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Despite a lower unemployment rate in 2023, recovery of labour markets in Latin America and the Caribbean is still insufficient – ILO

  • New ILO regional report warns of the need for measures to help prevent formal employment precariousness and to stimulate the creation of more decent jobs throughout the region.
  • “Labour Overview is not only a guide to decision-making, but also a photograph and a historical record of what is happening in our region,” said Claudia Coenjaerts.

LIMA, PERU, (ILO News) – The labour markets in Latin America and the Caribbean, almost four years after the outbreak of the COVID-19 pandemic, show a full recovery in their employment rates. However, these are still characterized by the persistence of gender gaps, youth unemployment, informality, and loss of purchasing power of wages, the ILO regional office said on December 19, 2023, when it presented the 2023 edition of its Labour Overview report.

During the presentation of the 2023 Labour Overview, ILO regional director for Latin America and the Caribbean, Claudia Coenjaerts, noted that “the decline in the purchasing power of wages, both minimum and average, is a challenge that has a negative impact on the life quality of Latin American and Caribbean families. Despite the recovery in employment, the mass of total labour incomes is still below pre-pandemic levels.”

In the international context, characterized by moderate global growth and high inflation – Latin America and Caribbean economies have experienced a widespread recovery, although they still face a complex macroeconomic scenario.

The world economy is projected to grow by 2.9 percent in 2023 and, in our region, growth is expected to be 2.3 percent, according to the IMF, and 2.2 percent, according to ECLAC, for the same period. “While these rates indicate a recovery, they are below the levels reached in 2022,” Coenjaerts said.

This year, the dynamics of the labour market in Latin America and the Caribbean were characterized by an increase of less than 1 percent in the regional employment rate. Participation, on the other hand, decreased slightly compared to the previous year (62.3 percent in 2023 compared to 62.5 percent in 2022) and, finally, an average unemployment rate of 6.5 percent.

“While urban employment returned to 2019 rates, there is still some lag in rural employment”, said Roxana Maurizio, report coordinator and expert on labour markets in the region. This, therefore, has widened the employment gap in favour of the existing urban environment prior to the pandemic.

The rate of economic participation, as mentioned above, is lower than pre-pandemic values in both areas, around -2 per percent.

Finally, due to the more intense recovery in employment than in labour supply compared to 2019, the unemployment rate dropped in both urban and rural areas by 2.5 percentage points and 1.7 percentage points, respectively.

Gender, youth employment, informality, and wages

At the regional level, the recovery in female employment continued to be more intense than that experienced by male employment. However, gender gaps are persistent and remain very high in Latin America and the Caribbean.

According to Claudia Coenjaerts, “the female labour participation rate is 23 per cent lower than that of men, while the employment rate is 22.5 per cent lower. These disparities are even deeper between different levels of education”. This situation spotlights the need to promote transformative care policies, which would allow for greater equality between men and women, since the latter bear the greatest burden of care.

The report warns on the situation of youth employment. The unemployment rate for young people is 14.4 percent, more than double the overall rate of 6.5 percent. Notwithstanding, some countries in the region show significantly higher rates than those, reaching values close to 30 per cent.

In addition, historical difficulties experienced by young people in the labour markets of the region persist. They face increased work intermittence explained by, in part, intense hires and dismissals from the workforce. The greater occupational instability, in turn, is associated with its higher prevalence in informal, precarious, low-skilled activities.

These challenges, the report warns, can be intensified by technological transformations. In the current context of a growing need for digital skills, vocational training emerges as an essential element to bridge the digital and skills gap between young people. In addition, it plays a crucial role in ensuring more employability and access to quality jobs for this group.

Job recovery has continued to be driven by growth in informal employment in most countries. Informal occupations have contributed to job creation by 40 and 95 per cent in the third quarter of 2020, and the second quarter of 2023.

The average labour market informality rate in the region stood at 48 percent in mid-2023, however, in some countries it exceeded 70 percent.

In that regard, the regional overview remains very complex. Even more so, considering that certain branches of activity – such as domestic service – with a high incidence of informality and female participation still falls behind in employment recovery.

“The region needs comprehensive measures that support the creation of formal jobs, strengthen labour institutions, and provide social protection and income to those who need it most in a constantly changing world of work”, Coenjaerts concluded.

Three decades of analysis to build decent work

As a Special Theme for the 30 years of uninterrupted publication of the Labour Overview report, an exhaustive analysis was carried out that seeks to provide a comprehensive vision of labour evolution and contextualized within the framework of the broader transformations that Latin America and the Caribbean have experienced over the last three decades.

In particular, changes in the structure of employment are discussed, highlighting the decline of agriculture, stagnation of industry, sustained growth of services, and a great productive heterogeneity within and between economic sectors, as well as between regions and territories.

Progress of women – although insufficient- in the world of work, with labour force participation rate for women aged 15 and older rising from 41.3 per cent in the early 90s to 53.9 per cent on average in 2022, although it remains lower than that of men (76.3 percent).

It also highlights the continuing challenge to youth inclusion and its projection toward decent work trajectories, in a context where youth unemployment rates more than double the totals, and employment and participation rates are significantly lower.

It also deepens the analysis of technological advances and accelerated digitalization, in particular the challenges of the present and the future of work, such as the adaptation of legislation and institutionality; the increasing expansion of digital work platforms, with needs and dilemmas for its measurement and regulation, remote work and teleworking, and the reconsiderations that arose in this topic with the COVID-19 pandemic and that will continue in the future.

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