The Caribbean labour market paradox

The International Labour Organization’s (ILO) 2026 Employment and Social Trends report highlights shifting patterns of employment and social development worldwide, including distinctive trends emerging in the Caribbean and Latin America.

At first glance, labour market trends in the hemisphere offer reasons for cautious optimism. Unemployment is projected to continue declining across the region, including in the Caribbean. Yet beneath this “positive” headline lies a more troubling reality: the quality of work is stagnating, productivity is falling, and structural weaknesses are becoming more entrenched.

For the Caribbean, this paradox should set off alarm bells. Fewer people may be unemployed, but many remain trapped in low-productivity, informal and insecure jobs­ – conditions that undermine long-term growth and social cohesion. Simply put, it means workers struggle to find decent work, enterprises struggle to scale and innovate, and governments struggle to build fiscal space to expand opportunity and prosperity.

Informality remains the region’s most persistent challenge. Across Latin America and the Caribbean, more than 51 per cent of workers have been in informal employment since 2015, with virtually no progress over the past decade. In the Caribbean, there are some striking disparities: in Haiti, over 91.0 per cent of workers operate outside the formal economy, followed by Barbados at 62.0 per cent, and Jamaica at 54.6 per cent. What is particularly concerning is that this stagnation cuts across sectors. Unlike earlier periods, when targeted interventions within sectors contributed meaningfully to reducing informality, recent years have seen little real improvement. Between 2005 and 2015, within-sector formalisation accounted for a mere 2.5-percentage point decline in overall informality. Although these limited gains were hard-won before the pandemic, reversing the backsliding in the post-pandemic recovery has proved equally difficult.

PAYING A HIGH PRICE

Young people are paying a particularly high price. After years of gradual improvement, the share of youth not in employment, education, or training (NEET) reversed its downward trend in 2024 and is expected to rise further in the near future. The consequences are doubly damaging. For young people, prolonged detachment from work or education harms future employment prospects and lifetime earnings. For economies, it weakens the productive fabric by slowing human capital accumulation, reducing innovation potential, and perpetuating cycles of informality as young workers struggle to access higher-value-added employment.

In the Caribbean, these challenges are compounded by labour shortages in critical sectors. Health, education, and agriculture in many countries face acute gaps even as unemployment persists elsewhere. One key driver is outward migration. Many highly educated and skilled Caribbean workers leave the Caribbean Community (CARICOM) region in search of better wages and working conditions in more developed economies like those countries in the Organisation for Economic Cooperation and Development (OECD).

Migration brings undeniable benefits through remittances and skills circulation, but unmanaged labour outflows can leave essential services understaffed and weaken domestic productive capacity. These shortages point to the urgent need for stronger regional labour migration governance – mechanisms that balance mobility with retention, improve working conditions at home, and facilitate skills recognition and targeted mobility within the region. The promising development is that the CARICOM Secretariat, together with member states and social partners, is actively developing a regional labour migration policy and action plan.

SYSTEMATIC PROBLEM

Taken together, these trends point to a deeper, systematic problem that goes beyond short-term labour market dynamics. This reflects a broader slowdown in structural transformation. Economies are no longer shifting workers at scale from low-productivity activities into higher-productivity sectors. As a result, employment growth has been concentrated in low-productivity activities, often informal, offering limited pathways for skills development or wage increases over time. Between 2015 and 2025, labour productivity in Latin America and the Caribbean fell by an average of 0.4 per cent per year, and by 0.6 per cent in the Caribbean alone. Over the same period, the world economy recorded average annual productivity growth of 1.7 per cent, and high-income countries 1.1 per cent. The gap is widening, not narrowing.

Slow productivity growth is not only about slower structural change. It also reflects a general lack of productivity growth within sectors, driven by weak investment, insufficient capital accumulation, and slow technological upgrading. In many Caribbean economies, firms - especially small and medium-sized ones - struggle to invest in new technologies, training, and innovation. The result is a labour market that absorbs workers but fails to generate more productive, better-paid jobs.

The Caribbean’s labour market challenge, then, is not simply about creating more jobs. It is about transforming the kinds of jobs being created. Lower unemployment is indeed welcome, but without progress on informality, productivity, youth inclusion, and skills retention, it risks becoming a hollow victory.

The policy implications are clear. Revitalising investment, accelerating technological adoption, supporting formalisation within sectors, and expanding access to quality education and training – especially for young women – must move to the centre of the development agenda. At the same time, regional cooperation on labour mobility and skills development is no longer optional. It is essential.

The world of work in the Caribbean stands at a crossroads. The question is not whether people are working but whether work itself is becoming a stronger engine for prosperity, inclusion, and resilience.

Article courtesy International Labour Organization. Send feedback to columns@gleanerjm.com.