40% for men. Once the expansion cycle ended, the positive trend in employment stagnated, revealing the fragility of a system that had expanded mainly thanks to an increase in employment, without a considerable increase in productivity.
Employment is not only a requirement for individuals, it is also fundamental for equitable and sustainable economic growth. During the period mentioned, Latin America reduced poverty by almost 20% and inequality fell by 7%, according to the Gini coefficient. These results are partly due to the fact that by 2015 employment in the region had expanded to reach 58% of women and 85% of men.
Despite the improvements, very high job turnover is hidden behind the low unemployment numbers, which in several countries does not include young people, women or low-education workers, according to the report “Jobs for Growth” from the Inter-American Development Bank (IDB). "The region may find itself trapped in a vicious cycle of low-quality jobs, seen especially in the high percentage of informal jobs.” According to the report, job instability, lack of protection against unemployment, low productivity and low investment in human capital have economic, social and fiscal repercussions that make it difficult to design policies that guarantee the well-being of workers.
Not only would these weaknesses in the labor market not be solved by a new cycle of economic expansion, but they may actually be limiting productivity. Furthermore, while the various countries in the region have developed policies to promote credit markets, productive development and the reduction of transport costs, "the region's labor policy has been directed towards eminently redistributive ends, giving less importance to the search for productivity".
During the expansionary cycle, the new laws and regulations introduced in different countries have focused on redistribution, which is fundamental given that Latin America is the most unequal region in the world. However, less attention has been paid to improving productivity, which would lead to sustainable improvements in the quality of employment in the long term.
Therefore it is essential to complement redistributive labor policies with comprehensive policies that boost productivity, which is the engine of growth. And in this sense, labor productivity must be increased, without this leading to a flexible labor market that allows wages to be lowered and access to social benefits for workers to be reduced.
- Non-renewable commodities are playing an ever smaller role in Latin America’s tax revenues
- The real reason inequality is so high in Latin America
- Nearly a Third of Latin Americans Have No Right to a Pension
- 23 economic experts weigh in: Why is productivity growth so low?
Jeronimo Giorgi, a Uruguayan journalist dedicated to international issues, is pursuing a master's degree in Latin American Studies. He has collaborated with various media outlets in Latin America and Europe, and has received distinctions such as the Premio Rey de España for Journalism.
Latinoamerica21 is a blog about current economic, political and social topics in Latin America that is currently published within the newspaper El Observador de Uruguay and Pagina Siete in Bolivia, and will soon be published in other media outlets within the region. The original version of this blog post is available in Spanish: El desafío de aumentar la productividad sin afectar la calidad del empleo
*Guest blog posts do not reflect the views of FocusEconomics.
5-year economic forecasts on 30+ economic indicators for 127 countries & 30 commodities.
Disclaimer: The views and opinions expressed in this article are those of the authors and do not necessarily reflect the opinion of FocusEconomics S.L.U. Views, forecasts or estimates are as of the date of the publication and are subject to change without notice. This report may provide addresses of, or contain hyperlinks to, other internet websites. FocusEconomics S.L.U. takes no responsibility for the contents of third party internet websites.
Date: June 8, 2018
TagsAsia Banking Sector Exports oil prices Italy Vietnam Economic Debt Euro Area G7 Draghi economic growth Emerging Markets MENA GDP Agricultural Commodities China Nordic Economies Spain Sub-Saharan Africa Israel Germany United States Trade Eastern Europe France Iran Precious Metals Commodities Economists Base Metals election Unemployment rate Asian Financial Crisis Housing Market Turkey Base Metals Commodities Portugal Australia USA IMF Eurozone TPS Healthcare Canada interview Commodities OPEC Economic Crisis Consensus Forecast Copper Cryptocurrency Greece Cannabis Company News United Kingdom Major Economies Japan Africa Economic Growth (GDP) Tunisia European Union chile Venezuela public debt Investment Infographic Mexico Forex Brexit Latin America Exchange Rate TPP precious metals Energy Commodities Central America Colombia Bitcoin Ukraine Argentina Gold Inflation Asean India Lagarde Oil South Africa Canadian Economy UK Brazil Russia
Hungary: Economic sentiment nosedives in January amid worsening consumer confidence https://t.co/woIQBDWlWv
17 hours ago
Ukraine: Industrial output sinks to over four-year low in December https://t.co/aDiQFSk4X5
18 hours ago
After a subdued 2019, economic growth is projected to gain some pace this year in Latin America… https://t.co/HVnwqVtqZJ
19 hours ago
Growth is seen ebbing slightly this year in Central America and the Caribbean as weaker momentum in the Dominican R… https://t.co/LxWBqR4tCz
1 day ago
Nigeria: Central Bank keeps policy rate stable in January but hikes cash reserve ratio to curb liquidity https://t.co/7XnJdX1F9a
1 day ago