Latin America: Growth slowing but unemployment at historic lows
October 3, 2012
In the current global economic climate a job bonanza, rising salaries and low employment sound like a thing of the past rather than a present day reality. Not so in Latin America and the Caribbean.
Like with so many things lately, the region seems to be breaking with tradition and current trends to become a job powerhouse of sorts, largely thanks to its solid economic performance but also to a better educated and competent labor force.
Averaging 6.5 percent, unemployment in Latin America has fallen to near historic lows, contrasting sharply with rich nation’s rates and its own historic peak of 11 percent a decade ago. Salaries have also risen, narrowing the income inequality gap between high and low- income earners.
Fueling this is the region’s average projected growth of around 4 % for 2013, slightly below last year’s 6 percent but above the overall estimated growth for developed economies.
Such are the key points made in the latest Latin American economic outlook report by the World Bank Regional Chief Economist office The Labor Market Story Behind Latin America's Transformation released today to a global audience.
“It’s quite remarkable that Latin America has been able to break with a tradition of high unemployment and informal employment to bring down overall unemployment rates to new historic lows,” said World Bank Regional Chief Economist Augusto de la Torre.
It's worth noting the region’s ability to narrow income gaps while bringing more women into the workforce, as part of its efforts to reduce unemployment, explained De la Torre.
Overall, 35 million additional jobs were created over the past decade as the average length of schooling rose from 5 to 8 years, and women’s share of the labor force grew steadily. By the beginning of 2012, 65 percent of women aged 25-65 had joined the ranks of the employed, the report states.
Wages have stabilized with salaries remaining stable even as the global storm raged, the report adds. “The region’s long history of wage volatility linked to inflation surprises has come to an end. Behind this development is the rising credibility of the Central Banks’ inflation targeting regimes,” it says.
Latin America has been able to break with a tradition of high unemployment and informal employment to bring down overall unemployment rates to new historic lows
Even as the region’s growth slows in line with global trends, some countries are ahead of the pack.
Peru and Panama will grow 6-8 percent on a par with Asian economies. Uruguay, Chile and Colombia have beat previously low expectations with an estimated 4 percent growth rate.
Brazil and Argentina are expected to post lower than expected growth, bringing the regional average down.
“Global headwinds are slowing the region’s projections but the new numbers are still above the global average and speak about a resilience that is becoming quite familiar,” said De la Torre. Emerging economies are trending down, he said.
De la Torre spoke to a global audience of thousands via a live webcast, Twitter and Facebook.
Many questions and interactions touched upon job prospects for young people across the region. A user from Bolivia asked whether governments needed to promote policies to encourage the hiring of young workers. Another from Central America noted that globally, youth unemployment is on the rise.
De la Torre replied that youth unemployment in the region has been falling into sync with general regional trends.
Users also pointed out that even though Latin American economies are improving, remains very high within the region, with huge gender and salary gaps needing to be addressed.
“Inequality is dropping but we are still a very unequal region,” tweeted @eligonzg.
The report doesn’t dodge these issues and reinforces the urgency of reforms oriented towards raising the region’s productivity in all sectors.