Labor Markets in Latin America and the

Caribbean& IDB Agenda

May 6th, 2011

Laura RipaniSenior Economist

Labor Markets and Social Security UnitInter-American Development Bank

Agenda

Labor markets in Latin America and the Caribbean (LAC)Labor markets in Latin America and the Caribbean (LAC)

Examples of IDB projects in the region

Key action areas for the IDB in labor markets

Labor markets in the LAC region

Characteristics of LAC economies motivate and at

the same time condition labor policies

4

Relative productivity loss of LAC versus US…

Evolution of GDPpc, TFP, factors accumulation, relative to US

5

Productivity tends to be higher in larger firms

The problem: too many small (low-

productivity) firms…

25

30

35

40

45

50

po

rcen

taje

trab

ajo

)

América Latina: Alto porcentaje de autoempleo en relación a su nivel de ingreso

7

0

5

10

15

20

0 5'000 10'000 15'000 20'000 25'000 30'000 35'000 40'000 45'000

Au

toem

ple

o(p

orc

enta

jefu

erza

de

trab

ajo

Ingreso per capita, dolares USA de 2005, ajustado por P.P.P.

Developed countries Latin America Rest of the world

Fuente: BID en base a Perry y otros (2007), OIT (2009a) y Banco Mundial (2009).

High job rotation, particularly for least protected workers

0.25

0.3

Transitions between formality and informalityPeople with incomplete secondary or less

Age: 25-65

8

0

0.05

0.1

0.15

0.2

Argentina (95-01) Venezuela (95-02) Mexico (90-01)

F-I

I-F

High inequality:

Income share held by highest 10%(2005-2009)

Source: World Bank

Youth unemployment rates are above 20% and are

about 3 times as high as the rates observed for adults

4.1

3.8

3.7

3.4

3.4

3.4

3.3

3.3

3.3

3.2

3.1

3.0

2.83.0

3.5

4.0

4.5

UR ratio youth/adults

10

2.8

2.5

2.4

2.4

2.3

2.0

2.5

Uru

guay

Jam

aica

Par

agua

y

Cos

ta R

ica

Bol

ivia

Arg

entin

a

Mex

ico

Ecu

ador

Pan

ama

Chi

le

Gua

tem

ala

Bra

zil

Per

u

Hon

dura

s

Col

ombi

a

Dom

inic

an

Rep

.

Ven

ezue

la, R

B

Source: own calculations using the most recent household survey for each country. Youth is

defined as 15-24 years old, adults as 25-65 years old

On average, women are 1.6 times more likely to

be unemployed than men

10%

15%

20%

25%

Male Female

11

0%

5%

Col

ombi

a

Chi

le

Arg

entin

a

Dom

inic

an R

ep.

Cos

ta R

ica

Jam

aica

Bra

zil

Ven

ezue

la, R

B

Mex

ico

Uru

guay

Bol

ivia

Par

agua

y

Per

u

Hon

dura

s

Ecu

ador

Pan

ama

Gua

tem

ala

Source: own calculations using the most recent household survey for each country.

High informality: Percentage of salaried workers not covered by SS

30.0

40.0

50.0

60.0

70.0

80.0

Pe

rce

nt

Average: 43.2

Source: SCL/LMK ca lculations based on household surveys data.

69

.3

67

.4

65

.4

63

.4

61

.1

56

.6

54

.3

49

.9

48

.4

36

.6

35

.7

34

.1

29

.7

28

.6

27

.8

18

.7

16

.2

14

.7

0.0

10.0

20.0

Pa

rag

ua

y

Bo

livi

a

Nic

ara

gu

a

Ho

nd

ura

s

Gu

ate

ma

la

Ecu

ad

or

Pe

ru

Me

xico

El S

alv

ad

or

Ve

ne

zue

la, R

B

Arg

en

tin

a

Co

lom

bia

Bra

zil

Do

min

ica

n R

ep

.

Pa

na

ma

Uru

gu

ay

Ch

ile

Co

sta

Ric

a

Pe

rce

nt

In summary, LAC countries face big challenges

Improve

workers

13

Increase

productivity

Reduce

informality

Reduce

inequalities

workers

protection in

a context of

high rotation

& aging

population

Key action areas for the IDB in labor marketsKey action areas for the IDB in labor markets

New Labor Markets and Social Security

Unit

• Created January 1st, 2009

• Responsible for Bank operations, research and policies in the sector of labor markets (training and intermediation) and social insurance (pensions, intermediation) and social insurance (pensions, access to health insurance, unemployment insurance)

• Objective: applying high quality research and analysis directly into loan operations

Main programs at the IDB in Labor Markets

- Loans: ~ $4 billion dollars since 1996

Key Areas for Skills Development

� Demand-based Training Systems

– Financing programs to link the unemployed (most vulnerable groups) to

real vacancies in the productive sector + employers surveys to identify

skills demands.skills demands.

– Financing the definition of labor standards and accreditation systems with

the productive sector.

– Incentives for co-financing mechanisms

� New models for Labor Intermediation Systems- Financing the creation of integrated systems (training and intermediation)

with only one entrance door

� Supporting Impact Evaluations of these programs

� Supporting Labor Markets Information Systems

Mexico

Honduras

Haiti

Dominican Republic

Nicaragua(dialogue)

ColombiaPanama

Costa Rica

El Salvador(dialogue)

Guatemala(dialogue)

Bahamas

IDB Skills Development Support(Analytical and Financial)

Brazil(state of Rio de Janeiro)

Costa Rica (dialogue)

Peru

Bolivia

Chile Uruguay

Paraguay

Skills Development Goal

The Unit of Labor Markets and Social Security is dedicated to:support countries in LAC to have better policies and programs in order better policies and programs in order to improve coverage, quality, pertinence and financial sustainability of training and lifelong learning in LAC

» What are we doing in 2011? General� Institutional analysis � Characterization of labor supply (HH surveys) � Toolkit for performance management and monitoring

» What are doing in 2011? Youth

� (Quantitative) Impact evaluations for different modalities of training (mostly for youth): DR (ex), PE (ex), MX, PN, HO

� (Qualitative) In depth analysis of key success factors

These days…analytical in skills development

� (Qualitative) In depth analysis of key success factors � Labor dynamics analysis for different sub-groups (youth &

adults)� Unemployment duration / formal-informal transitions, etc.

» What are doing in 2011? Employed

� (Quantitative) Analysis of existing LAC employer surveys (incidence and intensity of training) + new generation of productivity-training surveys

� (Qualitative) Good practices / lessons learned from specific firms that train the most (LAC vs OECD)

» What are we doing in 2011? Loans:

� The Dominican Republic (integrated ~ employment services + training (mostly youth))

� Honduras (integrated ~ employment services + training) � Haiti (training funds)� Paraguay (training for youth)� Peru (labor reforms)

These days…operational in skills development

� Peru (labor reforms)� Colombia (technical training reform)� Rio de Janeiro (Brazil) (training for vulnerable youth in favelas)

Examples of IDB projects in the region(“if we have time” slides)(“if we have time” slides)

Example of Labor Market Insertion Program

Dominican Republic:

Youth and Employment Program

• Provides training (in class + on-the-job) to increase employability of disadvantaged youth (16-29 years old with less than high-school educ.)

• Co-executed by Ministry of Labor and INFOTEP (national • Co-executed by Ministry of Labor and INFOTEP (national training institute)

• Rigorous impact evaluation (randomization)

• Positive impact: beneficiaries find better jobs after the training (with health insurance benefits, and higher wages)

Example of analytical product

Employers’ surveys

• Diagnostic instrument to:– have information on the way companies identify

productivity problems and the means they use to increase it:

• how much and how they invest in training their Bahamas Uruguay Panama Honduras

• how much and how they invest in training their workers; what is the frequency, relevance and effectiveness of training; who are the main suppliers;

• What are their policies and tools for job placement.• What skills are more difficult to find; what skills

they value the most; • Etc, etc...

Thanks!

laurari@iadb.org