It is necessary to understand exactly what we are talking about when address the issue of employment informality. It is possible to design integral and effective plans to fight against it.

By Martín Padulla for staffingamericalatina

Employment informality is a scourge within our region. Every day, millions of people go to work without having any kind of labor right, health insurance or social security coverage, completely defenseless towards National States which ignore the issue or which cannot, do not want or do not know how to solve it.

As always, the International Labor Organization has been the standard bearer when exposing this issue. Towards the end of the past year, it released a program named FORLAC, focusing on employment formalization. Several countries of the region have developed different degrees of advance on such program under the certainty that informality is an obstacle the development of Latin American economies.

Nowadays 130 million workers in the region belong to the informal market. This phenomenon occurs with more frequency among vulnerable groups, such as: young people, women, immigrants and poor people.

When analyzing the last decile, which is the group of workers with higher incomes y Latin America, we find that the informality rate among them is around 30%. However, when analyzing the first decile, that is to say, the group with lower incomes, non-registered employment goes up to 74%.

When crossing the variables of income and gender, and focus on domestic work –performed on a 90% by women-, we discover that informality rate is of 70%. Some countries within the region have taken concrete measures to solve the problem, creating incentives to increase formal employment and ratifying ILO’S convention no.189 on domestic work.

As regards young people, only 40% of those employed have a formal job. Each year over 5 million young people enter the employment market in our continent. According to calculations presented by OIT’s Regional Director, Elizabeth Tinocco, 40 million formal jobs should be created starting today and up to 2020, so as not to aggravate the current situation.

Unemployment rate among young people still doubles general unemployment rate and triples adults’ unemployment rate.  Young people represent 43% of unemployment in the region. Over 21 million young Latin-Americans neither work nor study and, according to ILO, 4.6 million of those youngsters are a hard nucleus as they do not study, nor work, are not looking for a job and do not help with the house-chores at their homes, consequently they are in a social exclusion situation.

Yet we constantly hear, day after day, the concept of social inclusion. How can we do to prevent this concept from becoming meaningless and promote it to transform into a reality?

Experts –not politicians- coincide on the fact that in order to fight informality, it is essential to revise rules and standards so that they become easier to accomplish by companies and employees. Creating incentives to formalize employment is very important. It is vital to improve the systems that control the fulfillment of laws, to simplify processes, develop strategies for employment training and assemble public and private initiatives.

As regards this last point, it is interesting to highlight some specific recommendations made by the ILO as regards public employment services. The main purpose of public employment services is to ease the adjustment between workers and companies to the labor market’s changing conditions. ILO exact interest for the employment services area is focused on:

• Support the reform and modernization of public employment services
• Promote the correct regulation for private employment agencies
• Encourage cooperation between public employment services and private employment agencies in order to strengthen collaboration with the World Association of Public Employment Services (WAPES) and the International Confederation of Private Employment Agencies (CIETT).

In Latin America, agencies employment regulation is deficient. However, it is the main entrance towards the formal employment market for young people, as every young person who joins the market through these agencies, does so with a formal job. 40% of them keeps working in the user company in a formal and permanent position. In several countries in the region, these companies may not provide their services to sectors such construction, rural employment or public employment, all areas that show high levels of informality.

Despite restrictions and old-fashioned regulations, these companies are actually a social and economic progress factor.

Which is the adequate regulation for these agencies? The ILO considers that it is that regulation with adjusts to Convention no.181. This document was created by the leaders of the tripartite organization, which has the correct balance.

In order to fight informality, it is essential to include the following measures: tax incentives; ratification of Convention no.189 on domestic work; ratification of Convention no.181 on private employment agencies. This set of measures shall facilitate the struggle against informality, actively promoting formalization and employability among our citizens.

Though economic growth is important to create employment, it is not enough. Without establishing active, deliberate, innovative and inclusive politics, at least 55 years shall be needed to reduce informality to the half in the region, a period of time way to long given the potential of Latin America.

The pace must be speed up. Our youngsters claim for it.

Later we will have to work on productivity, but that issue shall be addressed on my next column.

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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