ILO Reports Latin American Labor Market Retreated a Decade Because of Covid-19

RIO DE JANEIRO, BRAZIL – Latin America’s labor markets have regressed by at least ten years due to the Covid-19 crisis, which has closed at least one in ten jobs, pushed unemployment to its highest level in recent decades, and marked historical lows in employment and labor share.

This is the scenario set by the International Labor Organization (ILO), which on Thursday, December 17th, presented its report “Labor Panorama 2020” for Latin America and the Caribbean, a document that once again confirmed that the region has been the most affected by the pandemic in economic terms and that its consequences on the labor market are unprecedented.

“We have regressed ten years in ten months,” said the ILO director for Latin America and the Caribbean, Vinicius Pinheiro, who noted that the setback resulted mostly in losing the progress made in the past years in the share of women in the labor market and the reduction of child labor.

“The impacts have been devastating and we are reaching 2021 with employment in intensive care. This crisis is very different from others because of its magnitude and scope, as it affects all sectors,” added the ILO official, whose report provides the worst labor scenario in the region since it was first published in 1994.

MORE THAN 30 MILLION UNEMPLOYED

The report estimated that Latin America will close 2020 with an unemployment rate of 10.6%, equivalent to 30.1 million people, an increase of 2.5 percentage points over 2019. The figure means 5.4 million more unemployed than last year and the highest unemployment rate in recent decades.

Youth unemployment rose 2.7 percentage points to 23.2%, a level never seen before: nearly one in four youths were unemployed at the end of the third quarter of 2020.

The projection for 2021 is no better, as unemployment could reach 11.2% given that most people who lost their jobs did not seek new employment immediately and were therefore left on the sidelines of the labor market waiting for economic rebound to return. Some 23 million people are in this situation: they not only lost their jobs but were also left out of the labor market for an indefinite period.

“It is a crisis so abrupt and incomparable that unemployment only tells part of the story,” the ILO noted when recording an unprecedented decline of -5.4 percentage points in the labor participation rate to 57.2%, a historical low at the end of the third quarter of 2020.

WOMEN ARE PARTICULARLY AFFECTED

Women were more affected than men, as the share of females in the labor market in Latin America declined -10.4% compared to -7.4% for men.

The employment rate also marked another historic low, dropping six percentage points to 51.2%.

Total paid employment and self-employment dropped by -6.8% and -8.9%, respectively, but the impact was also strong in other occupational categories such as employers (-9.8%) and domestic work (-19.4%), an eminently female sector.

The contraction in employment was particularly significant in service sectors such as hotels (-17.6%) and retail trade (-12%), but also in construction (-13.6%) and industry (-8.9%), while agriculture was the least affected (-2.7%).

The prolonged school closures, the longest in Latin America’s history, have also placed some 300,000 children at risk of falling into child labor, warned Pinheiro, who said it will be an issue “to be closely monitored” in 2021.

THE WORST SEEMS TO BE OVER

However, the worst moment of the crisis seems to be over in the second half of 2020, but the ILO Director for the Southern Cone, Fabio Bertranou, recalled that “we are still far below the pre-pandemic situation”.

“What is clear is that the crisis will leave some scars and lasting effects for many years to come. When workers are unemployed for a long time, they lose skills and their full insertion becomes difficult,” added Bertranou.

These harsh impacts of the pandemic are owed to preexisting conditions in the Latin American labor market, which exacerbated the consequences of the crisis such as informality, limited fiscal room, large gaps in social protection and high inequality.

NO HEALTH, NO WORK

The report also laid out the guidelines for labor markets to rebound as quickly as possible and to reform in order to prevent a similar collapse when faced with a new shock similar to Covid-19.

According to the ILO, first of all “there is no dilemma between preserving health and economic activity, because without health there is neither production nor consumption,” said Pinheiro, who also considered social debate crucial because “no one is going to get out of this alone, on their own.”

The ” Labor Panorama 2020″ thereby urged the rethinking of the international economic model, promoting technological development with environmental sustainability, encouraging entrepreneurship and formality, and employment policies that meet the new realities.