23, August, 2014

The Employment Situation in Latin America and the Caribbean: Conditional Transfer Programmes and the Labour Market

This issue of 'Employment Situation in Latin America and the Caribbean' by ECLAC and ILO looks at Latin American conditional cash transfers in the context of the labour market.

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Real wages continued to rise in Latin America and the Caribbean, but more slowly than in previous years. Thanks to positive but declining job creation rates and real wage increases, the wage bill continued to support household consumption. Accordingly, the labour market continued to contribute through domestic demand to economic growth, albeit in declining measure as it cooled generally.
In addition to job creation over the past decade, other factors have helped reduce poverty, such as more robust social protection systems and the implementation of innovative social programmes. These include conditional transfer (or joint responsibility) schemes, which have been set up in several countries and benefit 21% of the regional population. The second part of this report summarizes the main features of these instruments and discusses their impact on labour markets, as well as the challenges they face.
Cash transfers delivered through these programmes are small amounts and therefore tend not to bring down the employment rate among working-age adults, but rather among children, as is the intention. There is a shortage of productive employment, which tends to be especially severe in areas with high rates of poverty, and this affects the labour market position of both adults and young people (once they have completed their education). Weak public support of childcare and the care of older adults and persons with disabilities also hinders the labour participation of women living in poverty. Transfer programmes must therefore be closely coordinated with comprehensive social protection systems and active labour market policies that boost labour demand.
These programmes must also be designed to enable beneficiaries to transition through various stages that constitute a continuum of measures meeting different needs and supporting different rights, so that beneficiaries do not lose their entitlements on “graduating” from the programmes, as this could discourage labour formality.
Once again, the outlook for 2014 is unfavourable for the region’s labour markets, given that ECLAC forecasts economic growth of 2.7% for the region in 2014. The regional employment rate is expected to hold fairly steady in 2014, on the basis of modest economic growth and recent labour market trends. However, if the participation rate resumes its long-term upward trend, unemployment could climb somewhat.
Despite relatively low unemployment levels, therefore, the prevailing conditions present major challenges for labour market policies in terms of making progress on the creation of good-quality jobs and, in particular, promoting productive employment for young people. Should sluggish growth lead to higher unemployment in some cases despite these efforts, the countries will need to strengthen their unemployment insurance and other protection measures to weather the situation.

Orginally published: May 2014
Publisher:  The Economic Commission for Latin America and the Caribbean (ECLAC)

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