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Lessons from the crisis: the path to job recovery in Latin America and the Caribbean

Since the pandemic, Latin America and the Caribbean have experienced significant employment recovery.

However, the labor market in this region might have an uncertain and complex future marked by increasing informality, unemployment, and a higher number of the working poor.

High inflation, low economic growth, and a global crisis significantly increased by the Russia-Ukraine aggressions have affected the quality and quantity of jobs this region generates.

This will only prolong the negative impact of the pandemic on the labor market.
To address the problems of lack of purchasing power and lower economic dynamism, it’s important to create formal employment.

Image source: Unsplash
Image source: Unsplash

According to data from 2022 Q1, there’s a 7.9% average unemployment rate within this region, a 57.2% employment rate, and a 62.1% labor force participation rate.

These figures are similar to those from Q1 of 2019. Given the devastating effects of the COVID-19 pandemic, this regional recovery rate is positive.

However, the major challenges for the labor market in this region in the not-so-long future are an increase in the poor working population and greater informality.

Out of 14 countries where data was collected, the employment rate for Q1 2022 in 10 showed that they had recovered less value than they did in Q1 2019.

Also, only three countries showed that they’d recovered the labor force participation rate to the level of Q1 2019.

About 50% of the employed people were still in informal conditions within this region.

These jobs are unstable, lack labor or protection rights, and are generally low-income.
Another major cause for concern is the high inflation that has affected the labor market significantly.

Although the price rises started in 2021, the war between Ukraine and Russia has affected food and energy availability, among others.

Consequently, the level of real labor income has been affected directly. The continuous loss of purchasing power has given rise to the working-poor phenomenon.

This means that people may have a formal job and even seek help from professional cover letter writing services and nursing resume writing services for some of these jobs, but they’re still living in poverty.

While this isn’t a new occurrence in regions with high informality, it has risen significantly in this region.

In the present scenario, the countries within this region must start focusing on creating and promoting more formal jobs.

They must do this while creating active policies, sectoral policies, and vocational training. It’s also important to advocate for collective bargaining and minimum wage within the framework of social dialogue.

During a crisis scenario, it’s important to constantly hold social dialogues between workers, employers, and the government.

This way, it’s easier to adopt policies and implement them in a way that responds to the real economy’s challenges with a high chance for success.

It’s common knowledge that crises rarely occur in stable countries, and even when they do, their effects easily wear off.

Understandably, the lack of stability in Latin America and the Caribbean region is why the effect of the pandemic and other crises is yet to wear off.

This region has experienced several large shocks in recent decades, leaving long-term consequences and deep unemployment scars.

On average, a major regional crisis occurs within three years, leading to a net loss of over 1.5 million jobs, a 3% formal work contraction, and the informal sector expansion by 2 %.

The low-skilled workers are the ones that suffer the most, exacerbating the persistent inequalities within this region.

Image source: Unsplash
Image source: Unsplash

These people could suffer the scars of these crises for up to 10 years, with higher vulnerability and loss of income since most countries in the region don’t have unemployment insurance programs or national assistance.

However, the whole employment structure suffers from the crisis, and the economy’s formal sector loses new opportunities, leading to lasting or sometimes permanent consequences.

This is an important consideration when the region still suffers from the effects of the pandemic.

The recessive impact can cause even more contraction within the formal sector (4%) than in the previous crisis.

The current losses may become long-term or permanent without taking the appropriate measures to create new opportunities and recover lost jobs.

It’s important to look into the mirror of the previous crisis to help avoid making the same mistakes or considering returning to the pre-pandemic situation.

The goal must be to be better.

Looking at some of the past major crisis and their impacts on the labor market in the region, such as the Brazilian 1992 debt crisis, the 2008-2009 Mexico crisis, and Chile’s Asian financial crisis, it’s pretty obvious that a rapid recovery from the crisis is a myth in this region.

In these cases, the employment curve experienced strong negative deviations due to the crisis, and instead of reversing, it became more pronounced with time.

Some milder crises in the past were also followed by extended periods of little to no growth rates.

This is the dilemma that the regional leadership is facing with the impact of the pandemic. It’s usually not very easy, but it’s important to try and get better results by learning from past experiences.

This means several policies must be implemented to facilitate employment recovery in this region while ensuring a sustainable reconstruction of the economies.

But the first step is putting out a prudent macroeconomic framework and automatic stabilizers to protect the labor market from the effects of crises.

Excellent monetary and fiscal policies can ensure macroeconomic stability and also prevent a wide financial strain when next there’s a crisis.

The fiscal reforms must include efficient public spending, less distortive taxation, clear fiscal rules, and financially sustainable pension programs as the first line of defense whenever a crisis strikes again.

Other income support initiatives, like unemployment insurance, can help the economies to recover faster from crises while limiting the damage from contractions.

It’s also important to improve the capacity of the labor and social protection policies in the region.

These policies must blend into a system that seeks to provide income support while helping workers prepare for new jobs through reemployment assistance and reskilling.


Historically, the Latin America and Caribbean region don’t often recover well from crises and suffer long periods of employment problems as a result.

But this can change if lessons are learned from these crises and the right steps are taken to cushion their effects.

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