Creating More and Better Jobs, the Challenge of the Hour in Latin America

Latin America is the region most affected by the Covid-19 pandemic in the world, with a health impact as strong as that of advanced countries, but without comparable means to mitigate the effect on economic activity and employment. It is a complex, painful scenario in which millions of people suffer daily the difficulties facing the region and their devastating consequences on the world of work.

Informal workers have been the most affected: if quarantines keep them from going out, they cannot earn income for their families, and because they are not covered by unemployment insurance and other social programs, it is difficult to help them. Formal employment has resisted better so far, but these jobs will likely be heavily affected in the coming months as companies’ liquidity problems become solvency problems, and many will be forced to close.

We cannot overcome these difficulties by returning to the past, however. The World Bank report launched this month, Going Viral: COVID-19 and the Accelerated Transformation of Jobs in Latin America and the Caribbean, demonstrates that in the region, employment in the industrial sector stagnated at levels below those of advanced economies and emerging economies of East Asia. It also shows that most employment is concentrated in the service sector, which is typically more informal and has higher self-employment rates. The technological revolution has accentuated these trends. With respect to the pandemic, the need to adopt digital platforms that reduce social interaction is widening the gap between those who can telework and those who cannot.

The creation of more and better jobs is vital for the region. It is crucial to invest in creating the human capital necessary for the jobs of the future, which will be less routine and simple. Education and vocational training programs create opportunities and should be within everyone’s reach. The countries of Latin America and the Caribbean should work to increase the market value of education if they strive to keep up with the most advanced economies. Additionally, they should promote training and labour reentry programs for adults.

In addition to supporting the health response, social containment and economic recovery in 17 countries of the region during the Covid-19 emergency, the World Bank approved several programs to create human capital this year, including in Peru, Honduras and El Salvador.

Boosting productivity is equally important. The productivity index for the region’s agricultural sector is an average of 20 per cent lower than that of the United States. It is 40 per cent lower in industry and 25 per cent lower in services. Improving efficiency in these three areas will require incorporating technology; stimulating innovation, competition and quality; eliminating market distortions that impede the growth of the most productive firms; removing trade barriers, and advancing international agreements that facilitate exchange. The region’s potential is enormous but will only materialize if we apply the appropriate policies.

The report also underscores the need to rethink labour regulations in a way that promotes job creation and the formalization of employment. It is necessary to expand employment, but in a way in which social protection benefits reach larger segments of the population. Governments can also improve the business climate to attract investment and develop communications, transport and logistics infrastructure to drive business growth. The World Bank will help implement these much-needed changes.

Additionally, the jobs of the future may be conditioned by technological advances associated with the so-called fourth industrial revolution. We still do not know how innovations such as artificial intelligence, the Internet of Things and 3D printing will impact the labour market. Historically, despite potential initial fears, new technologies have supported increased job creation, higher productivity and improved quality of life. The region has the opportunity to be at the forefront of this revolution and to reap its benefits.

One of Latin America’s greatest challenges – perhaps the biggest – is to create new sources of employment in the current environment of sectoral changes and technological development. The enormous economic and social costs of the pandemic have accelerated the transformation of the labour market and have made addressing this challenge even more urgent. But the path to inclusion through employment is inescapable if we want more equitable societies. That will be the measure of success.

Carlos Felipe Jaramillo is the Vice President of the World Bank for Latin America and the Caribbean