The vicious cycle of precarious jobs

Jobs for Growth offers new evidence on the functioning of the labor market in Latin America and the Caribbean, that can be related to three main factors.

1. A region trapped in low-quality jobs

Despite the economic and social progress achieved during the last decade, in Latin America and the Caribbean jobs continue to be generally of low quality: 55% of jobs in the region are informal. Unemployment figures are low, but they hide a high degree of job rotation and transitions: the average tenure is 40% lower than in the OECD, and in Brazil, Argentina and Mexico, most workers who change jobs worsen their salary and benefits conditions. Furthermore, less than 8% of workers have received some type of on-the-job training during last years.

Most workers in the region are worried about losing their jobs

2.  Labor productivity remains low

Compared to the OECD, the average productivity is low and has been growing modestly (only 26.6% since 1990) relative to Asia, North America and Western Europe. Without significant changes, GDP growth rates expected for the coming years won’t be able to sustain progress on poverty reduction and equity.

3. A self-fulfilling vicious circle

In the region, factors like labor instability, low investment in workers’ human capital, informality and low productivity seem to reinforce each other, such that millions of workers end up falling into a poverty and inequality trap, with little access to economic opportunities. This vicious cycle can be related to three main factors.

The book reveals that, in Latin America andt the Caribbean, the cost of formality is high relative to productivity, and it accounts for more than 39% of the GDP per worker. Only the minimum wage and other labor costs are already 50% higher than the average costs for OECD countries.

To redress this situation, Jobs for growth offers a  menu of policy options.

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