Mon | May 25, 2020

Informal sector the main source of new jobs in Latam and the Caribbean

Published:Wednesday | August 21, 2019 | 12:05 AM

The Economic Commission for Latin America and the Caribbean, ECLAC, has reported a deterioration in the average quality of employment in the region in 2018, a situation it expects will worsen during the course of this year.

The regional UN agency also found that the informal sector was the main source of new jobs, which tend to be characterised by low and unstable incomes as well as precarious employment conditions and social protections.

“Therefore, the stability of the unemployment rate hides the fact that many households must generate labour income to meet their subsistence needs without having access to good-quality jobs,” said ECLAC in its 2019 economic survey of Latin America and the Caribbean released this month.

The unemployment rate in Jamaica decreased to 7.8 per cent in the second quarter of 2019 from eight per cent in the first quarter, according to data released by the Statistical Institute of Jamaica.

ECLAC said real average wages for registered employment have remained stable. That, together with weak job creation and the deterioration in the average quality of employment, helps to explain households’ anaemic purchasing power and consumption that has characterised domestic demand since the beginning of the year.

Against the backdrop of low economic growth in the region, it added, the average quality of employment is expected to deteriorate further over the course of the year.

ECLAC said that around 2014, labour market conditions began to gradually deteriorate in Latin America and the Caribbean. Over the following years, indicators such as the open unemployment rate, the composition of employment by occupational category, labour informality and hourly underemployment have fluctuated, but generally within an overall downtrend, thereby partially reversing the progress made in labour conditions since the mid-2000s.

Open unemployment is a condition in which people have no work to do. They are able to work and are also willing to work but there is no work for them. Hourly underemployment refers to employed persons who work less than a minimum number of hours set in each country, wish to work more hours and are available to do so.

The agency reported that between 2013 and 2017, for the region as a whole, the proportion of the working-age population employed – the employment rate – fell from 58.1 per cent to 57.1 per cent, and the urban unemployment rate rose from 7.1 per cent to 9.3 per cent.

That was accompanied by a deterioration in the composition of employment: low economic growth weakened labour demand in private firms and the public sector, so that wage job creation – which is, on average, better quality than other categories of employment— rose by a mere 0.6 per cent per year.

“Since this sluggish growth was clearly insufficient to meet the income needs of many households, work expanded in other categories of employment of lower average quality, especially own-account work,” ECLAC said.

It said that although the concept of own-account works covers a wide range of labour situations, in a context of low wage employment creation, most of it is characterised by low and variable income and precarious working conditions.

Between 2013 and 2017, own-account work expanded by 2.8 per cent per year. Accordingly, employment declined not only by the measure of the employment rate, but also in terms of quality.

The start of 2019 brought no sign of improvement in the labour market’s performance. While the urban unemployment rate has held stable at the regional level, a number of other indicators reveal a deterioration with respect to 2018, pointing to a new loss in job quality.

For the seventh consecutive year, weak labour demand led to a larger rise in own-account work (3.8 per cent) than in wage employment (1.4 per cent) in the first quarter of 2019.

“This speaks to a deterioration of the average quality of employment, given that wage employment tends to offer better-quality conditions —in terms of social protection, remuneration and working conditions— than own-account work. The greater growth in own-account work has been a fairly widespread phenomenon among the countries for which data are available,” ECLAC said.