CEA. Session : Options for better jobs Montreal, June 1, 2013

1. CEA. Session: Options for better jobs Montreal, June 1, 2013 Thedifficult road for better jobs in Latin America Leonardo Gasparini

2. The bright side • Positive labour market performance in Latin America since the early 2000s • In all the countries • In nearly all the labour dimensions

3. Employment Employment rate. Latin America. Unweighted average. Source: CEDLAS (2013).

4. Unemployment Unemployment rate. Latin America. Unweighted average. Source: CEDLAS (2013).

5. Wage premium Conditional wage premium (skilled/unskilled). Latin America. Unweighted average. Source: Gasparini et al. (2013)

6. This permeated into a substantial fall in poverty Poverty headcount ratio (line USD 4 PPP). Source: CEDLAS (2013).

7. …and in inequality Gini coefficient – Household per capita income. Unweighted average. Source: CEDLAS (2013).

8. Someprogress, butstillsignificant problems High wage inequality Low productivity Low job quality  labour informality

9. The concept of informality • “Informality is a term that has the dubious distinction of combining maximum policy importance and political salience with minimal conceptual clarity and coherence in the analytical literature” (Kanbur, 2009). • I use the social protection definition: lack of labor protection and social security benefits associated to the job.

10. Evidence on informality • Drawn from recent study based on microdata of more than 300 household surveys in Latin America.

11. Heterogeneity across countries Source: CEDLAS (2013). Share of informal salaried workers

12. Some improvements in the 2000s, but still high levels Informality rate. Social protection definition. All workers. Unweighted mean for Latin America. Source: CEDLAS (2013).

13. Main determinants • Economic expansion (informality seems counter-cyclical) • Changes in the structure of the economy toward more “pro-formal” sectors (public sector, some skilled services). • More enforcement: • stronger labour markets • improved technology

14. Approach 1 • Informality is a feature of • under-development • Growth will take care

15. Approach 2: more enforcement • Some improvements but • Still difficult • Weak public sector • Large self-employment sector • May not be optimal • More enforcement may imply higher unemployment, at least in low-productivity sectors

16. Approach 3: dual system • Trend in the region toward the extension of social benefits to cover the informal workers. • Significant impact on poverty but .. • might generate some problems in the labor market.

17. Incentives at work? Transitions to formality Informal workers in poor households Source: Gasparini and Garganta (2013).

18. Incentives at work? Transitions to formality Informal workers in poor households Source: Gasparini and Garganta (2013).

19. In summary • Few good-quality jobs with access to social security. • Then, government provides social protection to workers in bad-quality jobs. • But that slows down the creation of good-quality jobs.

20. Concluding remarks • Positive labour performance since the early 2000s but still much to improve. • A delicate balance between enforcement, active policies and incentives.