Latin America must solve its’ productivity problems in a difficult context to avoid losing the advances made. The cooperation between public employment services and private employment agencies may play a key role once the cycle of high price commodities is over.

By Martín Padulla for staffingamericalatina

The history of Latin America will remember the first decade of the 21^st century as the years in which economic growth enabled poverty reduction. However, in the second decade of the century oil, food and mineral prices are no longer high, and the situation seems to unravel the productivity problems that put the progress made under risk.

Informality still is a scourge in the region. Youth unemployment is elevated. Employability problems remain an unsolved strategic issue. And not every country made the most of the favourable wind propelled by commodities.

A fact that is clear is that active employment policies are needed.

A recent article published by the IDB blog, Factor Trabajo, written by Rafael Novella and Laura Castrillo, wonders about the policies that work best. The authors quote a research developed by Card, Kluve and Weber, who made a thorough analysis of cases looking for evidence about different policies using samples from Europe, the United States and Latin America. The study showed that the most effective policies are those linked to job seeking and training and the least effective are the kind of policies linked to allowances. In the short term, labour intermediation policies are more effective than policies linked to training and education. Obviously, in the long term, policies linked to employment training gain a leading role once again. Therefore, there is a lot of work to be done in order to make training more efficient.

In Latin America, the largest part of the budget for active employment policies is destined to training. We need to work on the skills to be developed, putting emphasis on the abilities that the labour market demands and, most importantly, on the skills it will demand in the medium term. Unfortunately, several of our countries insist on delivering solutions based on allowances, even though empirical evidence shows that these mechanisms are inefficient.

The clear recommendation to face the short term without leaving the long term unattended is to strengthen public employment services in order to improve labour intermediation.

Following this idea, the Director of Employment of OECD, Stefano Scarpetta, promotes the articulation between public and private employment services as an effective way to make them stronger. The ILO also encourages cooperation using several mechanisms. Its’ Convention no. 181 on Private Employment Agencies, states in its Article 13, subsection 1 that “A Member shall, in accordance with national law and practice and after consulting the most representative organizations of employers and workers, formulate, establish and periodically review conditions to promote cooperation between the public employment service and private employment agencies.”

It sounds like a very reasonable recommendation. If labour intermediation programs are the most effective, it is necessary to make them stronger, to give them professional status, to make them more dynamic, and to use public resources in a more efficient way. Public-private articulation is the way to do so, as the in cases where this articulation occurred, there was a virtuous feedback between labour intermediation and employment training based on demand.

The evidence demonstrates that cases such as the Netherlands, United Kingdom, France and Germany, where there are joint efforts between public and private employment services, show that this is an accurate strategy. These are countries that have deeply understood that the challenge of a stable job is unwaiverable, but that it is necessary to set the real basis of stability in volatile labour markets and in economies that have increasingly shorter economic cycles.

If a company hires a worker, helps him to develop while enjoying every labour right and provides positions for him in different user companies, allowing him to experience economic and labour growth, then we are talking about something entirely different from labour scarcity. Nobody can link the concept of lack of stability with an adequately regulated triangular relationship, as there are workers who have retired in private employment agencies. These are all markets with an extremely low level of undeclared employment, which is the kind of employment that comes from a sinking economy and has a lethal load of exclusion, loss of rights, disloyal competition and damage of the public coffers. These are economies that instead of denying transitions, work strongly on them, strengthening workers by implementing training based on demand. These are places where the concept of flexibility comes with no ideological burden, as it is based on social pressures and has been implemented using models that link flexibility with workers’ security. These are countries that deeply study their labour markets and that provide multiple types of contracts so that companies and workers may have the freedom of choice.

Maybe the second decade of the 21^st century will be remembered in the regional history as the years that enable the modernization of our labour markets, with focus on employability, fighting undeclared employment and inclusion, and leaving behind tautological discussions that prevent us from reaching development.