By Manuel Urquidi

Media has devoted the past few months to tell us how the price of oil is dropping: a barrel today is worth less than half the value it had last year. In addition, there is a threat of mineral prices continuing to fall, which makes economic perspectives for Latin America and the Caribbean less flattering as days go by. In our region, many people’s jobs depend either directly or indirectly on the prices of primary matters, because the economies of several countries depend mostly on these products. The scenery has changed: the elevated prices that used to enable greater social expenditure and larger public investments no longer exist.

What changes with the drop of oil prices? Paradoxically, a drop of these prices also creates new jobs and, therefore, has a positive effect. The problem lays on the fact that the skills of people who are left with no jobs tend not to match the skills demanded for new jobs. Consequently, there is a risk of unemployment rates growing. What can government and public institutions do to help?

If we analyze the situation that enables the drop of oil’s price, we can see there is an interesting parallelism with what happens when countries apply free trade agreements (FTA). FTA generate new jobs, but also destroys other jobs. For this context there are programs such as the STAA (Strenghtening Trade Adjustment Assistance) of the United States. These programs offer economic support to dismissed workers, while training them to develop new skills in the areas where new jobs are being created. It is about reconverting unemployed people to help them find new jobs.

The same model may be modified to offer some benefits to unemployed workers and help them gain the skills the market demands in the new context. Generally speaking, these programs require active employment policies (training) and economic support during unemployment. They also differ with the classical training programs that I mentioned in other articles on the amount of training time needed to reach a re-training process.

Its’ context is different to that of employment protection programs because, sadly, we know that primary matters take a long time to recover their price and most workers cannot quickly go back to working in the areas they used to. This justifies a reintegration process with new skills that provide workers not only an income source but also enables them to provide wealth to the country’s economy. Once again, we are talking about social policies with economic perspectives that cause positive social impacts and positive economic impacts. These sort of programs can minimize the negative effects that a drop of prices in our region will cause if nobody does anything about it.

Source: http://blogs.iadb.org/