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

Overview 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

SHOCK WORKERS

Stabili zers + M a c r o e c o n o m ic framewor ks

Income support Active labor market programs

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 • O er robust and coordinated employment services to get workers back to the workforce quickly • Support working people for change: Enhance their skills