The reactivation of the economies of Latin America and the Caribbean is still insufficient to recover the jobs lost during the COVID-19 pandemic and has resulted in a labor market characterized by high unemployment and a strong predominance of informal occupations, according to a new technical note issued by the International Labor Organization (ILO).

Neither the quantity nor the quality of jobs that the region needs to cope with the aftermath of an unprecedented crisis are being generated. The labor outlook is complex and poses challenges of great magnitude. In 2021, informal occupations are leading the partial recovery of employment. These are jobs that are generally unstable, with low wages, no social protection, and no rights.

The close link between labor informality, low income, and inequality has become even more evident in this context. Neither the quantity nor the quality of jobs required to face the aftermath of an unprecedented crisis are being generated.

The technical note "Employment and informality in Latin America and the Caribbean: an insufficient and uneven recovery" reviews the changes detected in labor markets, income, and inequality in recent months. It also addresses the impacts of the crisis and the recovery of jobs as some economic activities recovered.

About 70% of the jobs being generated from mid-2020 to the first quarter of 2021 are informal occupations, according to data from a group of Latin American countries, the ILO document highlights. In the first quarter of 2021, around 76% of self-employed workers, and slightly more than a third of salaried workers, were informal.

Although it is premature to state that a process of informalization of previously formal occupations is being observed, taking into account previous crisis experiences, this is an important latent risk. The document analyzes the dynamics of informality registered by the pandemic, highlighting an atypical behavior, because unlike in other crises, informal occupations did not increase nor did they offer refuge for those who lost formal jobs.

There is a significant latent risk that formerly formal jobs will become informal.

On the contrary, the measures necessary to face the health crisis had as a correlate a strong impact on the destruction of informal occupations and the loss of income of people working under these conditions, who found themselves without social protection networks and without the possibility of accessing programs for reducing hours or teleworking. In many cases, this even led to a temporary reduction in informality rates in some countries.

With the new scenario of a more intense recovery of informal positions, it is possible that in many countries the informality rate will be similar to or even higher than that observed before the pandemic when it affected around 51% of the employed. Together with informality, the region is experiencing an insufficient recovery of jobs, according to the data in the technical note. It highlights that the reduction of occupation between the first and second quarter of 2020, at the worst moment of the crisis by COVID-19, came to just over 43 million jobs.

The subsequent recovery from that time until the first quarter of 2021 was around 29 million. Thus, the increase in employment failed to fully compensate for the earlier loss. About 30% of the jobs lost have not yet been recovered. At the same time, critical labor indicators were dragging on at the beginning of the year. In the year-on-year comparison between the first quarter of 2020 and the same quarter of 2021, there was an average reduction of 3.5 percentage points in the employment rate for the region, and a contraction in the economic participation rate of 2.6 percentage points. In addition, there was an increase of two percentage points in the unemployment rate.

30% of the jobs lost in the COVID-19 pandemic have not yet been recovered.

For the first quarter of this year, the economic participation rate was 59% and the employment rate 52.6%, in both cases the lowest in at least a decade, and the unemployment rate was 11%, which implies that around 32 million people were actively looking for a job without finding it.

The reduction in the participation rate has been a peculiarity of this crisis, during which millions of people preferred to exit the labor force in the face of the prospect of finding jobs that were not available. When many of these people return to seek employment, along with others who will need income after the crisis, there will be additional pressures on both the unemployment rate and levels of informal employment.

Women, youth, and the low-skilled have been disproportionately affected by the contraction in employment and incomes, and are hit hardest by the inequitable and poverty-increasing impacts of this crisis in the region.

32 million people actively looked for a job but did not find it. The most affected are women, young people and those with lower qualifications.

In the case of women, there was a decline in labor participation after decades during which there had been an increase in their incorporation into the labor force. It has been more than 15 years since such a low rate of women's economic participation had been recorded. Faced with a labor scenario characterized by an economic recovery with insufficient impact on employment, the region needs to adopt a comprehensive, consensual, and far-reaching policy agenda, focused on people, to support the creation of more formal jobs. The measures must go hand in hand with strategies to rebuild the productive apparatus, including the creation of new companies and increasing the productivity of those companies that managed to survive the crisis.

The technical note stresses that measures especially focused on improving employment generation seek to prevent the crisis from prolonging and leaving long-term scars. The dissimilar speeds of employment recovery among different groups of workers and the growing levels of inequality and poverty may not only severely limit economic growth, but may also increase the degree of social unrest in the region.