GOOD JOBS WANTED : Labor Markets in Latin America GOOD JOBS WANTED : Labor Markets in Latin America...
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Transcript of GOOD JOBS WANTED : Labor Markets in Latin America GOOD JOBS WANTED : Labor Markets in Latin America...
GOOD JOBS WANTEDGOOD JOBS WANTED: : Labor Markets in Latin AmericaLabor Markets in Latin America
Inter-American Development Bank
Washington DC. October 2004Washington DC. October 2004Economic and Social Progress Report 2004Economic and Social Progress Report 2004Inter American Development BankInter American Development Bank
Unemployment, low wages, and employment instability Unemployment, low wages, and employment instability are the main labor problems in Latin America.are the main labor problems in Latin America.
Most important problem in your country
0% 5% 10% 15% 20% 25%
Discriminación racial
Medio ambiente
Transporte
Problemas de vivienda
Tráfico de drogas
Problemas de salud
Violaciones derechos humanoa
Consumo de drogas
Falta de oportunidades para jóvenes
Inflación
Baja calidad en la educación
Terrorismo/ violencia política
Bajos salarios
Inestabilidad laboral
Delincuencia /Insecuridad
Pobreza
Corrupción
Desempleo
What is going on?What is going on?
The usual suspects Labor supply
The increase in labor supply is not the root of The increase in labor supply is not the root of the problem. In fact, it is a source of economic the problem. In fact, it is a source of economic growth.growth.
Structural reforms Did not have the expected resultsDid not have the expected results
External shocks The labor market in the region has mostly The labor market in the region has mostly
adjusted through wage variation with little adjusted through wage variation with little unemployment, but this seems to be changing. unemployment, but this seems to be changing.
The usual suspects
Technology The problem is not technology, but the lack of The problem is not technology, but the lack of
it.it.
Inequality Income inequality reflects education Income inequality reflects education
inequality, but education in and by itself will inequality, but education in and by itself will not eliminate poverty. not eliminate poverty.
… and some new.
Labor reallocation
Regulations
6. Labor reallocation is very high in 6. Labor reallocation is very high in the regionthe region
Job turnover is very high and comparable to the Job turnover is very high and comparable to the one observed in other parts of the worldone observed in other parts of the world
Average Annual Gross Job Flows (% of employment)
1.5
-3.2
-1.6
1.5
1.2
0.7
2.6
-4.1
2.2
1.1
6.0
-25 -20 -15 -10 -5 0 5 10 15 20 25
Germany (1983-1990)
Estonia (1992-1994)
Finland (1986-1991)
U.S.A. (1979-1983)
Italy (1984-1992)
France (1984-1992)
Canada (1983-1991)
Sweden (1985-1992)
New Zealand (1987-1992)
Denmark (1983-1989)
Brazil (1991-2000)
Mexico (1994-2000)
Gross Job CreationEntryGross Job Destruction Exit Avg. Net Change in Employment
-0.1
Across the world, job turnover is an important Across the world, job turnover is an important engine of productivity growthengine of productivity growth
Labor Productivity Growth DecompositionAnnual Growth
Rate
Within-firm productivity growth
Output reallocation amongst existing firms
Entry of firms Exit of firms
5.3
4.1
4.33.9
2.1
2.3
5.25.0
4.7
2.53.1
1.63.0
3.0
5.3
2.3
-75 -25 25 75 125 175
1987-92Finland 1989-94
France 1987-92
Germany 1992-97
1987-92Italy 1992-97
1987-92Netherlands 1992-97
1987-1992Portugal 1992-1997
1987-92UK 1992-97
1987-92United States 1992-97
Chile 1992-97
Colombia 1992-97
But rellocation flows impose costs But rellocation flows impose costs on workerson workers
During the 90’s, employment unemployment flows in América Latina were twice those of the US (and workers do not have protection in developing countries).
The likelihood was higher for women, youth, unskilled and workers without social security.
Workers that are involuntarily separated suffer Workers that are involuntarily separated suffer wage losses after reemploymentwage losses after reemployment
Involuntary unemployed in t+1
-20% -18% -16% -14% -12% -10% -8% -6% -4% -2% 0%
Change in monthly wage
Mexico
Argentina
Change in hourly wage
7. Regulations generate costs7. Regulations generate costs........
América Latina is highly regulated on paper, but…América Latina is highly regulated on paper, but…
Employment conditions index (0-1)
0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1
Jamaica
Uruguay
Chile
Ecuador
Argentina
Perú
Rep. Dominicana
México
Colombia
Panamá
Brasil
Venezuela
Bolivia
Anglosajones industriales
Sur de Asia
Africa Sub-Sahariana
Medio oriente y norte de Africa
Europa oriental y Asia central
América Latina y el Caribe
Industrializados Europa continental
Este de Asia y Pacífico
… … a large fraction of workers are not covered.a large fraction of workers are not covered.
Percentage of wage workers without social security benefits, late 90’s
0 10 20 30 40 50 60 70 80
Costa Rica 2000
Chile1998
Colombia1999
México 1999
Brasil 1999
Argentina 2001
Venezuela 1998
El Salvador 1998
Rep. Dominicana 1998
Bolivia 1999
Perú 2000
Nicaragua 2001
There is abundant evidence about the There is abundant evidence about the costs of regulation.costs of regulation.
Social security contributions and other non wage costs reduce employment and increase unemployment.
Mico and Pagés (2004) point that job security regulation reduce reallocaction and the ability of firms to adjust. These effects seem to be more pronounced in sectors with volatile demand or subject to frequent technological shocks.
Job security regulations reduce youth and unskilled employment.
Job security may increase wage rigidity.
What can we do ?What can we do ?
Labor policies and the social contract Labor and Social policies:
- Differences in focalization, nature and purpose
Without adequate registries and enforcement capacity there are no labor policies:
It’s impossible to create UI when the labor authority doesn’t know whether or where a beneficiary works
The region spends very little in labor policies
The dilemma of labor policies
Worker reallocation is a powerful motor of growth 30% of workers change jobs every year Many lose income in the process
Income protection is not a free good. It has efficiency and equity costs. The ability to induce compliance with labor
regulations is crucial to sustain the social contract.
Labor policies in a dynamic world
Reduce macro volatility
Ease the reallocation process with LIS
Provide feasible and adequate level of income protection
Increase the population marketable skills
Improve the labor administration capacity to register, enforce and evaluate labor laws and regulations
Labor intermediation
A permanent function
Implemented through a complex network of public and private providers, with lots of referral capabilities.
Inclusive to improve the opportunities for poor workers.
Income protection
Set of systems adapted to the variety of labor insertions of the population.
3 fundamental criteria Do not create incentives against work or production. Coverage as wide as possible, including workers in
non regulated contracts. With counter-cyclical funding.
Training systems
The priority is to increase the attrative, relevance, and pertinence of basic education.
The State can help being the strong and transparente regulator of a variety of public and private suppliers.
Local experimentarion can help meaningful participation of the social partners.
The labor authority
The labor authority needs to increase its capability to The labor authority needs to increase its capability to register, enforce, and evaluate the impact of policies register, enforce, and evaluate the impact of policies and regulations.and regulations.
A good design of collective bargaining rules helps to A good design of collective bargaining rules helps to improve productivity.improve productivity.
Innovation in enforcement should involve the State Innovation in enforcement should involve the State and private agents.and private agents.