LIMA (ILO News) – The International Labour Organization (ILO) has urged Latin American countries to carry out a “strategic reorientation” of their labour market policies in order to increase productivity and to address rising unemployment and informality resulting from the economic slowdown.

The report in short

A report warns that “the achievements made since the 2000s, in terms of social inclusion and work quality have stalled and are even beginning to reverse,” which can lead to a dangerous “structural stagnation” in labour markets that could, in turn, generate an increase in inequality and informality and erosion in the middle class".

“The alarm bells are ringing, the economic slowdown will impact the region’s labour markets in 2016 and over the next years,” said the ILO’s Regional Director for Latin America and the Caribbean, José Manuel Salazar.

“Now what we are talking about are effective solutions. The so-called active labour market policies represent a policy shift that seeks to improve and update the skills of the labour force, readjust labour supply and demand, and promote productive employment. This integrated approach is what labour markets in the region need,” he added.

The report, “What works: Active labour market policies in Latin American and the Caribbean”, was developed by the ILO’s Research Department in Geneva.

According to the document, despite some years of solid growth in which social progress and unemployment advanced, those achievements were not consolidated, thus revealing structural deficiencies. The report warns that “even with remarkable progress, the shift to a knowledge driven economy and one based on better quality jobs has not been completed”.

Based on a summary and analysis of labour market policies over the last two decades, the analysis concludes that many countries in Latin America do not have an integrated system of active labour market policies, even if evidence resulting from the implemented programmes in the region show that these policies have positive impacts.

Active labour market policies are interventions that help people find sustainable jobs, promoting directly or indirectly the creation of productive jobs, improving qualifications and productivity of people and guaranteeing links between those looking for jobs and employers.

The report by the ILO highlights that the available evidence suggests training programmes, employment subsidies and programmes to support self-employment and micro-entrepreneurship have shown positive results in the region, but that only in few a countries like Argentina, Brazil and Chile, is the level of investment in active labour market policies (ALMPs) comparable to the levels registered in high income countries.

In other countries of Latin America and the Caribbean there are either no such policies or spending levels are very low.

Aside from putting a major emphasis on these active labour market policies, the report highlights the need to improve the ALMPs in the region so that countries can take full advantage of their positive effects. It goes on to propose a series of improvements in the design and implementation of ALMPs, such as creating incentives to increase the number of beneficiaries, adapting the policies to the specific context and making sure that programmes benefit all of the target population.

ILO specialist Veronica Escudero, one of the authors of the report, warned that “even if these policies have great potential, we need to highlight that the design, targeting and implementation are essential to guarantee their effectiveness.”

In this sense, it is necessary to “be very clear about the employment barriers that people in a country face, as well as the needs of the local labour market, to ensure the relevance of the policies and to maximize their impact, including the number of beneficiaries,” explained Escudero.

An urgent policy reorientation for Latin America and the Caribbean

Another conclusion of the analysis is that many of the ALMPs implemented in the region centre around one type of intervention, instead of providing a more complete set of measures, which would be desirable. A well-structured programme of policies can drive “towards economic specialization to higher added value and increase the growth of productivity,” added Escudero.

The ILO’s Regional Director highlighted that the “slow motion” economic downturn of the region has revealed the need to “advance strategies of productive development and training of the workforce that are essential to achieve a more inclusive and sustainable growth, and that active labour market policies are a very important part of the arsenal of instruments that countries in the region require at this moment.”

The new report by the ILO analyses data from the entire region with an emphasis on Argentina, Colombia and Peru, in order to understand the needs and challenges of the generation and implementation of these policies.

For more information, please contact Luis Cordova, cordova@ilo.org.