Employment Quality Remains an Issue in Latin America

Indicators such as labour stability and working hours are crucial to measure the employment quality. Photo: Governo de Minas Gerais. Wellington Pedro/Imprensa MG, Flickr

Open unemployment is one of the most widely used indicators for analysing the state of the labour markets of countries and regions. However, another fundamental concept that should also be used for this purpose is “employment quality”.

This notion is largely determined by two factors: the economic and productive environment (reflected in labour productivity and heterogeneity) and labour institutions.

According to a document recently published by ECLAC, Employment quality in Latin America, job quality indicators worsened in the period of low economic growth observed between 1996 and 2002, and subsequently improved thanks to a more favourable macroeconomic context and some specific public policies.

Despite some improvements between 2002 and 2007, all indicators show the large gaps that reflect the huge challenges facing the region in terms of job quality and equality. There are major differences in employment quality between men and women, employees and non-employees and between urban and rural workers.

This is demonstrated by the household surveys carried out in 18 of the region’s countries, which give a general overview of the following main employment quality indicators in Latin America:

• Labour income. In the period between 1996 and 2002, there was an increase in the percentage of workers with income below the poverty line (from 20.8% to 22.0%), whereas between 2002 and 2007 the figure dropped by almost three percentage points (from 22.0% to 19.1%).
• Non-wage benefits. Between 2002 and 2007, eight countries saw the proportion of waged workers who receive a bonus rise from 52.2% to 55.7%. The proportion of waged workers who have the right to paid holidays climbed from 32.6% to 36.3% between 2002 and 2007.
• Labour stability. This refers to the following two aspects: a written employment contract stipulating the labour rights and obligations of waged workers, and the stability of the labour relationship. In the period 2002-2007, the proportion of waged workers with a contract increased from 54.6% to 57.6% in the six countries with data available (Plurinational State of Bolivia, Chile, Guatemala, Mexico, Panama and the Dominican Republic). According to the study, despite recent improvements labour relations remain highly informal, with a high proportion of workers who have no contract and, more generally, none of the rights associated with contracts. In terms of the duration of the labour relationship, temporary labour relationships increased in 1996, 2002 and 2007 (from 19.0% to 26.5%) in Argentina, the Plurinational State of Bolivia, Chile, Costa Rica, Ecuador and Mexico.
• Social protection. The following two areas were analysed: membership of a pension system and health insurance. As far as pension membership is concerned, between 2002 and 2007 the proportion of waged workers paying into a pension system rose from 57.9% to 59.7%, while in 2007 only 14.5% of other employed people were paying into such a system. As for waged workers who pay health insurance, between 2002 and 2007 the proportion increased from 50.5% to 54.6%, whereas only 23.3% of those who are not waged workers have access to health insurance.
• Working hours. Excessive working hours of more than 48 hours a week on average fell significantly between 1996 and 2007 in the 11 countries of the region with data available (from 32% in 1996 to 27% in 2007).
• Organization of collective interests. In the five countries with data available for 2002 and 2007 (Plurinational State of Bolivia, Brazil, Costa Rica, Mexico and Peru), there was a slight rise in the number of waged workers who are members of a union (from 13.5% to 15.4%). Including four additional countries that have data available for 2007 (Colombia, Honduras, Dominican Republic and Uruguay), the percentage rises to 16.3%.
• Training. In 2002 and 2007, in the five countries analysed (Chile, Ecuador, Guatemala, Mexico and Nicaragua), the vast majority of workers do not benefit from regular training (just 12.5% in 2007).

Although recently many of the region’s countries have made efforts to improve the quality of employment, progress in most indicators has been modest.

The document’s authors, Jurgen Weller and Claudia Roethlisberger, argue that there could and should be a virtuous circle between employment quality and productivity, in the sense that increasing productivity enables employment quality to be improved, while improvements to employment quality would have a positive impact on productivity.

This is because of greater worker satisfaction in a positively perceived work setting, as well as workers’ interest in keeping a quality job because of the cost of losing it in terms of well-being. Both factors would boost worker effort, commitment, creativity, and so on.

Appropriate labour institutions are required if this virtuous circle is to be established. In this regard, it is vital for collective bargaining to be strengthened. The work contract is also a key means of promoting quality, given that many elements of employment quality are related to contracts.