More than a year after the onset of the health crisis, the region’s social balance shows a complex scenario. Latin America and the Caribbean is the region most affected by the pandemic, according to estimates by the International Monetary Fund, as its economy contracted by about 7.4% in 2020. This deterioration has translated into a increased unemployment, both formal and informal, which has led to a drastic increase in poverty.
In the labor market, a major setback is evident across the region. According to the Economic Commission for Latin America and the Caribbean (ECLAC), nearly 3 million businesses have closed during the pandemic. This led to unemployment, which affected 8 out of 100 people before the health crisis, and in 2020 it started to affect almost 11 people.
But unemployment does not only affect formal workers. During the months of greater containment and paralysis of economic activity, between April and June of last year, a significant segment of informal workers found themselves unemployed or inactive. ECLAC data shows an annual reduction for the second quarter of 2020 in informal employment of 35% in Chile, 20% in Brazil and 31% in Costa Rica.
This reduction in undeclared work has mainly affected the rural sector, due to the precariousness of agricultural work in the region. In addition, women working in the informal sector were more affected than men due to their greater participation in the most affected sectors, such as hospitality and tourism, domestic services and commerce.
With the gradual reactivation of production, informal employment rates in the region are increasing. In Mexico, for example, this indicator fell from 48% to 55% between April and August 2020. And it is expected that when the situation returns to normal and Latin Americans return to looking for work, the most direct route is to informality, with lower quality jobs and falling wages.
According to the IDB (Inter-American Development Bank), about 7.5 million people will join this year the huge group of Latin Americans who work without social security. And in the coming years, the percentage of people working informally will drop from 56% before the pandemic to 62%.
Although the measure of informality varies from country to country, this type of employment is a latent and constant phenomenon in the economies of Latin America and the Caribbean.
In addition, undeclared work is unevenly distributed with a disproportionate presence of women, young people, the poorly educated and rural residents.
WHAT IS INFORMAL WORK AND WHY IS IT INFORMAL?
According to the ILO (International Labor Organization), this type of employment is characterized by the fact that it does not give access to contracts, licenses, holidays, allowances, bonuses and, mainly, access to social security. And its structural character in the region is due to the inability of economies to create jobs under adequate and formal conditions, to institutional weakness, to corruption, to wide educational and social gaps, and even to discrimination. either by ethnicity, sex or socio-economic status.
Therefore, the incidence of this phenomenon, both before and during the pandemic, varies considerably from country to country. While in Uruguay, informality affects 1 in 4 people or in Chile 3 in 10, in countries like Honduras, Guatemala or Bolivia, it affects around 8 in 10 workers. In other words, having a contract is something for the privileged.
THE CHALLENGES OF RECOVERY
An increase in the levels of informality implies, at the social level, an increase in the population living in poverty, inequalities and a general deterioration of living conditions. At the macroeconomic level, the consequence is a reduction in domestic demand and consumption and, consequently, in economic activity in general.
In order to cope with the increase in informality, unemployment, poverty and economic recovery, it is essential that in the short term, countries maintain and, if possible, extend the social assistance policies adopted. in 2020.
It is also necessary to implement measures to create formal jobs and reactivate small businesses.
In the medium to long term, Latin America and the Caribbean face the challenge of strengthening their institutions, improving productivity, correcting structural inequalities, closing social gaps and expanding their social protection and support systems. social Security. Only in this way will they be able to mitigate both the causes and the consequences of the informality of work.
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