“Half of the Latin American population is being left out of social protection”
(Transcription of Karina Batthyány's Column)
(In InfoCLACSO – September 21, 2022)
As a general context, it's worth remembering that the countries in our region face a highly complex economic landscape. In addition to slower economic growth, our countries are experiencing inflationary pressures, sluggish job creation, declining investment, and growing social demands that are once again being seen on the streets of Latin America and the Caribbean.
This situation translates into very important challenges, of course, for macroeconomic policy, which has to reconcile policies that promote economic recovery, but also policies aimed at controlling inflation and ensuring the sustainability of public accounts and finances.
To the complex scenario from the internal point of view of our region, we must add the international scenario, where a central element is the war between the Russian Federation and Ukraine, which causes increasing tensions from the geopolitical point of view, but also a less dynamic global economic growth: a lower availability in terms of food –nothing more and nothing less– and increases in the price of energy that increase those inflationary pressures that were already occurring as a result of the post-COVID-19 pandemic.
Let us also remember that ECLAC is projecting for 2022 that South America will grow by only 2.6% (last year it grew by 7%), that Central America and Mexico will grow by 2.5% (last year they grew by around 6%) and that the Caribbean will be the only sub-region in our region that will grow by almost 5% (compared to the 4% it grew in the previous year).
Furthermore, poverty has increased for the sixth consecutive year, and inequality continues to rise, breaking the downward trend that began around 2002 and continued uninterrupted until 2014. We must also add to this the crisis in education, including problems with continuity, learning gaps, and increased dropout rates, which are truly complex issues for our region.
In this context, the labor market in Latin America and the Caribbean showed some signs of partial—very partial—recovery during 2021 after the crisis caused by the pandemic, social distancing, and quarantines in 2020. The labor force participation rate and employment registered slight improvements, but some of the groups most affected by the impact of the pandemic, such as women and predominantly female domestic workers, continue to lag significantly behind compared to the pre-pandemic situation.
The partial recovery of local demand and the influence of the international environment on production costs are contributing to the rise in regional inflation, which in turn affects minimum wages and real wages. Put simply: we are observing a decline in both wages and real wages in the region.
Real wages are lagging behind the recovery in employment; in other words, wage recovery is not keeping pace with the job recovery observed in the region, always compared to pre-pandemic levels. And some groups are particularly affected, such as women, young people, and less-skilled workers, among whom we also see a large number of migrant workers who are suffering the effects of this crisis more intensely.
If we look at the first of these dimensions, gender, which affects women, the pandemic caused a significant exodus of women from the labor market (either total or partial), with a substantial loss of income and an increased burden of caregiving during the pandemic. While the male unemployment rate fell from 10% at the end of the second quarter of 2020 to 7% at the end of the first quarter of 2022 (a reduction of more than 3 percentage points), the female unemployment rate registered a decrease of only 2 percentage points in the same period, that is, it fell from 12% to 10% between the second quarter of 2020 and the first quarter of 2022.
Also at the end of the first quarter of this year, the female labor force participation rate stood at 51%, compared to 74% for men. There we observe a gap of 23 percentage points, and this is related to the lag in women's reintegration into the labor market, which is conditioned by the delayed recovery of the economic sectors that concentrate female employment and also, once again, by the increased need for caregiving that became very pronounced after the start of the pandemic.
Furthermore, this female employment, according to data from a report by ECLAC, represents a setback of more than 18 years in the levels of the participation rate of women in the labor market; that is, we have regressed more than 18 years due to the effects of the pandemic.
This recovery we are observing in the Latin American labor market is uneven. It is unequal from a gender perspective and also unequal in relation to the formal and informal sectors and unemployment. Let's look at the Latin America and Caribbean region, which resumed its economic growth, but with a limited reactivation of labor markets, because this recovery was largely based on informal work. Therefore, it did not have a direct impact on unemployment. Unemployment reached over 10% during the pandemic and is projected to decrease to 9% in 2022 and 8.8% in 2023, according to studies by the ILO (International Labour Organization). It's worth remembering that before the pandemic, our region had unemployment levels below 8% (7.8% to be more precise).
Furthermore, in 10 of the 14 countries that provided this data, the employment rate in the first quarter of 2022 had not yet reached 2019 levels. And only in 3 of the 14 countries that presented data for the first quarter of 2022 had the economic participation rate recovered to the levels of the first quarter of 2019.
Furthermore, between 50% and 80% of the jobs created during the recovery process have been in the informal sector, in a region where we already know that informal employment levels hover around 50%. And where we also know that these informal workers have no access to social protection or social security, which led to serious levels of insecurity during the pandemic.
And finally, the issue of young people. We know very well that youth employment is always a relevant and challenging topic. Here again, we find youth employment among the sectors most affected by the pandemic, and also where gender gaps are evident within this segment of the population. The gender gap persists in youth employment indicators. Both the youth activity rate and the employment rate are 25 percentage points lower for women compared to men. And the gap in the youth unemployment rate averages 6 percentage points, double the rate observed for the total workforce in the economy. In other words, we see how these gender issues are also accentuated in a sector that is already difficult to enter the workforce.
Labor market integration problems are widespread among young people, although they manifest themselves differently depending on their educational attainment and where they live. Clearly, young people with secondary or higher education levels have fewer difficulties than those who haven't completed secondary education or who have very basic levels of employment. Integration difficulties among young people decrease in these sectors with higher or secondary education levels. Problems with job quality also affect young people, and the level of informality among young people at the time of entry into the workforce is particularly significant. Informality is actually higher than in the general population. In terms of job quality, the labor market integration of young people is quite deficient compared to the jobs obtained by adults. And this, once again, translates into a lack of protection and social security.
So, given this situation and the data we're beginning to see regarding performance in 2022, marked by the problems in our region, but also by this prolonged international situation involving high levels of inflation and rising food, energy, and basic service costs, let's look at what's happening in the labor market and how we can once again place this discussion on the need to establish new foundations for the social contract—in this case, new foundations for social contracts from a labor perspective. And how, once again, we need to strengthen state participation, the various institutions, and particularly those linked to social protection systems, so that they are truly universal, sustainable, and comprehensive. Otherwise, if we look at it from the perspective of the labor market, half of the Latin American population is being left out of this social protection. So, let's once again place these structural issues at the center of the discussion.
-One piece of data that really caught my attention was the effect of the worst and most restrictive phase of the pandemic in 2021, with 7% growth in South America and current forecasts of 2.6%. That's a huge change; it was a sort of rebound effect after the pandemic, in terms of the total paralysis of the economy, the very large surge, and then the regulations… What happened there?
-Exactly. It's precisely the rebound effect that was expected. What wasn't anticipated is that after those growth levels, partly explained by the rebound, the decline would be so significant in 2022. That's why I began by explaining the context of both regional and international difficulties, particularly the conflict in Russia and Ukraine and the rise in prices for certain items such as food, energy, and inflation, which directly affects everything mentioned.
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