Fri | Jul 20, 2018

Study shows continued deterioration of labour markets

Published:Friday | October 21, 2016 | 12:00 AM

The Economic Commission for Latin America and the Caribbean (ECLAC) said Wednesday that labour markets in Latin America and the Caribbean (LAC) continued to suffer the effects of a regional economic contraction during the first half of 2016.

In a study conducted by ECLAC in collaboration with the International Labour Organisation (ILO), the LAC labour markets registered a significant rise in the unemployment rate and an overall deterioration in their indicators.

The study, titled Employment Situation in Latin America and the Caribbean, analysed the region's labour performance during the first half of this year.

The report indicates that, according to the most recent projections, the regional gross domestic product (GDP) will contract by 0.9 per cent in 2016.

During the first half of the year, this contraction resulted in a 0.6 percentage point decline in the urban employment rate, which, when coupled with an increase in the participation rate, caused unemployment to rise by 1.6 percentage points compared with the same period last year.

The study noted that the urban employment rate is the proportion of the working-age population that is employed, while the participation rate refers to the proportion of the working-age population that is either employed or unemployed, meaning that people who are outside the labour force are excluded, mainly students, housewives, and retirees, among others.

The report predicts that during the second half of 2016, no significant improvement in the labour situation is expected at a regional level.

"The contraction in regional GDP and its impact on labour demand should serve to hold the inter-annual decline in the employment rate steady. At the same time, the expansion of informal jobs - and self-employment work above all - is seen lessening this impact in quantitative terms, but would reflect a deterioration in job quality."

The document adds that the regional urban open unemployment rate is expected to keep rising and to end 2016 at 8.6 per cent.

On average, regional unemployment reached seven per cent in 2014 and 7.4 per cent last year.

"Although this negative performance has been strongly influenced by the case of Brazil and its heft in the weighted averages, all the other South American countries with available information, except Peru, are also suffering increases in their unemployment rate.

"In contrast, in Central American countries and the Caribbean, with the exception of Panama and Trinidad and Tobago, the unemployment rate declined," wrote Alicia Barcena, ECLAC executive secretary, and JosÈ MaÒuel Salazar, the ILO regional director for Latin America and the Caribbean.

They add that this notable heterogeneity among subregions can also be observed in the available indicators on job quality, the inter-annual change in registered employment, and on real wages in formal employment.

Along with analysing the region's labour situation, the ECLAC/ILO report addresses the participation of Latin American and Caribbean countries in global supply chains and its impact on decent employment.

It indicates that the region's insertion is weaker than that of other areas of the world and states that the relatively poor linkages shown by Latin American and Caribbean economies reflect a low degree of productive diversification.

The study also analyses some examples of countries in the region that have achieved improved economic insertion in global supply chains, which can then translate into social improvements through more job creation, higher wages and greater labour formality.

However, it has been demonstrated that this link is not automatic, since the results in terms of decent work also depend on the other economic, labour and educational policies that accompany this process.