Informality in the time of COVID-19 in Latin America: Implications and policy options

Abstract

This paper analyzes the dynamics of the labor market in Latin America during the COVID-19 pandemic. After a decade of a virtuous circle of growth with the creation of formal jobs, the pandemic has had an considerable impact on the region’s labor market, generating an unparalleled increase in the proportion of the inactive population, considerable reductions in informality, and, in contrast, smaller fluctuations in formal jobs. In this context, the formal sector, given its lower flexibility, became a "social safety net" that preserved the stability of employment and wages. Based on the findings presented in this paper, it is projected that, starting in 2021, informality will grow to levels higher than those of the pre-COVID-19 era–with 7.56 million additional informal jobs–as a result of the population returning to the labor market to compensate for the declines in incomes. According to the simulations presented, postponing or forgiving income tax payments and social security contributions conditional on the generation of formal jobs could reduce the growth of informality by 50 to 75 percent. Achieving educational improvements has the potential to reduce it by 50 percent.

The Work, Economic, and Remittance Stress and Distress of the COVID-19 Pandemic Containment Policies: The Case of Venezuelan Migrants in Argentina and Chile

“…However, working conditions in the Global South tend to have more precarious labor markets for citizens and immigrants than in the Global North. For example, Latin American countries’ economies were among the most negatively impacted by the COVID-19 pandemic containment efforts because approximately half of workers were in the informal labor market and did not have social security protections when they faced underemployment and unemployment [ 1 , 2 , 45 , 46 ]. Our findings capture these patterns.…”

“…The economies and labor markets in Latin American countries were among the worst impacted by the pandemic, largely because half of the workforce, on average, is in the informal labor market [ 1 , 2 , 45 ]. Informal jobs are unproductive and highly unstable and do not contribute to workers’ social security or provide them benefits, such as health insurance, social security, and severance payments [ 45 , 46 ]. Thus, in 2020, Latin American and Caribbean countries experienced an approximate 21% decrease in hours worked, the biggest lost worldwide [ 2 ] (p. 12).…”

“…Venezuelan immigrants were particularly vulnerable to these macro-economic changes [ 3 ]. Most Venezuelan immigrants work in the informal labor market or in service industries that were negatively impacted by social distancing measures [ 36 , 46 , 47 , 48 ]. Not surprisingly, a survey found that 24% (of 416) Venezuelans immigrants throughout the Americas lost income and the ability to buy food due to job loss because of the COVID-19 containment policies [ 3 ].…”

“…Nonetheless, immigrants and informal workers had limited access to public COVID-19 assistance [ 45 , 46 , 49 , 51 ] because government officials could not reach these workers [ 46 ], and the programs had high requirements. In Chile, the pandemic aid programs required a valid RUT [ 53 ], which disqualified undocumented immigrants, those with expired RUTs [ 51 , 52 ], or those who were processing their lawful residency status and did not have RUTs.…”

A Review of the Progress and Potential of Energy Generation from Renewable Sources in Latin America

“…However, the social-distancing measures and incurred financial strain on the health system and industry with the recent pandemic affected countries' political and welfare systems. Thus, in 2020, the region's poor population (US$2.15 per day, in 2017 purchasing power parity) rose due to reduction of Gross Domestic Product (up to 7.4%) and formal jobs (39 million people, Acevedo et al 2021). However, the region has a variety of emerging economies, climates, ecosystems, and untapped renewable sources, and the promotion and benefits of renewable energy integration in economic, social, and political matters have been recognized in several studies (Flavin et al 2014; Organisation for Economic Co-operation and Development [OECD] 2019).…”