Latin America, Caribbean shed 26 million jobs during a year of the pandemic

The Latin American and Caribbean region lost 26 million jobs as a result of the pandemic, and started 2021 with a complex employment landscape aggravated by new waves of contagion and slow vaccination processes that make the prospects for recovery in labour markets more uncertain, says a new technical note from the International Labour Organization (ILO).
“The quest for better normality will require ambitious action to recover from setbacks in the world of work,” warned Vinícius Pinheiro, ILO Director for Latin America and the Caribbean, when commenting on the note, which presents the latest data on the impact of COVID-19 over the past year.

“It is now time to rebuild the jobs lost by the pandemic and create new decent work opportunities,” Pinheiro said, noting that despite adversity, action must be taken and consensus reached so that “2021 is the year of vaccination and economic recovery with more and better jobs.”

However, the ILO Regional Director highlighted that “in the pursuit of recovery, addressing pre-existing conditions in the region will be unavoidable and those conditions are key to understanding why the impact of the pandemic on employment was so strong. Many of the challenges we had before the pandemic remain in place, although they are now more urgent.”
“High informality, small fiscal spaces, persistent inequality, low productivity and poor coverage of social protection, coupled with problems that still persist such as child labour and forced labour, are part of the ongoing challenges in the region,” he added. The ILO regional technical note, “The employment crisis in the pandemic: Towards a human-centred job recovery”, emphasizes that the labour impacts were devastating in the second quarter of 2020 when the employment and participation indicators plummeted, and then partially recovered.

However, by the end of 2020 the region’s average employment rate had fallen from 57.4 per cent to 51.7 per cent, a sharp drop equated to the loss of around 26 million jobs, of which 80 per cent, or more than 20 million people, left the workforce. This significant exit from the workforce was unprecedented and has been characteristic of 2020. By comparison, the unemployment rate has only partially reflected the magnitude of the difficulties faced by labour markets in the region, increasing by just over 2 percentage points between 2019 and 2020, from 8.3 per cent to 10.6 per cent.

This situation would have begun to change, explained Roxana Maurizio, ILO Regional Labour Economics Specialist and author of the technical note, who commented that in 2021 there could be “a significant increase in the employment rate when millions of people who had ceased to participate in the labour force return to the workforce.”

In addition to lost jobs, the region experienced a sharp contraction in working hours, as well as a reduction in labour incomes, which account for 80 per cent of what people in Latin America and the Caribbean earn. The region has recorded the largest losses in hours worked worldwide. The ILO’s technical note indicates that during the crisis both formal and informal employment experienced very pronounced contractions, but with greater intensity for the latter and for this reason the informality rate was reduced (temporarily), in the context of the widespread collapse in employment demand, especially in the early months of the pandemic.

But that situation has already started to change. “There is a high risk of informalization that adds to the already high levels of labour informality that countries had before the pandemic,” said Maurizio. According to available data from seven countries, employment recovery in the second half of 2020 has been almost entirely contracted by informal employment growth. These occupations account for more than 60 per cent of the total increase in employment. “The formal work deficit, in turn, is likely to become more apparent to certain types of workers such as young people, women and adults with lower qualifications – groups that traditionally experience greater difficulties in accessing formal employment,” she added. “The macroeconomic collapse has disproportionately impacted some segments of the population, amplifying labour and social gaps – especially gender gaps – that characterize the region,” she continued.

“The outlook for economic recovery by 2021 is modest and still very uncertain, so expectations about a possible reversal of the critical labour market situation should be very cautious.” The ILO has proposed developing recovery strategies based on a Policy Framework with four main pillars: stimulating the economy and employment; support businesses, jobs and incomes; protect workers in the workplace; and resort to social dialogue to find solutions. The technical note highlights that in a scenario as complex as the current one “social dialogue and the building of new consensuses, pacts or agreements are more relevant than ever” to advance the recovery of employment.