It's time to tackle the informal economy problem in Latin America

A fruit seller pulls his cart in Guatemala City, Guatemala.

Fifty-five percent of Latin Americans toil without contracts, social security or pensions. Fixing this must be our priority. Image: Reuters/Jose Cabezas

David Herranz
Regional Head, Adecco Group Latin America
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Latin America

This article is part of: World Economic Forum on Latin America

As I’m joining my third World Economic Forum on Latin America, the occasion leads inevitably reflection on events over recent years. While I wish I could return with news of huge progress in regional labour markets, I must sadly point instead to continuing challenges.

Youth unemployment remains a scourge. In much of our continent, more than 40% of young people lack jobs. Worse still, six out of 10 are in so called “informal” work – with no proper contract or social security, whether healthcare or pension cover. In fact, about a fifth of Latin America’s young – or nearly 30 million people – are “NEET”: neither in employment nor engaged in education or training.

Confronted with a problem of this scale, all of us – in the public and private sectors – need to work together to create opportunities. Some initiatives have started to gain momentum, notably the work-readiness programmes and measures like the Adecco Group’s engagement in the Global Apprenticeship Network, which creates national networks fostering apprenticeships schemes across the region and already has a presence in Mexico, Colombia, Argentina and Costa Rica.

But informality, by contrast, remains largely untackled. Nearly 140 million Latin Americans – about 55% of the working population – toil in the so called “informal” economy. Around 241 million have no access to social protection.

A man sells sweets car to car in Sâo Paulo, Brazil.
A man sells sweets car to car in Sâo Paulo, Brazil. Image: Reuters/Nacho Doce

What can be done? We can start by simplifying and untangling the overly complex, highly bureaucratic labour regulations and standards that stifle economies and innovation across much of our continent.

That means putting reforms to boost competitiveness and ensure workers’ rights at the top of our political agenda. And there are best practices we can be inspired by. Denmark’s flexicurity system, for examples, shows how regulatory frameworks can provide protection and flexibility at the same time. We also need active employment policies to promote training and upskilling. These moves have proven benefits, and can even stimulate entrepreneurship.

There must also be more recognition for the role of agency work, which can spur employment opportunities for the young. Data shows that 40% of young people who start working with private employment services move to a permanent position with the client company. Moreover, countries with close links between private and public employment services are known to demonstrate efficiency and quality gains, helping workers and employers alike.

One country – Argentina – is leading the way by giving public and private players the chance to shape what could be one of the most progressive labour markets in the region. In bold steps linked with his country’s G20 presidency this year, Argentina’s labour minister, Jorge Alberto Triaca, has proposed changes to truly meet the demands of today’s world and create an environment promoting the security and employability of workers, while allowing businesses to flourish.

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His reforms include simplifying labour laws; ratifying International Labour Organization Convention 181, allowing private employment agencies to operate within clear guidelines; and introducing active labour market policies. Argentina’s plans also involve promoting cooperation between public and private employment services, a focus on inclusion, and the implementation of policies that promote the access and integration of all workers based on their ability and irrespective of age, gender or ethnicity, as well as physical or mental disabilities. The Adecco Group Argentina has backed these bold ambitions with its own initiative, called #TalentoSinEtiquetas, which launched in May 2017.

As the Adecco Group’s regional CEO, I’m committed to combating youth unemployment, increasing the employability of young Latin Americans and, above all, fighting informality. Who knows – by next year, maybe we’ll be able to say we managed to move the needle.

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