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What effects will COVID-19 have on employment in Latin America and the Caribbean?

May 11, 2020 by Álvaro Altamirano Montoya - Oliver Azuara - Stephanie González Rubio Leave a Comment


In a prolonged recession from the coronavirus, The Bahamas could see job losses of -26.9% and Jamaica -24.8%. While in Guyana, Suriname and Trinidad and Tobago, their jobs could shrink by -16.7%, -14.5% and -10.5% respectively.  

COVID-19’s impact on the world’s labor markets is unprecedented. In the United States, 16.8 million people applied for unemployment  benefits over the period March 19 to April 9, a number never before reported in American history. In  Mexico, 346,878 formal jobs were lost in only 24 days (March 18 to April 6). For  Latin America and the Caribbean as a whole, this health crisis has emerged amidst a weak economic context: after the 2000-2013 boom, informality went from 61% to 55%, with the creation of 36 million formal jobs; but since 2015 this growth has stagnated and informality in the region stands at around 56% of the total employed.

Job loss scenarios

There is no consensus on the magnitude or duration of the pandemic or its full effects on the economy, but there is consensus on the sectors that will be most affected by quarantines and social distancing. This includes the trade sector, restaurants and hotels, as well as the transport sector. Lower aggregate demand will also have substantial effects on manufacturing sectors, as health restrictions have already begun to disrupt global supply chains.

At the IDB,  we created three possible scenarios to measure the potential impact of the pandemic on employment in the region. Estimates of job losses by economic activity were made, taking into account the largest historical declines in countries’ GDP. Additionally, the magnitudes for smaller countries and more open economies were separately analyzed, characteristics that imply greater reductions than those of larger and middle-income countries.

  • Short-term crisis. In this scenario we would see a fall in output twice that observed in the 2009 crisis, with a negative growth rate close to 4 percentage points.
  • Medium-term crisis. The recession would span three consecutive quarters, with a negative growth rate close to 10 percentage points.
  • Prolonged recession. A major recession without any kind of economic recovery in the medium term, and a negative growth rate close to 15 percentage points.

Our initial estimates paint a very difficult picture for Latin America and the Caribbean. Approximately 17 million formal jobs could be lost, and the informality levels could hit 62% in the region, losing all progress made here during the 2000-2013 period. This will depend, however, on how the pandemic evolves and on the mitigation measures taken by governments. The following table shows the results:

Solutions for overcoming the challenges of the pandemic

Because of its effects on the health of so many and the way it is affecting the world economy, COVID-19 represents the biggest challenge the world has faced in decades. After striving to protect citizens’ physical well-being, care for the sick and slow the spread of the virus, the main challenge for countries will be to rediscover a path to economic growth and labor and social protection. In fact, this pandemic highlights the need to restructure how social security operates in the region, so that access to health becomes universal and does not depend on working conditions.

To mitigate the impact of the virus on employment, at the IDB  we are supporting the design of strategies that best respond to the challenge that the pandemic poses to labor markets in countries, boosting different support mechanisms that can be provided by governments in the region. Coordination of different labor, fiscal, monetary and financial measures will be key to avoid permanent damage to productivity and improve the lives of workers in Latin America and the Caribbean.

To learn more, we invite you to download the publication How will COVID-19 impact employment? Possible scenarios for Latin America and the Caribbean (in Spanish).

In this podcast Laura Ripani (Principal Specialist and Coordinator of the Future of Work Agenda) and Fernando Pavón (Skills Development Specialist for the Caribbean) discuss the labor market in the Caribbean, how it is impacted by COVID-19 and the future of work in the region.

To listen to more of our podcasts, click here.


Filed Under: Coronavirus, Economy & Investment, Labour & Learning, Podcast, Social Systems Tagged With: Podcasts

Álvaro Altamirano Montoya

Alvaro Altamirano es consultor de la División de Mercados Laborales del BID. Su experiencia pasada incluye trabajos de consultoría para organismos regionales e internacionales desde los Think-Tanks FUNIDES y COPADES. Ha contribuido con consultorías para la Unidad de Desarrollo Sostenible del Banco Mundial. Cuenta con experiencia en docencia e investigación en universidades de Nicaragua y Brasil. Su investigación se centra en comparaciones de pobreza multidimensional, movilidad económica, trabajo doméstico no remunerado, medidas de bienestar en hogares monoparentales, y educación técnica. Posee Licenciatura en Economía Aplicada por la Universidad Centroamericana en Nicaragua y Maestría en Economía Familiar por la Universidad Federal de Viçosa en Brasil.

Oliver Azuara

Oliver Azuara es economista sénior en la División de Mercados Laborales del BID desde agosto de 2017, donde lidera operaciones e investigaciones orientadas a seguridad social digital, futuro del trabajo y evaluación. En 2020 ha trabajado en dar respuesta a cómo puede la tecnología facilitar la recuperación del empleo tras el COVID-19, y además es coordinador del Laboratorio de Ahorro para el Retiro del BID. Oliver se integró al BID en 2012 a la Oficina de Evaluación y Supervisión (OVE). Antes de ingresar al BID, Oliver trabajó como investigador en la evaluación del efecto de los programas de protección social en los mercados laborales y en el diseño de evaluaciones impacto sobre la educación financiera y pensiones en México. En el sector público mexicano se ha desempeñado como Director de Prospectiva Social en la Secretaría de Desarrollo Social (SEDESOL) y Líder de Proyectos en la Comisión Nacional de Ahorro para el Retiro (CONSAR). Oliver obtuvo una maestría y un doctorado en Políticas Públicas por la Universidad de Chicago, un postdoctorado de la Universidad de Yale y un diplomado sobre las reformas a los sistemas de pensiones en el Harvard Institute for International de Development.

Stephanie González Rubio

Stephanie González es consultora en la División de Mercados Laborales del BID desde 2017. Anteriormente, ella trabajó como investigadora en el Departamento de Estudios del Ministerio del Trabajo y Previsión Social en Chile, apoyando en temas de indicadores laborales, participación laboral femenina y juvenil, trabajo infantil, salario mínimo, sindicalización, y programas de capacitación. Dentro de esta área, ella participó en la creación de proyectos de Ley y realizó distintas investigaciones. Stephanie obtuvo un Master en Economía en la Universidad de Chile y es Licenciada en Ciencias Económicas en la misma universidad.

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Caribbean Dev Trends

We provide unique and timely insights on the Caribbean and its political, social, and economic development. At the IDB, we strive to improve lives in the Caribbean by creating vibrant and resilient economies where people are safe, productive and happy.

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