Latin American Labor Markets in the 1990s: Deciphering the Decade

Type:
SCID Working Paper 137

Author(s):

Published:
06/1/02

Region:
Latin America

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Abstract:
Opportunities in the labor market are essential to the well being of individuals and families in Latin America since total household income depends more on labor earnings than it does in other regions. The importance of labor markets has not escaped the minds of Latin Americans. According to the Latinobar├│metro, a public opinion survey conducted in 17 Latin American countries, labor market troubles are consistently reported as the main problem in the region. From a list of 20 problems including corruption, poor education, poverty and violence, 40% of respondents in the region as a whole reported that a labor market problem was the most pressing for the country. This paper takes a global view of the region and uses data that focus on the decade of the 1990s. We find that LAC labor markets are very dynamic and have absorbed remarkable numbers of new workers. However, rising unemployment rates in the region are found to reflect a limited capacity to absorb the increased supply in some sub-regions. While unemployment has generally been "democratically" spread across groups, there is a narrowing of the ratio of youth to working age unemployment and of the ratio of urban to rural unemployment. A strong demand for female workers is associated with rising relative wages and higher labor force participation. Average wages (measured in PPP-adjusted U.S. dollars) remained constant or declined throughout the decade both in the Mexico and Central America region as well as in the Andean region. We also document the dispersion across the region in the share of workers earning "poverty wages." Low productivity, even among skilled workers, is shown to be a tremendous challenge for numerous countries. Finally, we find that for most countries, wage returns to secondary education declined, while in some, but not in all countries, wage returns to tertiary education increased. Overall, our findings suggest important sub-regional differences in labor market behavior.