Employment in Crisis

O v e r v i e w 15

A more complete characterization of the policy areas that can be focused on in order to achieve stronger social protection and labor responses to crises (policy dimension 2) is given in figure 1.4. Evidence from multiple contexts shows that each of these priority areas can make a real difference in labor market adjustment.

Sectors and places: Tackling structural issues This study shows how factors beyond the labor market affect the magnitude of the impacts of crises on workers. Structural challenges in the LAC region act to slow and even to prevent necessary labor market adjustment, hence weakening economic recoveries and causing lasting effects on efficiency as described above. These structural issues can change the

nature—and the impact on people—of a systemic shock from transitory to long-term. The policy implication of this study’s findings and the related literature is that even if macroeconomic and social protection and labor policies are pristine and flawlessly implemented, better outcomes could still be achieved for workers in crises by complementing these policies with sectoral and place-based policies to deal with any structural issues impeding strong recoveries from crises. Such policies would address inefficiencies in labor market adjustment resulting from labor market legislation, product markets’ structures, insufficient geographic mobility, and localized economic depression. Addressing these structural challenges will require changes in legal frameworks and regulations as well as targeted public investment. A more

FIGURE 1.4 Addressing crises’ impacts and preparing workers for change: Policy reforms

WORKERS

SHOCK

Source: World Bank.

acroeconomic framew rs + M orks e z i l bi a t S

s

am rogr ort upp arket p s e m m Inco e labor v Acti

Cushion the short-term impact of shocks on workers • Augment unemployment income through the creation or redesign of unemployment insurance • Improve the capacity to assist with social assistance programs Beyond short-term income support • Offer robust and coordinated employment services to get workers back to the workforce quickly • Support working people for change: Enhance their skills

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Employment in Crisis

Published on Sep 21, 2021

World Bank Publications

"A region known for its volatility, Latin America and the Caribbean (LAC) has suffered severe economic and social setbacks from crises—including the COVID-19 pandemic. These crises have taken their toll on careers, wage growth, and productivity. Employment in Crisis: The Path to Better Jobs in a Post-COVID-19 Latin America provides new evidence on the effects of crises on the region’s workers and firms and suggests several policy responses that can bolster long-term and inclusive economic growth. This report has three key findings. First, crises lead to persistent employment losses and accelerate structural changes away from the formal sector. This change occurs more through reductions in the creation of formal jobs than through job destruction. Second, some workers recover from crises, while others are permanently scarred by them. Low-skilled workers can suffer up to a decade of lower earnings caused by crises, while high-skilled workers rebound fast, exacerbating the LAC region’s high level of inequa

Employment in Crisis

Articles inside

References

Notes

Conclusion

4.18 Tackling structural issues that worsen the impacts of crises on workers

4.12 Employment and reemployment policies, by the nature of the shock causing displacement

4.4 Permanent, systemic shocks: Responses to job dislocation caused by structural changes

4.6 Evidence on the effects of place-based policies on mobility and labor market outcomes

4.17 Labor market regulation instruments and the duration of unemployment

4.11 Positive effects of welfare transfers on local formal employment

4.5 How well have regional policies performed at strengthening economic opportunities?

4.1 Family allowances as de facto unemployment insurance

4.8 Insufficient support, with many left behind

selected LAC countries

Aggregate: Stronger macroeconomic stabilizers

4.1 Landscape of formal unemployment income support in the LAC region

4.1 How adjustment works and a triple entry of policies to smooth it

4.1 Unemployment insurance throughout the world

Introduction

Three key policy dimensions

References

Notes

Places: The role of local opportunities and informality

Introduction

Workers: A bigger toll on the unskilled

Conclusion

3.1 Effect on wages of displacement caused by plant closings in Mexico

and informal sectors, 2005–17

A changing employment structure and the disappearance of good jobs

2.2 Cyclicality of net flows across sectors and out of employment, 2005–17

Key insights

References

Labor market flows: Unemployment versus informality

Introduction

Notes

1.4 Addressing crises’ impacts and preparing workers for change: Policy reforms

1.3 Stabilizers and macroeconomic frameworks: Policy reforms

Rationale for this report