2008 Labour Overview.

"Urban unemployment declined for the fifth consecutive year in 2008 in Latin America and the Caribbean, but the international crisis brought to an end the positive trend and it is estimated that in 2009 the number of unemployed persons could increase by between 1.5 and 2.4 million individuals, the ILO said today as it presented the new edition of its report, Labour Overview."

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The 2008 Labour Overview for Latin America and the Caribbean is special. This edition provides evidence of the effects of an unprecedented international crisis that has cast a shadow over the global economy and is reflected in the employment situation in the region. Employment will be a challenge in 2009. As ILO Director-General, Juan Somavia stated, “The ILO’s message is realistic, not alarmist” with respect to this situation.

It should be stressed that this crisis is not hitting the region at a bad time. The region has experienced several years of favourable economic growth, which has had a direct impact on the employment situation. The 2008 Labour Overview indicates that unemployment diminished for the fifth consecutive year, permitting Latin America and the Caribbean to reach unemployment rates not seen since 1992.

The 2008 Labour Overview for Latin America and the Caribbean is special. This edition provides evidence of the effects of an unprecedented international crisis that has cast a shadow over the global economy and is reflected in the employment situation in the region. Employment will be a challenge in 2009. As ILO Director-General, Juan Somavia stated, “The ILO’s message is realistic, not alarmist” with respect to this situation.

It should be stressed that this crisis is not hitting the region at a bad time. The region has experienced several years of favourable economic growth, which has had a direct impact on the employment situation. The 2008 Labour Overview indicates that unemployment diminished for the fifth consecutive year, permitting Latin America and the Caribbean to reach unemployment rates not seen since 1992.

The decrease in the urban unemployment rate, from 8.1% to an estimated 7.4% for 2008, occurred in a context of 4.6% GDP growth in the region. The 2008 Labour Overview also reports that real wages have increased, although modestly. In addition, it notes that gaps in unemployment by sex and age persist in the region, which remain unfavourable to women and youth. The report also points to the continuing decent work deficit. Statistics on informal employment, which includes workers in the formal and informal sectors, indicate that nearly six of every 10 urban employed individuals worked in informal employment in 2007 among selected countries with available information.

The 2008 Labour Overview states that these results mark the end of a positive cycle in the urban unemployment rate. According to the figures for urban employment provided by the countries, which our specialists used to conduct the analysis, the effects of the economic slowdown became apparent beginning in the third quarter of 2008.

We are facing the most severe economic crisis since the 1930s. This crisis originated in the financial sector of the United States in August 2007, spread to other developed countries and then worsened in 2008, particularly since mid-September. It eventually affected developing countries that had previously avoided its effects. The main inter-related global effects on the economies of Latin American and the Caribbean include the reduced demand for exports, declining commodity prices, rising capital costs and shrinking credit, as well as a reduced flow of remittances and lower demand for tourism services.

Although the crisis originated in the financial system, it has had enormous repercussions on the real economy. Moreover, we are clearly facing an employment crisis, which will have a direct impact on the living conditions of individuals and which threatens to reverse progress made in the fight against poverty.

The extent of this crisis has generated constant speculation, but it is difficult to make predictions with any certainty, although trends are clear. News of falling prices and demand appear in the media together with reports of layoffs and the lack of jobs. Results of opinion polls already reveal individuals’ growing fear of losing their sources of income.

The most recent growth forecasts for Latin America and the Caribbean indicate that despite the poor global prospects, the region will still have positive growth. Although the situation varies by country, the ECLAC reported in December that GDP growth for the region could reach 1.9% in 2009. This means a strong economic slowdown that will affect labour markets. This figure may be revised in the coming weeks, in which case we will be facing an even more dismal scenario.

The ILO estimates that with GDP growth of 1.9%, the region’s urban unemployment rate in 2009 will increase for the first time since 2003, to an annual average of between 7.9% and 8.3%. In absolute numbers, this means the potential loss of 1.5 million to 2.4 million jobs this year.

This situation can and should be cushioned with public policies that provide support to the most vulnerable segments of the population. Specifically, governments of the region should intervene with counter-cyclical policies to stem the loss of employment by investing in physical and social infrastructure, improving access of small establishments and microenterprises to credit and business training, creating temporary employment programmes and providing support to citizens who need social protection.

Several governments of the region and the world have begun to apply measures to address the crisis and its impact on the population. The ILO has a Decent Work Agenda, supported by governments, employers and workers around the world, which can serve as a tool to guide the design of strategies by combining objectives of job creation, social protection, social dialogue and respect for labour standards.

Social dialogue among employers, workers and governments will be even more essential during this crisis period to ensure transparency and participation in decision-making under equal conditions.

The 2008 Labour Overview also includes a study on micro, small and medium-sized establishments (MSME) in the era of globalization. This study reveals a visible decent work deficit in this key segment of the Latin American economy, where two-thirds of regional employment is concentrated. This affects the sector’s capacity to increase productivity and competitiveness and contributes to poverty and the high level of income inequality in the region. The 2008 Labour Overview summarizes the regional policies and actions targeting MSME that have been adopted in the ILO’s 2006-2015 Regional Agenda for Decent Work in the Americas and provides examples of good practices in this area.