Labor Markets in Latin America and the Caribbean & IDB Agenda May 6 th, 2011 Laura Ripani Senior Economist Labor Markets and Social Security Unit Inter-American Development Bank
Agenda Labor markets in Latin America and the Caribbean (LAC) Key action areas for the IDB in labor markets Examples of IDB projects in the region
Labor markets in the LAC region
Characteristics of LAC economies motivate and at the same time condition labor policies 4
Relative productivity loss of LAC versus US Evolution of GDPpc, TFP, factors accumulation, relative to US 5
Productivity tends to be higher in larger firms
The problem: too many small (lowproductivity) firms América Latina: Alto porcentaje de autoempleo en relación a su nivel de ingreso Autoempleo (p porcentaje fuerza de tr rabajo) 50 45 40 35 30 25 20 15 10 5 0 0 5'000 10'000 15'000 20'000 25'000 30'000 35'000 40'000 45'000 Ingreso per capita, dolares USA de 2005, ajustado por P.P.P. Developed countries Latin America Rest of the world Fuente: BID en base a Perry y otros (2007), OIT (2009a) y Banco Mundial (2009). 7
High job rotation, particularly for least protected workers Transitions between formality and informality People with incomplete secondary or less Age: 25-65 0.3 0.25 0.2 0.15 0.1 F-I I-F 0.05 0 Argentina (95-01) Venezuela (95-02) Mexico (90-01) 8
High inequality: Income share held by highest 10% (2005-2009) Source: World Bank
Youth unemployment rates are above 20% and are about 3 times as high as the rates observed for adults 4.5 3.4 3.4 3.4 3.3 3.3 3.3 3.2 3.1 3.0 2.8 4.1 3.8 3.7 4.0 UR ratio youth/adults 3.5 3.0 10 2.5 2.4 2.4 2.3 2.5 2.0 Uruguay Jamaica Paraguay Costa Rica Bolivia Argentina Mexico Ecuador Panama Chile Guatemala Brazil Peru Honduras Colombia Dominican Rep. Venezuela, RB Source: own calculations using the most recent household survey for each country. Youth is defined as 15-24 years old, adults as 25-65 years old
On average, womenare 1.6 times more likely to be unemployed than men 25% 20% Male Female 15% 10% 5% 0% 11 Colombia Chile Argentina Dominican Rep. Costa Rica Jamaica Brazil Venezuela, RB Mexico Uruguay Bolivia Paraguay Peru Honduras Ecuador Panama Guatemala Source: own calculations using the most recent household survey for each country.
High informality: Percentage of salaried workers not covered by SS 80.0 70.0 60.0 50.0 40.0 30.0 20.0 Average: 43.2 28.6 69.3 67.4 65.4 63.4 61.1 56.6 54.3 49.9 48.4 36.6 35.7 34.1 29.7 Percent 27.8 18.7 16.2 14.7 10.0 0.0 Dominican Rep. Paraguay Bolivia Nicaragua Honduras Guatemala Ecuador Peru Mexico El Salvador Venezuela, RB Argentina Colombia Brazil Panama Uruguay Chile Costa Rica Source: SCL/LMK calculations based on household surveys data.
In summary, LAC countries face big challenges Increase productivity Reduce informality Reduce inequalities Improve workers protection in a context of high rotation & aging population 13
Key action areas for the IDB in labor markets
New Labor Markets and Social Security Created January 1 st, 2009 Unit Responsible for Bank operations, research and policies in the sector of labor markets (training and intermediation) and social insurance (pensions, access to health insurance, unemployment insurance) Objective: applying high quality research and analysis directly into loan operations
Main programs at the IDB in Labor Markets - Loans: ~$4 billion dollars since 1996 Key Areas for Skills Development Demand-based Training Systems Financing programs to link the unemployed (most vulnerable groups) to realvacancies in the productive sector + employers surveys to identify skills demands. Financing the definition of labor standards and accreditation systems with the productive sector. Incentives for co-financing mechanisms New models for Labor Intermediation Systems - Financing the creation of integrated systems (training and intermediation) with only one entrance door Supporting Impact Evaluations of these programs Supporting Labor Markets Information Systems
Bahamas Haiti Mexico Dominican Republic Guatemala (dialogue) Honduras El Salvador (dialogue) Nicaragua (dialogue) Panama Colombia Costa Rica (dialogue) Peru Brazil (state of Rio de Janeiro) IDB Skills Development Support (Analytical and Financial) Bolivia Paraguay Chile Uruguay
Skills Development Goal The Unit of Labor Markets and Social Security is dedicated to: support countries in LAC to have better policies and programs in order to improve coverage, quality, pertinence and financial sustainability of training and lifelong learning in LAC
These days analytical in skills development» What are we doing in 2011? General Institutional analysis Characterization of labor supply (HH surveys) Toolkit for performance management and monitoring» What are doing in 2011? Youth (Quantitative) Impact evaluations for different modalities of training (mostly for youth): DR (ex), PE (ex), MX, PN, HO (Qualitative) In depth analysis of key success factors Labor dynamics analysis for different sub-groups (youth & adults) Unemployment duration / formal-informal transitions, etc.» What are doing in 2011? Employed (Quantitative) Analysis of existing LAC employer surveys (incidence and intensity of training) + new generation of productivity-training surveys (Qualitative) Good practices / lessons learned from specific firms that train the most (LAC vs OECD)
These days operational in skills development» What are we doing in 2011? Loans: The Dominican Republic (integrated ~ employment services + training (mostly youth)) Honduras (integrated ~ employment services + training) Haiti (training funds) Paraguay (training for youth) Peru (labor reforms) Colombia (technical training reform) Rio de Janeiro (Brazil) (training for vulnerable youth in favelas)
Examples of IDB projects in the region ( if we have time slides)
Example of Labor Market Insertion Program Dominican Republic: Youth and Employment Program Provides training (in class + on-the-job)to increase employability of disadvantaged youth (16-29 years old with less than high-school educ.) Co-executed by Ministry of Labor and INFOTEP (national training institute) Rigorous impact evaluation (randomization) Positive impact: beneficiaries find better jobs after the training (with health insurance benefits, and higher wages)
Example of analytical product Employers surveys Diagnostic instrument to: have information on the way companies identify productivity problems and the means they use to increase it: Bahamas Uruguay Panama Honduras how much and how they invest in training their workers; what is the frequency, relevance and effectiveness of training; who are the main suppliers; What are their policies and tools for job placement. What skills are more difficult to find; what skills they value the most; Etc, etc...
Thanks! laurari@iadb.org