Policy response to face the international crisis en Latin America Andrés Marinakis, ILO Cartagena, October 19, 2009

Structure of the Presentation 1. Regional Conservatorium on the Crisis Indicators: ILO - ECLAC Bulletin Policy responses: ILO Notes on the crisis 2. Final Considerations: the need to institutionalize the progress made so far

Economic deceleration results in an increase on unemployment The Labor Panorama in LA (January) estimated an increase of unemployment from 7.3 % in 2008 to 7.9 and up to 8.3 % in 2009, as the worst case scenario. This implied between 1.5 and 2.4 new unemployed. s Updated estimates (April) show that the number of new employed people increased between 2.3 and 3.2 millions The data of the first semester of 2009, according to the ILO-ECLAC Bulleting, show unemployment at 8.5 %. Dominant characteristic of this new unemployed: heads of household, increasing men unemployment

LATIN AMERICANA (9 COUNTRIES) EMPLOYMENT AND UNEMPLOYMENT RATE, FIRST TRIMESTER 2006 TO SECOND TRIMESTER 2009 (Porcentages) Source: ECLAC and ILO, based on official country information.

LATINA AMERICA AND THE CARIBBEAN: URBAN UNEMPLOYMENT RATE FIRST SEMESTER 2008 AND 2009 (Porcentages)

LATIN AMERICANA: URBAN UNEMPLOYMENT RATE, MEN AND WOMEN, FIRST TRIMESTER 2008 AND 2009 (Porcentages) Source: ECLAC and ILO, based on official country information.

Attention: Recuperation sequence First, it must happen in the economy Reestablishment of normalization of financial system Reduction of stocks (houses, offices, capital goods) Recuperation of investment, credit Recuperation of product With a delay in the labor market Increase of working hours Increase in precarious jobs Increase in de-motivated labor participation Increase in formal employment Recuperation of wages

ILO Notes on the crisis Goal Highlight specific characteristics that make them adequate to face the crisis Identify new policies introduced in this crisis Identify lessons from general trends, built on what is learned Make these best practices known and promote exchange among countries

ILO Notes on the crisis Thematic Areas Employment policies –Public investments with impact on employment –Employment retention with reduction of workin\g day –Other active policies Protection policies –Unemployment insurance –Conditional transfers Wage Policy

General trends on active employment policies Countries have made important increases in public investment, But these have not always ensured increased impact in employment, During this crisis, there has been a moderate use of emergency employment programs, At the same time, there has been significant efforts in training workers to more demanded jobs And strengthen networks of Public Employment Offices

Innovation: Retention of employment with reduction on working day Crisis has affected specific sectors It is presumed that the drop in demand is temporal (short term) It is concluded that massive employment losses should be avoided which may endanger economic and employment recuperation (it benefits workers and businesses) Condition: agreement among parties Countries: Argentina, Chile, México, Uruguay

Protection: Unemployment Insurance Recent modifications to: –Increase coverage (reducing requirements, including short term contracts, etc) –Improvement in benefits During periods of crises, unemployment tends to last longer and re-insertion opportunities decrease Insurances have extended the duration of the benefit during moments of crisis, but in different ways: –Brazil: specific sectors affected by the crisis –Uruguay: when there is an economic recession –Chile: when unemployment is higher than the last four years’ average

Protection: Conditional transfers In the sphere of social protection, it is understood that these programs can: –Sustain income in the most poor families –Control the increase in the labor market of young people due to school drop out Goal: avoid youth from dropping out of formal education in search of a precarious job Long term strategy strengthened during a period of crisis with greater coverage: –Costa Rica, Avancemos Program –Brazil: Bolsa Familia/Bolsa Escola

Wage policy implemented in 2009 in general, limited to setting a minimum wage, given the low coverage of collective bargaining Recuperation of real minimum wage generalized in LA, although at insufficient levels to cover basic needs In general, increase in minimum wage try to sustain purchasing power, which is favored by a decreasing trend in prices in 2009 Relevance of employment and wages to sustain internal consumption during this crisis

Increase in Minimum Wage Source: MG and Inflation, ILO, PIB, ECLAC

Progress and lessons learned from this crisis Consensus on the use of anti-cyclical fiscal policies There is a broad menu of policies being implemented in the region, among which best practices can be found Capitalize from learnings from this crisis and institutionalize changes and policies Provide Ministers of Labor with resources for employment policies during normal times, and extraordinary resources during moments of economic crisis Strengthen labor institution for employment and social protection with capacity to serve during periods of growth, as well as crisis