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Dim Outlook Despite Economic Growth, Says ILO

By Gustavo Capdevila, IPS, 23 August 1999

GENEVA, Aug 23 (IPS) - A new International Labour Organisation (ILO) report states that although economic growth rallied this decade in Latin America, that performance has not been accompanied by improvements on the labour front.

From 1990 to 1998, production in the region grew by an annual average of 3.3 percent, while inflation rose by 10.2 percent, compared to 550 percent from 1990 to 1993.

But economic growth and price stability failed to translate into significant improvements with respect to jobs and wages.

The region's unemployment rate remained steady at around six percent up to 1993, when it began to climb - to 7.7 percent in 1996 and 8.0 percent in 1998. The ILO projects an unemployment rate of 9.5 percent in Latin America and the Caribbean this year.

ILO Director-General Juan Somavía said the need to provide greater opportunities for decent employment for men and women and to provide social coverage for all was "the region's great pending demand."

Presenting the report, Somavía pointed out that safety nets had failed to expand their coverage, which had even shrunk in some cases.

Many informal sector workers and impoverished peasant farmers lack social benefits, Somavía told the 14th regional meeting of ILO member states from the Americas, meeting Aug 24-27 in Lima.

The ILO also reported that industrial and minimum wages had rallied slightly from 1990 to 1998, despite the sharp drop in inflation. But although wages in the industrial sector increased by 2.7 percent a year in real terms this decade, they stood just slightly above the 1980 average.

With respect to minimum wages, although their buying power improved by an average of 0.8 percent a year from 1990 to 1998, it remained 27 percent lower than the purchasing power of the average regional minimum wage of the early 1980s.

The incomes of the informal sector, crucial to the region's economy, also fell an average of one percent from 1990 to 1998 - a trend that has major repercussions, the report stressed, as a full 85 percent of new jobs in Latin America and the Caribbean were created in the informal sector.

Indeed, the creation of new jobs remained stagnant last year in the formal economy, while the informal sector grew 4.5 percent, mainly due to the dynamic performance of micro-enterprises.

The informal economy presently provides 58.7 percent of jobs outside of the agricultural sector, formal employment in large private sector firms 28.4 percent, and the public sector 12.9 percent.

Besides the outlook for employment, the ILO report also focused on the agency's other chief concerns: basic labour standards and rights, social protection and dialogue.

Somavía underlined that each area of concern must incorporate a development and gender perspective, because most of the countries in the region are developing nations, and because women have played a key role in survival during critical periods.

In his message to governments, labour and business, the three co-governors of the ILO, Somavía recalled the region's violent past while urging a renewal of dialogue between the various branches of society.

Social exclusion is bad company for democracy, he warned, adding that dialogue must constitute one of the main foundations of social stability.

The report incorporates a concept formulated by Somavía when he became director-general of the ILO last March: the expansion of the actors in the social dialogue to include participation by peasant farmers and the informal sector.

The ILO also recommends that labour organisation by workers in the agricultural, informal and services sectors be fomented in the region.

With respect to ministries of labour, the study recommends reforms designed to extend attention to workers outside of the formal sector, such as informal workers and the unemployed.

The ILO also brought proposals for new training systems to boost productivity and competitiveness to the Lima gathering. Another initiative focuses on reforms in labour legislation, and stresses the need for increased compliance with international labour standards.

In the terrain of social security, the ILO recommends special attention to the potential role of unemployment insurance schemes to expand social safety nets in the region.

The ILO projects an intensification of the growth of informal activities seen in the past few years, predicting that a substantial proportion of the economically active population will find work in that sector in the 21st century.

More and more people in the region will have a flexible work life, very different from the more rigid moulds of the present century, with frequent job changes and the periodic development of new skills, the report predicts.