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Infrastructure investment, emergency employment needed
– say UN agencies
The International Labour Organisation (ILO) and the United Nations Economic Commission for the Caribbean and Latin American (ECLAC) say the strong economic recovery of the region will make it possible to significantly lower unemployment. 
The organisations related that unemployment could fall from the 7.3 percent in 2010 to between 6.7 and 7.0 percent this year.
In the latest edition of the joint publication, “The Employment Situation in Latin America and the Caribbean,” the two UN agencies analyze labour trends in the region, as well as the countercyclical policies implemented by some countries during the recent international crisis.
It was noted that in 2010, trends in real wages were interrupted by a spike in inflation, causing the increases to be generally smaller than in 2009. Thanks to the economic recovery, however, real wages rose by around 2%, helping to strengthen domestic demand and aid recovery.
They recognize that, in many cases, such policies helped to reduce economic vulnerability, which, in turn, facilitated a faster economic upturn.
“This crisis saw greater concern for maintaining people’s employment and income levels,” said Alicia Bárcena, executive secretary of ECLAC, and Elizabeth Tinoco, ILO Regional Director for Latin America and the Caribbean, in the foreword to the document.
“Many of the measures adopted, represented a way for increased fiscal spending to reach people as much as possible, which reflected a concern for equality,” they added.
It was also noted that these countercyclical policies involved expanding fiscal spending during the crisis and consisted in various measures such as infrastructure investment, emergency employment programmes, stimulation for social programmes and companies, among others.
The analysis, however, said that the policies implemented during the crisis were often the result of “short-term reactions” rather than the consequence of an “institutionalized countercyclical approach.”
The UN officials said that because of the limited availability of fiscal resources, not all countries were in a position to implement strong countercyclical policies; while, in other cases, measures were introduced more as a reaction to a particular situation than as the result of a clearly-defined and established strategy.
“The challenge is to institutionalize a countercyclical approach throughout the economic cycle,” they recommended, adding that this would provide the capacity to respond immediately in the event of another crisis.
The new joint ECLAC-ILO publication also reviews the characteristics of the recovery of the region’s labour markets.
In 2010, the relatively strong regional recovery pushed up the urban employment rate by 0.8 percentage points to a record high of 55.2 percent.
At the regional level, the urban unemployment rate fell from 8.1 percent to 7.3 percent by the end of 2010, “which signaled a return to pre-crisis levels,” ECLAC and the ILO said.
In absolute terms, they said, in 2010 the number of employed people in the region’s urban areas rose by 6.4 million, while the number of unemployed shrank by 1 million to stand at 17.1 million urban unemployed.
This year, ECLAC and the ILO said the figure is expected to fall even more sharply and the unemployment rate might dip below seven percent. The two institutions point out that the improvements to the unemployment rate have been uneven, and that it fell by more in South American countries than in the north of Latin America and the Caribbean in particular.
The ECLAC-ILO bulletin states that many countries are showing signs of improvement in employment quality, adding that “data on formal employment trends strongly reflect the recovery of economic activity.”
However, the UN noted that since the region is highly vulnerable to extraordinary, non-stationary shocks and lacks well-established automatic stabilizers, authorities frequently respond by adopting discretionary public policies. In recent years, it has been suggested that in their bid to mitigate cyclical trends, political authorities and especially fiscal authorities would do well to resort to predetermined rules.
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