The latest data show that the jobs recovery in Latin America is lagging the overall economic recovery as the coronavirus (Covid‑19) pandemic continues to hinder fully-fledged economic normalisation. Although employment creation should pick up in the coming months, the quality of the regional job market is likely to remain weak for much longer. As a consequence living standards will remain weak, stoking the potential for social unrest, as well as suboptimal policy responses.

Broadly speaking, the jobs recovery has lost some of its dynamism in recent weeks amid a synchronised second wave of Covid‑19 infections. However, the aggregate outlook belies diverse trends across countries. For example, in Brazil and Chile employment is substantially below pre‑pandemic levels; this result, however, owes partly to the fact that generous government payouts in those countries have allowed workers to delay their re‑entry into job markets. By contrast, in countries with relatively weak safety nets, such as Bolivia and Ecuador, workers have been forced to seek out jobs wherever they are available, leading to much more rapid job growth. In 2020 the US, with US$17.1trn in sustainable investment, overtook Europe (US$12trn), according to the report. Excluding Europe, all the markets registered an increase in sustainable investment in the past two years. Canada noted the biggest jump, by 48%, as compared with the previous period, followed by the US at 42%. Meanwhile, sustainable investment in Europe declined by about 13% in 2018-20, largely owing to a change in methodology for calculating green investment.

At present, most unmet labour demand is concentrated in low-wage and informal jobs, as these jobs are better suited for the current context, characterised by volume swings and uneven production schedules. Consequently, this is driving a deterioration in the quality of the regional labour market. The proportion of salaried employees in most countries is falling as a growing share of job-seekers have been forced to accept part-time, contract or gig work. Although formal jobs are likely to show greater improvement once vaccine rollouts gather pace, they will take a long time to return to pre‑pandemic levels. This partly reflects structural deterrents to formalisation, including a high tax burden and cumbersome regulations. However, it also reflects the fact that a number of low-skilled jobs—in retail, for instance—will have been permanently destroyed. Opportunities will arise in other sectors such as information technology (IT) and healthcare, but reskilling workers for those roles will be a lengthy process.

The uneven jobs recovery will constrain improvements to households’ disposable incomes, increasing the likelihood of episodes of labour and social unrest. This will, in turn, heighten the risk that governments respond with myopic policies—such as tighter local hiring requirements, above-productivity minimum wage increases and inefficient government spending aimed at supplementing labour income—that ultimately weigh on the region’s longer-term prospects.

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