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Growth, Employment, and Poverty in Latin America$

Guillermo Cruces, Gary S. Fields, David Jaume, and Mariana Viollaz

Print publication date: 2017

Print ISBN-13: 9780198801085

Published to Oxford Scholarship Online: June 2017

DOI: 10.1093/oso/9780198801085.001.0001

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Introduction and Motivation for the Project

Introduction and Motivation for the Project

Chapter:
(p.3) 1 Introduction and Motivation for the Project
Source:
Growth, Employment, and Poverty in Latin America
Author(s):

Guillermo Cruces

Gary S. Fields

David Jaume

Mariana Viollaz

Publisher:
Oxford University Press
DOI:10.1093/oso/9780198801085.003.0001

Abstract and Keywords

This book examines the links between economic growth, changing employment conditions, and the reduction of poverty in Latin America in the 2000s. Its contribution is an in-depth study of the multi-pronged growth–employment–poverty nexus based on a large number of labour market indicators (twelve employment and earnings indicators and four poverty and inequality indicators) for a large number of Latin American countries (sixteen of them). It presents an exhaustive analysis of the growth–employment–poverty nexus which directly relates changes in all labour market indicators to economic growth, and changes in all employment and earnings indicators to changes in poverty. It also bases its analysis on a broader set of labour market indicators than those used in other studies.

Keywords:   Latin America, economic growth, employment, poverty, labour markets

1.1 Context and Motivation

The year 2015 marked the conclusion of the United Nations’ Millennium Development Goals and the beginning of the UN’s 2030 Agenda for Sustainable Development. Foremost among the Sustainable Development Goals is to end poverty in all its forms everywhere. Another of the SDGs is to promote sustained, inclusive, and sustainable economic growth, full and productive employment, and decent work for all.

This book examines the links between economic growth, changing employment conditions, and the reduction of poverty in Latin America. The research project that led to this book had its origins in a mid-2013 meeting attended by the director of UNU-WIDER, Finn Tarp, and Gary Fields, one of the researchers on this project. At that time, the United Nations’ Millennium Development Goals were nearing their target date for completion, and the number one goal—to halve, between 1990 and 2015, the proportion of people whose income is less than 1 dollar a day—had already been achieved. The new Post-2015 Development Agenda, since adopted, was under discussion.

UNU-WIDER, for its part, had just launched a four-year research programme with the three development challenges of transformation, inclusion, and sustainability. Fields has had a long-term research interest in improving labour market conditions as a means of helping the poor lead better material lives and had just published a book on this topic (Fields 2012). Other important works had just appeared as well—in particular, the World Bank’s World Development Report 2013, entitled simply ‘Jobs’ (World Bank 2013a). What struck Tarp and Fields and their colleagues was how much was known about some aspects of the problem, but also how little was known about others. In particular, a priority for deeper analysis was the growth–employment–poverty nexus in the various countries of the world.

(p.4) By then, the dismal growth–employment–poverty record of the United States and other OECD countries had been well-documented. In the case of the United States, Stiglitz (2012, 2015) showed: recent United States’ economic growth took place primarily in the top 1 per cent of the income distribution; as a result, there was growing inequality of income and wealth; those at the bottom and in the middle are actually worse off now than they were in 2000; life is particularly harsh at the bottom, and the recession made it much worse; and there has been a hollowing-out of the middle class. Other OECD countries have not done much better. The OECD Employment Outlook (2012, 2015) tells us: economic growth has not been strong enough to make more than a small dent in OECD-wide unemployment; labour market conditions are improving but recovery is far from complete; employment is still growing too slowly to close the jobs gap induced by the crisis any time soon; the jobs mix has shifted towards more part-time work, making it harder for some unemployed to find full-time jobs; the OECD average unemployment rate is still 1.6 percentage points above its pre-crisis level; long-term unemployment also remains unacceptably high; and weak real wage growth also remains a concern, particularly in the euro area.

UNU-WIDER had a strong interest in learning about the links between growth, employment, and poverty in the poorer regions of the world. It would have been an impossibly ambitious task to analyse the entirety of the rest of the world. Fortunately, though, an exceptional database had been compiled for Latin America and was available for our use.

Household datasets have been processed by CEDLAS (Centro de Estudios Distributivos, Laborales y Sociales, Universidad Nacional de La Plata), compiled into the database SEDLAC—Socio-Economic Database for Latin America and the Caribbean (CEDLAS and World Bank 2014), and made available for us to analyse in this project.1 The microeconomic data used in this project included more than 150 household surveys, comprising observations for five million households and eighteen million persons for sixteen Latin American countries: Argentina, Bolivia, Brazil, Chile, Colombia, Costa Rica, Dominican Republic, Ecuador, Honduras, Mexico, Panama, Paraguay, Peru, El Salvador, Uruguay, and Venezuela. Most countries offered annual household surveys, though a few were biennial, with sample sizes typically numbering in the tens of thousands of households. Further details are given in Chapter 2.

Our research project answers the following broad questions: Has economic growth resulted in gains in standards of living and reductions in poverty via improved labour market conditions in Latin America in the 2000s, and have (p.5) these improvements halted or been reversed since the Great Recession of 2008? How do the rate and character of economic growth, changes in the various employment and earnings indicators, and changes in poverty and inequality indicators relate to each other?

From the very outset of the study, we adopted broad conceptualizations of the three key terms: growth, employment, and poverty. Economic growth includes the usual measure: the growth of real gross domestic product (GDP) per capita. But growth goes beyond just the growth rate to include also attention to the type of growth being pursued. Are mechanisms in place making the economic growth inclusive in the sense that ordinary people can share in improved standards of living through the work they do and/or through the social programmes available to them? Employment and unemployment include the usual measures promulgated by the ILO—employed if working even one hour for pay or fifteen hours or more not for pay in the reference week; unemployed if not employed but actively looking for work; but in addition employment and unemployment also include other aspects of employment such as the amount earned in a month and the type of work performed. Poverty is gauged by ‘income poverty’, measured using a number of alternative absolute poverty lines.

The first stage of our research was a collection of sixteen detailed country studies completed in late 2014 and revised early in 2015 (Cruces et al. 2015a2015p). We then compiled all of the individual country data and results into a new dataset on the rate of economic growth, changes in employment and earnings indicators, and changes in poverty and inequality indicators. With this dataset, we performed cross-country analysis of the growth–employment–poverty nexus and provided additional within-country evidence (Cruces et al. 2015q). This volume is based on these working papers.

1.2 The Analytical Framework Adopted

Following Fields (in press), the analytical framework adopted in this volume can be visualized schematically in the following way. Consider a policy action of interest and an outcome variable by which the policy action is judged—in this study, it is pursuing economic growth as a means for reducing poverty. For economic growth to contribute to poverty reduction, there must be at least one channel, maybe more, through which growth reduces poverty.

The channel emphasized in this research is the employment channel. Employment is understood to include not only wage and salaried employment but also self-employment. The issue is not just whether people are employed but also how much they earn for the work they do. Thus, besides employment/unemployment per se, the types of jobs people are working in and their labour market earnings are central to the analysis.

(p.6) There are good reasons for concentrating on labour markets. One is that national accounts data show that labour incomes account for more of total income than do all other income sources combined. Another reason is that income and expenditure surveys indicate that most people derive most if not all of their income from the work they and other members of their households do. A third reason is that decomposition studies reveal that labour income inequality accounts for a larger share of total income inequality than do the inequalities of all other income sources combined.

But employment is not the only important channel. Economic growth may provide the tax revenues enabling countries to increase spending on existing social programmes and create new ones. Some of these social programmes work through the labour market, reaching people as workers (e.g. unemployment insurance, old-age pensions, and job-related health coverage). Others work in other ways, reaching people as consumers and citizens (e.g. free or subsidized transportation, food, or housing).

Consider Figure 1.1. Employment as a channel linking growth and poverty is the focal point of our analysis. For economic growth to reduce poverty via the employment channel, the growth must result in improved employment conditions (Channel A), and improved employment conditions must result in reduced poverty (Channel B). The growth–employment–poverty channel receives the bulk of the emphasis in what follows. But in addition, economic growth reduces poverty insofar as it results in improved social programmes (Channel C) and if the social programmes reach the poor (Channel D). These social programme channels are discussed in the specific country chapters, but they are not analysed from a cross-country perspective as this book is focused on the employment channel. Figure 1.1 displays the case in which all these channels are open, and consequently economic growth reduces poverty via both the employment channel and the social programmes channel.

Introduction and Motivation for the Project

Figure 1.1 Open transmission channels

Source: The figure is taken from Fields (in press).

Unfortunately, these channels may be blocked, because employment is created but the wages and hours of work offered are so limited that workers cannot escape poverty, or because the benefits of the social programmes go to the haves but not to the have-nots. This second case is depicted in Figure 1.2. (p.7) In such a case, economic growth may take place, but employment conditions may improve only for those at the very top of the income distribution but not for those in the middle or the bottom, and the same may be true for socially provided goods and services. Thus, although economic growth takes place, the poor may be left out, and thus poverty is not reduced.

Introduction and Motivation for the Project

Figure 1.2 Blocked transmission channels

Source: The figure is taken from Fields (in press).

Does economic growth benefit everyone? Or does it benefit just those at the top to the exclusion or even impoverishment of those further down in the income distribution? Neither answer can be assumed, especially in a region with as much inequality as Latin America has. A fruitful way to proceed is to examine which channels are open in Latin American countries, which are sluggish, and which are blocked. That is what the research in this book investigates.

1.3 Previous Literature and our Contributions

As detailed in our conceptual framework, we study the growth–employment–poverty nexus in Latin America. This work is related to several literatures dealing (mostly separately) with the growth–employment nexus, with the employment–poverty nexus, and with the growth–inequality nexus in the Latin American region. In the following pages, we highlight some of the most important multi-country contributions to these literatures. There are also country-specific studies covering growth patterns and changes in some labour market indicators on the one hand, and the relationship between changes in some labour market conditions and changes in poverty on the other hand. We provide more details about these studies in each of the corresponding country chapters.

In the latest of a series of papers, Weller (2014) studies mainly the growth–employment nexus in Latin America and the Caribbean for the years 2003 to 2012. He finds that, at the regional level, during the period of high economic growth from 2003 to 2012, the region experienced: an important reduction in (p.8) the unemployment rate; an improvement in employment quality indicators, such as wages, share of workers registered with social security, share of self-employed and wage/salaried employees, sectoral composition of employment, and level of education of employed workers; and a reduction in the wage gap between highly and low educated workers. The paper focuses on the whole period under study, does not analyse in detail the impact of the international crisis of 2008–9 on labour markets in Latin America, and has little to say about changes in individual countries. In the discussion of the results, the author attributes the generalized improvement in labour market conditions in Latin America over this period to the role of labour market institutions.

Another recent multi-country study (World Bank 2015a) also covers the 2003–12 period but focuses on the employment–poverty nexus rather than on the growth–employment nexus. The report, based as ours is on the SEDLAC database for almost the same group of countries (excluding Venezuela and including Guatemala), emphasizes the post-international-crisis period. Based on different microeconomic decomposition approaches, the study highlights the importance of changes in labour earnings to explain poverty reduction in the region during the 2003–8 and 2008–13 periods, documenting that the magnitude of this effect was lower for the post-international-crisis period. The report relates the rise in mean labour earnings to improvements in the educational composition of the workforce. Finally, the report also documents a fall in wage skill premiums, which it attributes to external conditions (e.g. the commodity price boom) and government policies (e.g. minimum wage increases).

There are other studies of the employment–poverty nexus for the region based on microeconomic decompositions of household survey data. ECLAC (2014) uses a variation of this methodology and concludes that the most important factor for poverty reduction was the combined increase in employment and wages, although in general, labour earnings increases had a greater impact than employment growth on household income changes. This is consistent with results from Beccaria et al. (2011), World Bank (2013b), and Inchauste et al. (2014), who also decompose changes in the poverty rate and report increases in labour income as the main channel to poverty reductions. While not based on decompositions, ECLAC-ILO (2015) is another example of a study of the labour market determinants of the fall in poverty in Latin America for the period 2002–12. The study highlights the role of strong job creation, especially in wage/salaried positions, and public policies, such as minimum wages increases, formalization of workers, and expanded coverage of education and social protection systems.2

(p.9) Another strand of the recent literature on Latin America deals with the well-documented fall in income inequality since 2002, and most of these studies cover the connection between labour markets and these changes in inequality. Some recent examples include López Calva and Lustig (2010), Gasparini and Lustig (2011), Gasparini et al. (2011), Alvaredo and Gasparini (2015), and Cornia (2014). The conclusion from these studies is that the fall in inequality in the region is attributable to global economic conditions, growth acceleration, and a rapid equitable accumulation of human capital. Others also speculate about the role of new policy approaches, including macroeconomic policies, fiscal and monetary policies, trade and financial policies, and labour and social expenditure policies (Cornia 2014).

Finally, a series of studies also cover the social programmes—poverty reduction nexus, dealing with the role of social policies in reducing poverty, highlighting conditional cash transfers (CCT), among others. The multi-country studies on these issues document an increase in the number of countries in the region adopting programmes of this type. They also find that the fiscal resources allocated to CCT programmes increased as a percentage of GDP from 2000 to 2010, which implied an increase in the percentage of the population covered by these programmes during the same period (Cecchini and Madariaga 2011; Stampini and Tornarolli 2012). While we do not cover this channel directly in our work, the country chapters discuss the specific initiatives adopted in each case during the period under study.

We build on these studies by analysing the growth–employment–poverty nexus in Latin America in the decade of the 2000s, which was only partially covered by the previous literature. Previous papers have only focused on the first part of the link (growth–employment and growth–poverty) or the second one (employment–poverty).

Building on what came before, our contribution is an in-depth study of the multi-pronged growth–employment–poverty nexus based on a large number of labour market indicators (twelve employment and earnings indicators and four poverty and inequality indicators) for a large number of Latin American countries (in our case, sixteen of them). Moreover, we present an exhaustive analysis of the growth–employment–poverty nexus which directly relates changes in all labour market indicators to economic growth, and changes in all employment (p.10) and earnings indicators to changes in poverty. We also base our analysis on a broader set of labour market indicators than those used in other studies: the previous literature focused mainly on labour earnings, unemployment, and a limited set of job mix indicators (mainly, the share of workers registered with social security), whereas we offer a greater detail in terms of job mix and sectors. In terms of the period under study, we cover the whole decade of 2000, starting in 2000 up to 2012–13, but our analysis is not limited to the whole period only: we include the domestic economic crises that some of the countries suffered at the beginning of the 2000s, and we also study the generalized crisis that followed the Great Recession of 2008–9. Finally, while we present a cross-country analysis of broad patterns for the whole region, our multi-country analysis is based on a consistent and systematic review of the experience of each one of the sixteen countries in our sample.

1.4 Main Questions and Major Findings

This section proceeds in two stages: first, the principal questions asked, and second, our major findings.

Some of our questions about the growth–employment–poverty nexus in Latin America are on a country-by-country basis. If a country grows faster, what is the effect on the employment and earnings indicators and on poverty and inequality indicators? What is the relationship between employment and earnings indicators and poverty rates? How did earnings change over all deciles of each country’s income distribution during the 2000s?

We also ask a set of cross-country questions. Do those countries that grew faster have larger and more widespread improvements in labour market conditions and consequently larger reductions in poverty? How tight is this cross-country relationship? To the extent that substantial variance is left unexplained by countries’ rates of economic growth alone, what other factors might be responsible for improving labour market indicators? The other factors examined include initial GDP, the initial value of the labour market indicators, and a list of selected macroeconomic variables: agriculture as a percentage of GDP, industry as a percentage of GDP, services as a percentage of GDP, final consumption expenditure as a percentage of GDP, expenditure in education and health as a percentage of GDP, expenditure in social security as a percentage of GDP, terms of trade, foreign investments as a percentage of GDP, revenues from natural resources as a percentage of GDP, and stock of public debt as a percentage of GDP. Other questions we ask in this study are: are labour market indicators moving together—improving or worsening? Do those countries that enjoyed larger and more widespread improvements in labour market conditions have larger reductions in poverty? Regarding the (p.11) economic crisis of 2008, how did labour market indicators change during the crisis and its aftermath in Latin America?

We turn now to the findings. Looking first at a comparison between each country’s initial household survey (typically the year 2000) and the final year (typically 2012), we find remarkable progress in all three aspects of the growth–employment–poverty nexus:

Growth: National income accounts reveal that all sixteen countries achieved positive rates of growth of real GDP per capita. These annualized rates ranged from just below 1 per cent in the case of Mexico to 5.6 per cent in the case of Panama and Peru. The regional average (unweighted) for the sixteen Latin American countries was just under 3 per cent, well above the annualized rate of growth of GDP per capita in OECD countries, which was 1.0 per cent.

Labour market indicators: The rate of improvement in labour market indicators in Latin America was exceptional. All sixteen of the labour market indicators used in this study improved in Bolivia, Brazil, and Peru, fifteen of the sixteen improved in Panama, and the majority of the labour market indicators improved in all of the other countries except for one (Honduras).

Poverty rates: Using the 4 dollars-a-day poverty line (‘poverty’) and the 2.5 dollars-a-day poverty line (‘extreme poverty’), we find reduced rates of poverty and extreme poverty in fifteen of the sixteen countries. Once again, Honduras was the only Latin American country to have registered an increase in its rate of poverty.

In short, the 2000s were a time of strong improvement in the growth–employment–poverty nexus in Latin America. The only exception to this pattern was Honduras, which was simultaneously affected by the international crisis and episodes of political instability that led to most of the deteriorations observed by the end of the period.

Of course, like the rest of the world, Latin America suffered from the global economic crisis of 2008. However, the downturns in Latin America were milder and more short-lived. Real GDP per capita in Latin America fell at a 1.5 per cent annual rate in 2008–9, but then grew at a near 3 per cent annual rate from 2009 to 2012. In the labour market, most countries in the region suffered a deterioration in at least some labour market indicators as a consequence of the international crisis of 2008, but the negative effects were reversed very quickly in most countries, with the result that nearly all labour market indicators showed improvements in 2012 compared to where they had been in 2008. And both poverty and extreme poverty rates fell monotonically, even during the global economic crisis.

In sum, in the great majority of Latin American countries, economic growth took place and brought about improvements in almost all labour market (p.12) indicators and consequent reductions in poverty rates. But not all improvements were equal in size or caused by the same things. To understand why some countries progressed more in some dimensions than others, we performed a number of additional analyses, from which we draw the following lessons, detailed below:

  • For the region as a whole, real GDP per capita grew during the 2000s, all employment and earnings indicators improved, and poverty and inequality fell.

  • Country by country, real GDP per capita grew during the 2000s in all Latin American countries, the great majority of labour market indicators improved in all countries but one, poverty rates using the 2.5 and 4 dollars-a-day poverty lines fell in all countries but one.

  • Looking across countries, faster growth was associated with larger improvements in labour markets indicators, but the relationships were not tight.

  • Looking across countries, increases in some macroeconomic factors were associated with changes in labour market conditions in Latin America during the 2000s, some of them always in the welfare-improving direction and some others always in the welfare-reducing direction.

  • Looking across countries, larger improvements in employment and earnings were associated with larger reductions in poverty.

  • Looking at year-by-year changes within countries, when economic growth was faster, employment and earnings indicators and poverty and inequality indicators improved more rapidly, and the faster labour market conditions improved, the faster poverty was reduced. The magnitude of the effect and the pattern over time varied substantially from country to country.

  • The patterns of changes in labour market earnings were strongly progressive.

In conclusion, the growth–employment–poverty nexus in Latin America changed much more favourably than was the case in the OECD countries in general and the United States in particular. It would be interesting to know about developing economies in other regions of the world. Such studies define the current research frontier.

1.5 Differences between Latin America and the United States and Other OECD Countries

Contrary to the Latin American experience, during the 2000s, inequality soared in developed countries even in the context of economic growth. Moreover, employment indicators have not yet recovered from the crisis of 2009, (p.13) and wages at the bottom have not increased. The question that naturally follows is: why was it different in Latin America? We cannot provide an exact answer to this important question, but we explore below three possible interrelated explanations.

First, the rate of economic growth was higher in Latin America than in the OCED countries (including the United States and excluding Chile and Mexico). Between 2000 and 2012, average GDP per capita grew by 35.2 per cent in the Latin American region, a growth rate nearly three times larger than that of developed countries. The corresponding figures for high-income OECD countries and the United States in particular were 12.4 and 10.7 per cent respectively (World Bank 2014). As postulated in our framework, higher economic growth could lead to larger improvements in employment and earnings indicators and expansion of social programmes, and to a subsequent reduction in poverty if the channels relating them are open.

Second, Latin America experienced a different type of economic growth compared to that of the United States and other high-income OECD countries. In particular, South America enjoyed excellent external conditions that not only promoted economic growth but also endowed governments with increased fiscal revenues. This was translated into more stable macroeconomic environments and more resources being devoted to social programmes (such as conditional cash transfers). Countries in Central America did not enjoy these exceptional external conditions, and with the exception of Panama, they had a more mixed experience in terms of the number of labour market indicators that improved. In the United States and high-income OECD countries, economic growth during the same period was based on rapid productivity increases, built mainly on innovation and information technology. This process of economic growth led to job losses for workers in the middle of the wage distribution (see Acemouglu and Autor 2011 for the United States, and Goos, Manning, and Salomons 2010 for evidence on Europe). It also led to stagnant wages for unskilled workers and to increasing wages for high-skilled workers.

Third, political conditions seem to have changed significantly in Latin America. In the words of Roberts (2014: 67):

Declining levels of inequality registered in most Latin American countries during the first decade of the twenty-first century coincided with a basic shift in the political and economic landscape—a shift from the politics of market-based structural adjustment to a new, post-adjustment era in which democratic competition has repoliticized social inequalities and placed redistributive policies at the forefront of the political agenda. Although new Leftist governments have increased the salience of redistributive politics and adopted innovative social welfare reforms, the renewed attention placed on social problems is hardly the exclusive preserve of the left. With heightened electoral competition from the left and (p.14) widespread public sentiments for an active state role in the provision of social welfare, conservative governments have also taken significant steps to address the needs of low-income groups. Consequently, the institutionalization of electoral competition in contexts of egregious social and economic inequalities appears to be producing new forms of democratic accountability, as parties and governments of diverse ideological profiles struggle to respond to popular demands for equity and social inclusion. The historic tensions between universal rights of democratic citizenship and de facto social exclusion continue to exist, but they have clearly given rise to new political expressions and policy outputs in Latin America’s post-adjustment era.

Although these ideas are hypotheses and as such difficult to test empirically, there is a widespread consensus that Latin America has advanced towards governments whose redistributive policies play a more important role, at least compared to the previous decade which was marked by widespread structural reforms. One example is that during these years every country in the region implemented or extended social programmes targeting the poor (in most cases, conditional cash transfers). A further sign of the increased importance of redistributive policies is the increase in minimum wages in real terms between 2002 and 2012 in most countries of the region, Mexico and the Dominican Republic being the exceptions.

These three factors are related to each other: high economic growth was possible because of favourable external conditions, which in turn made additional resources available for implementing social programmes.

1.6 Recent Developments

At the time that this research project was launched in 2014, the most recent labour market data available for Latin American countries came from surveys conducted in 2012 and 2013. It was not feasible to include an additional year or years of data and redo all the analysis for each of the countries or for all of them taken together. Nonetheless, it is worth noting some of the latest developments that have taken place in the interim.

Since 2012/13, the rate of economic growth has slowed down for a large number of countries in Latin America, especially those located in South America. Argentina, Brazil, and Venezuela were affected the most (World Bank 2015b). Argentina and Brazil practically did not grow from 2012 to 2014, while Venezuela entered a deep recession: GDP per capita decreased 5.3 per cent during this period. The other South American countries had a less marked deceleration in the rate of economic growth starting in 2013. The average rate of economic growth went from 5.3 per cent during 2012–13 to 2.5 during 2013–14. External conditions changed for these countries. (p.15) First, the commodity boom that most of these countries experienced during the first decade of the 2000s either slowed down or reversed after 2010, deteriorating their terms of trade. This affected the private sector, but it also reduced government revenues and increased pressure on government fiscal balances. The latter had not yet recovered from the deficits incurred to finance countercyclical policies during the international crisis of 2009. Projections for 2015 and 2016 indicate that this scenario of low growth is not likely to change (International Monetary Fund 2015). Our framework indicates that labour market conditions are likely to be affected, with a slowdown in the rate of improvement in some dimensions or even some worsenings, contrary to what happened in the first decade of the century. Furthermore, the tight relationship described in this book between improvements in employment conditions and poverty reduction indicates that the rate of poverty reduction is likely to slow down as well. Moreover, it might not be feasible to finance a further expansion of social programmes such as were implemented by most governments in the region in 2009, since the fiscal space has also diminished.

On the other hand, the experience since 2012 has been more positive for countries in Central America (Costa Rica, Dominican Republic, Honduras, Mexico, Panama, and El Salvador). These counties continued to experience rates of economic growth similar to the period 2000–12 (between 2 and 3 per cent a year on average). This process of growth was based on the service sector rather than commodities and on the economic recovery of the United States, which is the main trading partner of these countries. Our framework indicates that this group of countries is likely to continue to improve in terms of labour market indicators in the future at a similar rate as during the period 2000–12.

The post-2012 period seems to be marked by more heterogeneous country experiences than the period 2000–12 analysed in this book. Countries in the South will face the challenge of achieving economic growth without the tailwind of the commodity boom that took place at the beginning of the century. While policies to achieve economic growth are being put into place, the channels to improve employment conditions and social programmes should remain open and be enhanced: it is the only way economic growth will help reduce poverty, the single most important objective these countries can pursue.

1.7 Roadmap

The book is divided into three parts. Part I provides an overview of the project. In the two chapters in this part, the reader will learn about the principal questions, previous literature and our contributions, the analytical framework (p.16) adopted, overview of the major findings, and data and methodology. Part II presents cross-country analysis across sixteen Latin American countries in the 2000s. This part consists of four textual chapters—‘Changing Labour Market Indicators and the Rate of Economic Growth in Latin America during the 2000s’, ‘Cross-Country Analysis of the Growth–Employment–Poverty Nexus’, ‘Within-Country Analysis of the Growth–Employment–Poverty Nexus: Additional Evidence’, and ‘Conclusions from the Cross-Country Analysis’—plus two data chapters. Part III presents sixteen country chapters, each comprising a country study. These country chapters—for Argentina, Bolivia, Brazil, Chile, Colombia, Costa Rica, Dominican Republic, Ecuador, Honduras, Mexico, Panama, Paraguay, Peru, El Salvador, Uruguay, and Venezuela—follow a common format: introduction, economic growth, unemployment, job mix, labour earnings, poverty and inequality, and conclusions.

Overall, the book presents a positive and hopeful set of findings for the period 2000–12/13. Economic growth took place in all sixteen of the countries. The employment and earnings indicators and poverty and inequality indicators used in this study overwhelmingly moved in the welfare-increasing direction: in fifteen of the sixteen countries, most or all of the indicators improved, the only exception being Honduras. Thus, despite Latin America being one of the most unequal regions of the world (together with sub-Saharan Africa), economic growth brought about improvements in employment conditions and thereby reduced poverty.

References

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Notes:

(1) Three of the researchers—Cruces, Jaume, and Viollaz—are affiliates of CEDLAS.

(2) Other less comprehensive multi-country studies have also been carried out which include a more limited group of countries or fewer labour market indicators, or focus on previous years and not on the whole decade of 2000. Pagés, Pierre, and Scarpetta (2009), for instance, discuss the growth–employment nexus in Latin America, with data up to the year 2004, and found that many jobs were created during the 1990–2004 period in the Latin American and the Caribbean region, but they were of low productivity and low pay. Cho et al. (2012) document the fact that in Latin America, as in other low- and middle-income countries, employment increased apace of labour force growth in every country but one, although the study does not identify any single country by name. ILO (2014) reports an increase in the share of workers registered with social security in Argentina, Brazil, Colombia, the Dominican Republic, Ecuador, Jamaica, Mexico, Paraguay, Peru, and Uruguay, caused mainly by the favourable economic context and several government programmes.