ECLAC and ILO warn that the labour market in Latin America and the Caribbean will recover slowly after the COVID-19 pandemic

SANTIAGO  ‒ The post-COVID-19  labour market reactivation in Latin America and the Caribbean will be slow and it will take a lot of time for the world of work’s main indicators to return to the levels seen before the health crisis, and even more time to be able to meet the targets established in the Sustainable Development Goals  (SDGs), ECLAC and the International Labour Organization (ILO) indicated today in a new joint publication.

Edition No. 23 of the report entitled Employment situation in Latin America and the Caribbean. Employment trends in an unprecedented crisis: policy challenges  (November 2020) was presented simultaneously in Santiago, Chile and Lima, Peru via a joint virtual press conference led by the Executive Secretary of the Economic Commission for Latin America and the Caribbean (ECLAC), Alicia Bárcena, and the ILO’s Regional Director for Latin America and the Caribbean, Vinícius Pinheiro.

Returning to pre-pandemic economic activity levels will take several years, ECLAC and the ILO warn, which will translate into a slow recovery in employment. Thus, if the average growth rate in regional Gross Domestic Product (GDP) held steady at 3.0 per cent, GDP would only return to 2019 levels in the year 2023. However, with the average rate seen over the last decade (1.8 per cent), GDP would not attain 2019 levels until 2025. And with the average rate notched during the last six years (0.4 per cent), this could not be achieved in the next decade.

Therefore, the United Nations organizations stress that active macro policies are needed along with sectoral policies that would promote sustainable development with employment. This entails furthering environmental policies that stimulate jobs and growth, underpinned by active fiscal policies that foster employment, with labour-intensive investment projects and with a focus on environmental sustainability, which must be accompanied by industrial and technological policies to build national productive capacities and to increase competitiveness. It is also necessary to provide financing and liquidity to Micro, Small and Medium-sized Enterprises (MSMEs), with longer maturities and at a lower cost.

In addition to supplying figures on labour market dynamics in recent months – especially in the first two quarters of 2020 – the joint ECLAC-ILO report indicates that for numerous reasons, women, young people and migrants are among those heavily impacted by the health crisis. More specifically, the second part of the document examines the way in which young people have been affected by the current employment situation.

According to the report, in 2020 the COVID-19 pandemic dealt an unprecedented blow to the economies and labour markets of Latin America and the Caribbean, which has led to the biggest contraction in the last 100 years, with major economic, labour, social and production-related costs.

The groups most affected have been those that cannot work from home (telework) because of their type of employment. This includes women, who in addition to experiencing job losses have also had to leave the labour market to carry out care and household-related tasks; informal workers, affected by prohibitions on people’s movement and households’ lower capacity for hiring workers; sectors related to commerce, manufacturing, construction and services (tourism and entertainment); young workers who are just joining the labour market, due to the lack of new job creation; lower-skilled workers in general in more informal jobs that require physical proximity; and MSMEs.

The report also indicates that the greatest effects were felt in the second quarter of the year, when it is estimated that approximately 47 million jobs were lost across the region versus the previous year. Many of those who lost their jobs were unable to find opportunities to swiftly reenter the workforce or withdrew from the labour market because restrictions on mobility prevented them from seeking employment. That is why job losses are only partially reflected in the increase in open unemployment, which rose from 8.9 per cent in the second quarter of 2019 to 11.0 per cent in the second quarter of 2020.

“In terms of employment, the health crisis affected vulnerable groups above all, deepening inequality in the labour market. Women have been most affected by job losses and the decline in labour market participation. A strategic view must link sustainable development with job creation,” Bárcena and Pinheiro indicated in the presentation of the joint document.

With regard to youth employment during the COVID-19 crisis, the pandemic has sharply affected the employment of young people between 15 and 24 years of age, particularly those who are joining the labour market for the first time. According to available data from four of the region’s countries, the drop in employment for people in this age range was -7.8 percentage points versus the second quarter of 2019, while it was -7.3 percentage points for those 25 and older. In addition, the increase in the unemployment rate for young people in the second quarter of 2020 was bigger than for adults (3.4 versus 1.8 percentage points), even though their participation rate showed a larger decline (-8.7 versus -6.8 percentage points).

The impact of the crisis is greater among young people because there are fewer entry-level vacancies (fewer incorporations) and fewer renewals of temporary contracts and fewer hires following probationary periods (more terminations), ECLAC and the ILO indicate. The lower likelihood of obtaining employment discourages their job hunting, increasing the number of inactive youth who neither look for work nor study. “These long periods of inactivity have lasting effects on their career path: more informality and greater labour market exclusion in the future,” the report warns.

For all these reasons, the organizations call for promoting young people’s labour integration by combining classroom training with a subsequent phase of internships at companies. This should be complemented with monetary subsidies to ensure youth attendance and participation, along with employment services to support their reentry into the workforce. In addition, vocational training programs are needed that would facilitate labour reskilling or retraining for young people who have lost their jobs, and digital technologies must be harnessed to enhance learning capacity and thereby close the digital gaps between them.