MercoPress. South Atlantic News Agency

Latam unemployment expected to increase as economic activity weakens

“The labor market situation in 2015 is not expected to be particularly conducive to progress in reducing poverty and inequality” said Alicia Bárcena

The non encouraging economic outlook for the current year will likely prompt a mild increase in the regional unemployment rate to 6.2% from the 6.0% registered in 2014, according to estimates released by the Economic Commission for Latin America and the Caribbean (ECLAC) and the International Labor Organization (ILO).

 In a new edition of “The Employment Situation in Latin America and the Caribbean”, both institutions indicate that the 1% average expansion in economic activity forecast for the region will not be enough to reverse the deceleration process that began in 2011.

The stagnation of GDP per capita should weaken labor demand and, therefore, the creation of salaried employment. For that reason, a decline in the region’s urban employment rate—which refers to the relationship between the employed population and the total number of people who are of working age—is forecast for a third consecutive year.

The report says that on a regional level the decline in labor participation—which is to say, the proportion of the working-age population that is active in the workforce, whether employed or unemployed—seen in 2014 is not expected to be repeated with the same intensity in 2015, which, coupled with a decrease in the employment rate, should lead to higher open unemployment, similar to the levels seen in 2013.

“The labor market situation in 2015 is not expected to be particularly conducive to progress in reducing poverty and inequality,” Alicia Bárcena, ECLAC’s Executive Secretary, and Elizabeth Tinoco, ILO Regional Director for Latin America and the Caribbean, state in the document’s prologue.

In effect, the report indicates that during most of the last decade and at the beginning of this current decade, Latin America and the Caribbean made important advances in poverty reduction and income distribution, in a global context characterized by growing inequality.

These improvements were due to the labor market’s positive trends, such as the robust creation of salaried employment and the reduction of gaps in labor income. Other contributing factors included public policies on labor matters (minimum wage, formalization, inspection) as well as non-labor matters (expansion of social protection systems and education).

The first part of ECLAC-ILO’s document analyzes the region’s labor performance in 2014 and attributes the decline in the unemployment rate seen last year to the atypical behavior of labor markets in Argentina, Brazil and Mexico, more specifically to the steep fall in their labor participation rates.

In its second section, the report examines the expansion of social protection in the context of high degrees of informality in the region. It contends that, from a rights perspective, the universalization of social protection is essential to helping build societies where equality is the end-goal of development strategies.

The United Nations organizations indicate that to guarantee universal access it is necessary to integrate contributory and noncontributory components in social protection systems, which entails significant challenges, above all in terms of institutional design and financing.