ILO: After two years of the pandemic, labour market recovery has been insufficient in Latin America and the Caribbean

The economic growth recorded in 2021 was insufficient to recover labour markets in Latin America and the Caribbean, says a new report released today by the International Labour Organization (ILO). The Labour Overview of Latin America and the Caribbean notes that after two years of the crisis, the region faces high unemployment and the prospect of an increase in informality.

"The labour outlook is uncertain, the persistence of infections due to the pandemic and the prospect of mediocre economic growth this year could prolong the employment crisis until 2023 or even 2024," said Vinícius Pinheiro, ILO Regional Director for Latin America and the Caribbean.

"An employment crisis that is too long is worrying because it generates discouragement and frustration, which in turn has repercussions on social stability and governance," Pinheiro added.

The new edition of the Labour Overview of Latin America and the Caribbean offers a look at the worst employment crisis since the ILO Regional Office first began publishing the annual report in 1994.

The strong economic recovery recorded in 2021, with growth above 6 per cent, was not enough to recover the jobs that were lost. Of the 49 million jobs that had been lost at the worst point of the crisis in the second quarter of 2020, 4.5 million have not been recovered.

About 4 million jobs correspond to people who have become unemployed due to the pandemic crisis. At the beginning of 2022, it is estimated that there are about 28 million people looking for employment without finding it.

The average regional unemployment rate at the end of 2021 has been estimated at 9.6 per cent, which represents an improvement from the 10.6 per cent it reached in 2020, but a setback compared to the 8 per cent that was recorded for 2019, which in this case is used as a reference to calculate the impact of two years of the pandemic.

The ILO highlights that the forecast of much lower economic growth in 2022, just above 2 per cent, is a clear indication that it will take the region longer to get out of the COVID-19 crisis. Under these conditions, and considering the persistence of the pandemic, the ILO estimates that the unemployment rate this year could fall between 0.2 and 0.3 percentage points, remaining above 9 per cent.

This would be insufficient to return to 2019 levels when, in any case, the labour market situation was far from positive in a region that was already trapped in a scenario of slow growth, with low productivity and high levels of informality and inequality.

"In Latin America and the Caribbean, the pandemic had a more severe impact because of 'social comorbidities' such as informality and inequality," Pinheiro explained. He added that when the crisis began, "they contributed to the loss of jobs and income, without adequate social protection regimes to sustain people at such a difficult time."

The ILO report highlights that after the beginning of the pandemic the crisis manifested itself in an atypical way and instead of affecting formal occupations more, it was reflected in a greater loss of informal jobs that left millions of people without income. In some countries, the rate of informality even fell.

But since then, the situation has been reversed. The countries with available data indicate that between 60 and 80 per cent of the jobs recovered until the third quarter of 2021 had been in conditions of informality. The rate is already 49 per cent, similar to what it was before the pandemic, and indicates that one in two employed people are in informality.

The report also highlights that the unemployment rate for women remains high at 12.4 per cent since 2020 and it did not improve in 2021, which contributes to amplifying the impact of the crisis on gender inequality at work.

"The most intense impact among women in the region is associated with the greater presence of women in economic sectors strongly affected by the crisis such as hotels and restaurants, and in other service activities and the household sector. On the other hand, the higher incidence of informality among women," says the report.

The regional youth unemployment rate continues be of concern and remains at unprecedented levels, warns the ILO. Before the pandemic it hovered around 18 per cent and was already considered too high. But with this crisis it quickly exceeded the limit of 20 per cent and still remains at a level of 21.4 per cent.

The Labour Overview also includes data on urban-rural differences in employment, occupation in sectors of activity and occupational category, evolution of minimum wages and average incomes.

"Employment growth in 2021 was particularly significant in sectors such as construction (16.7 per cent), trade (9.1 per cent) and transport (6.7 per cent), which contrasts with what was observed in 2020, when these sectors registered strong contractions," says the report.

The ILO's Regional Specialist in Labour Economics, Roxana Maurizio, emphasized that in the current scenario it is imperative "to adopt a broader agenda of comprehensive and far-reaching policies focused on people and, in particular, on the creation of formal employment".

"Without a coherent set of measures to generate jobs, the impacts of the crisis will be prolonged and will leave deep social and labour scars in Latin America and the Caribbean," added Maurizio, who coordinated the ILO team of specialists tasked with preparing this report.

Digital transition and labour markets

The 2021 Labour Overview of Latin America and the Caribbean concludes with a special analysis of the challenge posed by digital transitions and the acceleration of trends caused by the pandemic, including the greater presence of teleworking and the evident increase in services based on digital platforms.

This new scenario poses significant challenges for policymakers to take advantage of the opportunities offered by these transformations and avoid potential disruptions in labour markets.

The report warns of the need to adapt the content and scope of vocational training to improve the fit between the supply and demand of qualifications, be better prepared for the skills required in the future and reduce the disruptive impacts of technology.

It also highlights the need for public policies to help remove the obstacles and ensure that this transition leads to the creation of more and better jobs.

Publication: 2021 Labour Overview, Latin America and the Caribbean - Executive Summary

Source: ILO Newsroom, Lima