Politics & Policies

Latin America – Active labour market policies are needed to protect social achievements and address productivity gaps

At a time when governments in the region face the dual challenges of creating quality jobs and safeguarding achievements in social inclusion and work quality, an ILO report highlights the need for a new approach based on active labour market policies to address the current economic slowdown.

A functional system of ALMPs in the region, and elsewhere, can ensure the continuous upgrade of workers’ skills, improve the quality of the match- ing between workers and employers and directly or indirectly promote productive employment creation. More generally, a comprehensive set of ALMPs can substantially support and facilitate the shift of the labour market in LAC towards high-value-added economic specializations and enhance productivity growth in the region. Importantly, these policies are capable of improving not only the labour market performance of participants in a sustainable manner, but also their living conditions and those of their families. This is particularly the case in developing and emerging economies, where ALMPs aim to address multiple objectives, beyond enhancing the employability of participants, which often include tackling some longer-term challenges, such as poverty reduction and community-level development. This multi-objective approach makes ALMPs a mainstay of national social protection floors in the region. As such, at the country level, a comprehensive set of ALMPs can contribute to improving equity in a sustainable manner, while enhancing employment mobility and job quality, thereby raising individual and economic potential more generally.

This report presents a thorough literature review and a meta-analysis of the impact evaluations of ALMPs carried out in LAC over the past two decades. The results highlight that these types of interventions can have an important impact on sustaining productive employment in the region (although further research is needed to unveil results on more spe- cific aspects). In particular, the evidence to date suggests that training programmes, employment subsidies and self-employment and micro-enter- prise creation programmes have been generally effective in LAC; although only limited knowledge exists concerning the two latter types of interven- tions. At the same time, public works schemes have proved to be successful in raising living standards of beneficiaries during participation, although their effects in terms of enhanced employability remain unclear. Similarly, very little is known with respect to the effectiveness of public employment services in the region. For all types of active interventions, the meta-anal- ysis shows that the design, targeting and implementation of a policy are essential in ensuring its effectiveness.

Despite the increased prevalence of ALMPs in the region, there continue to be gaps in both the coverage of ALMPs and the quality of the services provided, constraining the potential role of ALMPs as a policy tool to promote sustainable employment. In particular, while public spending on ALMPs has generally increased in the region, only in a few countries (i.e. Argentina, Brazil and Chile) is the level of expenditure on ALMPs as a share of GDP comparable with the levels registered in higher-income countries. In other LAC countries, no such policies exist or spending lev- els remain inconsequential, as is the case in Ecuador, Mexico and Peru, where spending is below 0.1 per cent of GDP (a mere fraction of expendi- tures dedicated to CCTs).

In addition, this report finds that while ALMPs in LAC often have multiple objectives, they are frequently narrowly focused on one type of intervention, rather than providing a more comprehensive set of meas- ures. For example, as shown by the ILO Compendium of labour market policies developed as part of this research project, training initiatives have been the most popular form of ALMP in LAC, both in terms of their incidence and the share of spending: 44 per cent of ALMPs implemented in the countries analysed have either been exclusively focused on training or have had a training component. Policies aimed at self-employment and micro-enterprise creation have also been popular, but only account for around one-quarter of all ALMPs. As such, the evidence presented in the report points to the need to leverage additional, and a more com- prehensive set of ALMPs, as well as to exploit the complementarities and synergies with policies that are already in place. For instance, the report finds that non-contributory programmes, particularly CCT programmes, provide an outstanding channel for leveraging further ALMPs to promote quality and sustainable employment.

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via Report on active labour market policies: ILO: Labour market policies in Latin America must be reoriented to protect social achievements and address productivity gaps

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