The health crisis generates an increase in unemployment in Latin America and the Caribbean

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The health crisis generates an increase in unemployment in Latin America and the Caribbean
Mon December 21, 2020

According to the World Labor Organization due to the effects of the pandemic, there are currently some 30 million unemployed people in the region


 Over the last 10 months, the labour markets in Latin America and the Caribbean have regressed at least 10 years and the crisis is far from over, said Vinícius Pinheiro, ILO Regional Director, today as he presented the new edition of the annual Labour Overview report, which features the unprecedented impact of the COVID-19 crisis.

"We are entering 2021 with employment in intensive care," Pinheiro said at a press conference to launch the main findings of the 2020 Labour Overview for Latin America and the Caribbean, a report that was first published in 1994. "This is the largest crisis that this report has ever recorded in its entire existence.”

Confronted with this scenario, the countries of the region now face the challenge of “laying the foundations for a new and better normal”, which will imply adopting strategies to generate more and better jobs as production reactivates and the health emergency diminishes.

“Now it is essential to achieve economic growth with employment. Employment is crucial to reduce poverty and decrease the growing inequalities that this pandemic is leaving in the aftermath,” added the ILO Director for Latin America and the Caribbean.

The 2020 Labour Overview registers a strong increase in the unemployment rate that rose to 2.5 percentage points compared to the previous year, going from 8.1 per cent to 10.6 per cent. This means that the number of job seekers who cannot find work increased by 5.4 million and reached 30.1 million.

But the ILO report warns that in such an abrupt crisis scenario, the unemployment rate tells only part of the story. This year there was an unprecedented transition towards inactivity by people who gave up looking for work due to the lack of opportunities. The participation rate plummeted by 5.4 percentage points to 57.2 per cent according to data available at the end of the third quarter of 2020.

Beyond the percentages, this means that some 23 million people were temporarily removed from the workforce and have lost their jobs and their income. As the economies recover, their return to the labour markets will create additional pressure on unemployment indicators for next year.

In 2021, the unemployment rate could rise again to 11.2 per cent, said the ILO, considering factors such as moderate economic growth of around 3.5 per cent, which is insufficient to recover the lost ground caused by the crisis. There is also uncertainty surrounding the future of the COVID-19 pandemic, including fears about outbreaks and the effectiveness of vaccination processes.

The report adds that before the health crisis, what sustained regional participation and occupation has been the inclusion of women in the labour market. Due to the pandemic, this process is clearly facing a setback. The reduction in the participation rate was proportionally higher among women at -10.4 per cent compared to men at -7.4 per cent.

The health crisis in 2020 has had an even more significant impact on the performance of women's employment indicators.

For persons between 15 and 24 years old, during the first three quarters of 2020, youth participation and employment rates fell by around 5.5 percentage points - reaching 42.7 per cent and 33.0 per cent. The youth unemployment rate rose 2.7 percentage points up to 23.2 per cent, a level that had not been recorded before, and which implies that one in four young people was unemployed as of the third quarter of 2020.

When analyzing the data available on occupational categories to the third quarter, the ILO report says that in 2020 total salaried employment and self-employment fell -6.8 per cent and -8.9 per cent. The impact that the health crisis had on other occupational categories is also observed, such as employers (-9.8 per cent) and domestic service (-19.4 per cent).

The contraction in employment was particularly significant in service sectors such as hotels (-17.6 per cent) and commerce (-12.0 per cent). On the other hand, it is also observed that the health crisis strongly affected employment in construction (-13.6 per cent) and industry (-8.9 per cent). The smallest drop in employment was observed in agriculture (-2.7 per cent).

Pinheiro emphasized that for the future it will be important to consider the lessons learned from this pandemic. First, there is no dilemma between preserving health and economic activity because without health there is neither production nor consumption. Occupational health and safety is now a key issue for reactivation.

Second, social dialogue is more relevant than ever because it allows for strategies agreed upon by governments, employers and workers to face the crisis.

He also stressed that it will be necessary to deal with "pre-existing conditions." "The region was hit hard by this crisis, even more than others in the world, and this was largely due to structural problems that existed and were known to us," said the ILO Regional Director.

For example, the persistent lack of fiscal space, gaps in social protection coverage, high social inequality and high informality that highlighted the precariousness of large sectors of our societies, he added.

The 2020 Labour Overview includes a special theme that analyzes various repercussions of the COVID-19 crisis, including the measures taken by governments to protect jobs, income, and the operation of companies in times of emergency. The report says it was an important effort, even though "in some cases there was the feeling that the aid was late, or that it was not enough to cover the lost income."

The boom in platform work, especially delivery, and the growth of teleworking, as well as the challenges faced in its regulation, in closing digital gaps, in training and in its performance under formal conditions, also are objects of analysis in this Labour Overview.

The challenges in times of COVID-19 for vocational training, social protection, labour inspections and support for Micro, Small and Medium Enterprises, are reviewed by ILO specialists.

The report concludes with a reflection on the policies that could contribute to a job recovery after the crisis, including the need to rethink the model of international economic insertion, technological development with environmental sustainability, promoting entrepreneurship and formalization, and having employment policies that respond to new realities.

 "Faced with the current crisis caused by COVID-19, it is important to adapt and update the National Employment Policy in countries that already have it, or to formulate a Policy in countries that do not yet have it," advises the document in a call to action to cope with the crisis.

"The road to a new and better normality will not be easy, nor will it be short," said the ILO Director for Latin America and the Caribbean. Pinheiro highlighted "that is the legacy of 2020, the year we live with COVID-19."

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