Fifty-five percent of workers in Latin America and the Caribbean work in the informal economy, a figure that has remained high for nearly two decades. This is just one of the key data points to keep in mind to achieve a fundamental objective for the region's future: creating quality jobs.
Understanding why people choose certain types of employment and what obstacles firms face in growing is critical to fostering quality jobs. Likewise, adapting social protection systems to a changing economy is key to ensuring greater social protection, thus advancing toward greater well-being for families and individuals.
Standing idly by is not an option, especially when the region faces the demographic challenge of integrating millions of young people into the labor market. The region has the opportunity to transform its labor markets if it successfully aligns talent development, the building of a business-enabling environment, and social protection around a common goal.
This new publication invites readers to look beyond conventional solutions, promoting a comprehensive and dynamic understanding of the current realities of labor markets in national economies.
Labor Heterogeneity and the Active Pursuit of Well-Being
Labor informality is far from being a homogeneous block of people. Workers make decisions based on their capabilities, preferences, and circumstances. Understanding this diversity is essential for designing policies that expand available opportunities and allow more people to access productive, quality jobs.
For example, informal wage workers (who are often young people in transition stages or facing specific barriers to access) are not the same as own-account workers. The latter frequently choose self-employment deliberately and over the long term, actively valuing "amenities" such as schedule flexibility, autonomy, and labor independence.
Boosting Enterprise Growth to Generate Quality Jobs
Evidence shows that most informal activity thrives in micro-businesses and family enterprises geared toward maintaining a local, close-knit scale rather than a trajectory of high corporate growth.
The central challenge lies in the need to strengthen the business fabric so that more firms with productive potential can expand, create more jobs, and invest to generate sustainable value.
The sustainable creation of quality jobs depends on a dynamic private sector capable of investing, innovating, growing, and generating opportunities at scale.
A Comprehensive Approach Centered on Skills and Social Protection
Skills development is the most powerful engine for strengthening the economy: better technical education expands quality job opportunities for workers, while business training enables entrepreneurs to shape stronger, more competitive projects that generate higher-quality jobs.
At the same time, the goal is to modernize the architecture of social protection so that its priority is to protect people and their needs directly, rather than focusing on their contracting status. This progress is substantially enhanced when complemented by a predictable regulatory environment and inclusive access to financing.
Understanding workers' preferences is a valuable input in designing a policy mix that enables the creation of high-quality, highly productive jobs
Two Key Charts to Understand the Phenomenon
While global informality ranges between 10% and 80%, in our region it remains stuck at 55% for nearly two decades.
The labor market in Latin America and the Caribbean is divided into four key sectors that differ profoundly according to workers' age, education, and earnings. This chart shows how employment is redistributed across the working life cycle.
Policies to Achieve the Three Goals of Worker Protection, Quality Jobs, and Growth
Creating more and better jobs is not just an economic objective. It is a fundamental condition for expanding opportunities, strengthening household resilience, and promoting more inclusive prosperity in Latin America and the Caribbean.
The perspective of this report urges the adoption of a comprehensive program composed of three pillars: improving skills across the human capital distribution, undertaking reforms to increase formal sector dynamism, and reforming the design of social protection systems to reduce the implicit bias against work in the modern sector and better serve workers' needs.
