ILO 2002 Labour overview. Latin America and the Caribbean

 

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Editorial

The world of work in Latin America and the Caribbean today faces a crisis of a depth unheard of in the past quarter of a century. A series of external factors, particularly the slowdown in growth of the most industrialized economies, the drop in prices for some of the region's main commodity exports, and the recession in Argentina, whose effects have spread beyond the countries of the Southern Cone, have pushed the average annual urban unemployment rate upward, to around 9.3% by the end of 2002, and driven more workers into informal sector employment.

Urban unemployment rose by similar amounts for workers of both sexes and for young people. Average productivity fell, as did wages' purchasing power. There is even evidence that the quality of family life has eroded, while new indicators for decent work development point to a growing deficit, as this edition of Labour Overview reports.

The impact of this crisis has particularly hurt those countries that have been struggling under an enormous burden of social debt since the 1980s; this in turn has translated into an increase in the decent work deficit. In fact, in 1990 the region entered the era of globalization with a deficit affecting 63 million urban workers (49.5% of the economically active population), which rose to 93 million in 2002 (50.5% of the economically active population, EAP). This means that the decent work deficit rose by 30 million workers.

Since the 1990s, almost without exception, the style of development prevailing throughout the region and virtually worldwide has been based on the greater integration of countries, combining greater openness to foreign investment, finance and trade, with requirements that domestic macroeconomic policies establish fiscal discipline, fight inflation, and reduce the size of the State. This process of opening up to the world and the reforms simultaneously applied to raise the competitiveness of companies affected a labour market characterized by an enormous range of structures, in which high productivity and high technology sectors coexisted with others, such as the informal sector, characterized by scarce capital, lack of social protection, and traditionally precarious conditions. Because of this, the reforms brought by globalization have primarily benefited workers in formal employment, excluding huge sectors or leaving them outside the reach of the modernization process.

Many workers who lost their jobs in recent years have resorted to the informal sector, while others grew discouraged and temporarily withdrew from the workforce. Moreover, a growing percentage of the region's workers have emigrated in search of employment in more developed countries, where they have joined the segments of cheap and/or illegal labour, in conditions that, while they are precarious, still offer better income than their countries of origin. This has allowed them to send remittances home, thus contributing to their families' survival. Without the contribution of these migrant workers, the figures on the decline in the labour market would be even worse than they are today. These pages reflect a new and worrisome trend: now, even conditions in the formal sector - which initially seemed to be more favoured by reforms -- are growing worse. Today, 12 years after the application of policies based on the Washington consensus, the data in this report clearly indicate that the outcome is not satisfactory from the perspective of Latin America and the Caribbean as a whole.

For 2002, the region's GDP growth rate is expected to fall by -0.8%, while ILO projections indicate that the region's GDP should grow 3% in 2003, thus permitting the region's urban unemployment to drop to 8.6%, still very high, but closer to rates achieved in the last years of the previous decade. No symmetrical effect in terms of pushing down the decent work deficit should be expected, however. The region needs to grow by at least 4% annually if a rise in both unemployment and lack of social protection is to be avoided.

The experiences garnered from frequent crises in the past indicate that in periods of economic growth or boom the labour market's basic variables recover more slowly than the pace at which they deteriorate at times of contraction or recession.

Two additional factors are cause for concern, both of them also based on lessons in development learned from the recent past. The first is that economic growth has tended to focus primarily on the more profitable export sectors, which in the region are intensive in technology and capital rather than labour-intensive, meaning that today, the creation of each decent work requires a greater investment than in the past. The second factor is that economic growth has become more cyclical and volatile, with more frequent and pronounced ups and downs, closely associated with sharp fluctuations in capital flows from abroad.

Current conditions are creating stress in all Latin American societies and their main actors, generating enormous challenges. The first challenge arising from the crisis is that, faced with the current recession, a short-term approach is essential. Countries in the region must set the goal of investing at least 2% of GDP in active and passive labour market policies, whose financing will require a response from the private sector.

Similarly, countries must implement strategies capable of reducing the magnitude of the decent work deficit, a medium- and long-term task, and do so without setting aside their agenda of democratic consolidation. The ILO has proposed a Decent Work Agenda, which refers to the need to generate not just any kind of job, but rather decent work which in the context of the global economy is capable of satisfying the age-old demand that our societies be capable of providing work, shelter, food, education, social protection and reasonable income to their people, as the ILO Director-General has stated (ILO, 1999).

In the context of this strategy, the region should, first, move toward economic policies that are genuinely productive and structural, which means reviewing the content of current macroeconomic policies and promoting sectoral policies that encourage investment in more labour-intensive sectors.

Second, they must push for more active labour policies, which multiply peoples' skills, take care of informal micro-establishments and small businesses, promote the criteria of equality among those population groups with difficulties participating in the workforce, apply gender criteria, and encourage an entrepreneurial spirit, which is vital to increasing business competitiveness.

Third, companies' need for greater flexibility should be resolved in a context where workers have more access to social security. Fourth, social actors must reduce their differences and reach agreements through the permanent practice of social dialogue. Finally, it is essential to progress in terms of global governance, which implies a renovated international system in which equity becomes the source of legitimacy. This would encourage greater respect for democracy and increase citizens' level of satisfaction with their principles and institutions (ILO, 2002).

In applying this strategy, two basic aspects should be considered. The first constitutes an ethical, but also a pragmatic imperative, to ensure that the weight of this crisis is not borne solely by the region's poorest workers. The second aspect is that without the committed participation of social actors in building and ensuring the sustainability of agreements that permit a better distribution of the costs, it will not be possible to meet the objective of reducing the decent work deficit.

The situation moreover poses challenges for the ILO itself. We must be capable of implementing technical cooperation initiatives that, in the short term, help governments, workers and employers in the daily effort to face the most dramatic and urgent problems and, in the long term, push forward growth strategies that include decent works. Of particular importance in this sense are the national decent work programmes that the ILO will be developing for the region's countries. These programmes incorporate the development of different project lines, all with consistent objectives, in which the ILO, as a specialized international agency with broad experience in technical cooperation, will provide precisely the support necessary in this field, coordinating and establishing synergies with other bodies within the system.

The responsibility for generating employment belongs to all of us. Governments, workers, employers and the ILO must all make a maximum and unified effort to create more and better employment and reduce the decent work deficit. As the report indicates in the following pages, the means and the experience exist: all that is lacking is the collective willpower to begin this effort.

Agustín Muñoz Vergara
Regional Director for the Americas
Lima, December 2002

 

 

 

 

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