# **II. Trends over the last decade**

# **a. Overall evolution**<sup>**1**</sup>

**_In the 1990s, employment grew faster than the working age population until 1998_**<sup>**_2_**</sup> **_after which it declined._** Despite higher GDP growth rates than in the 1980s, (3.9 v. 1.1 percent), the rate of employment growth was lower (2.9 v. 2.1), although Stallings and Peres (2000) argue that the employment-output elasticity during the 1990s was quite similar to what was observed during the 1960s and 1970s.  There is therefore some disagreement around whether the region has entered a period of “jobless growth” (perhaps related to changes in output composition) or simply a cyclical slowdown.  Further, this inverted-U employment growth obscures great heterogeneity in the region. The employment rate showed a downward trend in Argentina, Brazil, Ecuador and Uruguay while the reverse was true in Chile, Costa Rica, Dominican Republic, Mexico, Peru, Venezuela and Caribbean countries.  Finally, these trends have occurred concomitant with a continuous expansion of labor force participation, with a particular increase in female participation from 44 to 50 percent between 1990 and 2000, that has exacerbated the challenge of creating sufficient good jobs.

**_Real wages increased in the formal sector of the economy in almost all Latin American countries during the 1990s._** By 2000, the median wage for selected Latin American countries was 15 percent higher than the level observed in 1990, although in many cases, with the notable exception of Chile, still below the levels of the 1980s.<sup>3</sup> The upward trend was particularly strong in Bolivia, Chile, Costa Rica, Guatemala and Nicaragua, where real wages in 2000 were well above 20 percent of what was observed in 1990. Formal sector real wages increased in Colombia, Ecuador, Paraguay, Peru and Uruguay, remained relatively constant in Argentina and Brazil, and clearly fell in Venezuela - declining 35 percent between 1990 and 2000.  The  wage gains were likely driven by productivity increases in the modern part of the economy. Saavedra (2003) pools data from different sources for Brazil, Chile, Colombia, and Peru, and finds a clear positive correlation between labor productivity and real wages in manufacturing during the 1990s. Aggregate labor productivity, however, remained stagnant growing at an annual rate of  –0.03 percent per year (IDB 2004).

**_LAC has some of the highest unemployment rates in the world._** (ILO 2001) Unemployment rates have been rising across the 1990s in Argentina, Colombia, Chile, Uruguay, and Venezuela, experiencing a jump in 1998 when employment rates began to fall amidst expanding participation. By 2000, the median open urban unemployment rate among Latin American countries was 9 percent. Argentina, Colombia and Panama reached levels above 15 percent, while it continued to be particularly low in Mexico (2.2%).  In Caribbean countries for which data are available, urban unemployment decreased during the 1990s. Increasing urban unemployment tends to be less driven by shedding in the formal sector, and more due to reduced access to the market, especially by the young.

**_However, the incidence of long-term unemployment has not increased significantly._** (see IADB 2004).  The incidence of longer unemployment spells is still low compared to Eastern European countries and other developed countries; during the 1990s the incidence of unemployment spells longer than one year was 11 percent among Latin American countries but 42 percent among

> 1 This section draws on background work by Saavedra

> 2 based on information from household surveys compiled by the International Labor Organization (ILO).

> 3 CEPAL’s early evaluations found if anything a positive impact on wages (see Weller 2000) Stalling and Peres (2000).

2