Evidence shows that growth is a necessary condition, but it may not be sufficient. We need to grow in productivity and competitiveness in order to reach development. Knowledge seems to be the key.

By Martín Padulla

Labour markets in Latin America are changing as businesses become more sophisticated in a developing region. However, there are two factors that evolve at a much lower pace than expected. Both, low productivity and small investments in research and development, in comparative and relative terms, remain a problem.

The sustained growth experienced over the past years did not contribute to strengthen competiveness. Some countries, such as Argentina, Colombia, Mexico, Chile and Republic Dominican, made progresses as regards research and development. Nevertheless, information exchange must still be improved.

When thinking about global value chains, it becomes evident that it is not completely convenient to access them only by producing commodities. Challenge lies on specialization, finding a competitive advantage that allows us to integrate to such chains. Merge actions that enable us to solve inequality issues.

Nowadays we find data that indicates that an important amount of people have come out of extreme poverty and accessed a category usually called “middle-class”. Nonetheless, we are facing a very vulnerable social segment, in which, if a key member of the family endures illness or disability, the entire family goes back to being poor due to the fact of belonging to the informal employment sector. We are talking about millions of people without health insurance, pension or vehicles. Such vulnerability generates high tension, as better opportunities that do not always comes, are expected. Such expectation is a consequence of people having the idea that they now enjoy a better socioeconomic situation. Other negative elements are extremely high youth unemployment rates, employment informality and outrage.

Examples taken from other continents may better illustrate this issue. I.e. over ten years, Tunisia experienced an annual growth of 5%, no deficit and low debt. From an economist’s point of view, everything seemed to be functioning well. However, the “Arab Spring” came along, leading to a political and social crisis of great importance, as people were dissatisfied due to the lack of employment opportunities for young people and the vast extension of informal economy.

Evidence shows that economic growth is a necessary condition, but it has turned out not to be enough on its own. Consequently, active policies must be generated in order to promote social cohesion and citizen’s welfare. Both are achieved through the dignity that a decent job provides.

It is not possible to think about the labour world without discussing educational affairs in Latin America. In some countries, investment on this area has grown greatly. However, quality remains being far away from what a progressively dynamic, tough and unstable employment market demands. This means that besides investing, it is necessary to analyse how effective such investment might be. This shall become a reference to understand whether an investment is functional or not for the future of these countries.

There is a direct correlation between education problems and low productivity and business competitiveness. Any process that aims to improve productivity and competitiveness requires procedures that provide added value to products and services. Within such procedures, technological factors are included. Furthermore, flexible and dynamic technical-productive training is essential to improve the skills of both, employees and entrepreneurs.

Nowadays there is gap between the countries in the region and advanced countries. The large amount of small a single-owner companies is one of the main reasons that explain low productivity and competitiveness. If we do not accomplish to shorten the educational gap with advanced countries, Latin America may fall under the trap of productivity, a situation emphasized when foreign companies invest in our countries y demand workers with certain qualifications. As the Vice-president of the World Bank for Latin America, Hasan Tuluy states, the region should keep on making a smart use of foreign capital to replace its scarce saving capacity and improve the investment quality. The attempt to improve competitiveness by using cheap workforce and a devaluated exchange currency seems politically unviable and economically inadequate. The option of generating active policies on employment training through public-private articulations appears to be a more sustainable option.

The employability concept shall become further numeric and should be on the top of rulers’ priorities. Only by strengthening the quality and competences along with the productive system’s dynamic, shall the region grow in terms of productivity and competitiveness.

Informal employment, informal entrepreneurship and informal economy tend to create a vicious circle that punishes growth.

The basis for development is productivity and the basis for productivity is knowledge. A pertinent knowledge, adjusted to what is demanded.

Now more than ever, it becomes necessary to increase our human capital, promote policies that aim to formalize the economy and provide dynamism to the labour market with public-private articulations, to raise productivity and competiveness. Both factors are essential to develop a formal and inclusive economic growth with translates into a better welfare for those of us who inhabit the region.

No one wants to share poverty; therefore, the challenge is to share prosperity.

About Martin Padulla

Managing Director of Staffingamericalatina. Martin Padulla is Sociologist (USAL), MBA (UCA) and labour markets expert. He published “Flexible Work in South America” and “Regulatory framework for employment agencies in Latin America” two books about the new realities of work in Latin America.

mpadulla@staffingamericalatina.com

About Staffingamericalatina

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