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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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Uruguay

Uruguay

Chapter:
(p.397) 21 Uruguay
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/9780198801085.003.0021

Abstract and Keywords

The Uruguayan story was one of declines in the early years of the 2000s in most indicators, followed by improvements in all of them. Economic growth was negative in the early years due to a severe economic crisis, and positive and rapid thereafter except during the international crisis of 2008. The chapter shows that most labour indicators followed the same U-shaped pattern and were in 2012 at a better level than at the beginning of the decade, with the exceptions of labour earnings and some poverty indicators. The international crisis of 2008 slowed or temporarily stopped the improvements in some labour market indicators.

Keywords:   Uruguay, economic growth, economic crisis, labour market indicators, earnings, poverty

21.1 Introduction

This chapter on labour markets and growth in Uruguay since 2000 is one of sixteen studies of Latin American countries, each of which analyses the growth–employment–poverty nexus and aims to answer the following broad questions: Has economic growth resulted in economic development via improved labour market conditions in Latin America in the 2000s, and have these improvements halted or been reversed since the Great Recession? How do the rate and character of economic growth, changes in the various labour market indicators, and changes in poverty relate to each other?

To answer these questions, we analyse the growth experience of Uruguay during the 2000s and a wide set of labour market indicators that we assign to one of two different categories: employment and earnings indicators, and poverty and income inequality indicators. More specifically, for the group of employment and earnings indicators we construct statistics on the following variables: the unemployment rate; the employment structure by occupational group, employment position, economic sector, registration of workers with the social security system, and educational level; and mean labour earnings and hourly wages. We present all these indicators for the employed population as a whole and for different population groups (youth, adults, men, and women). For the group of poverty and income inequality indicators, we compute poverty rates using the official moderate and extreme poverty lines and the international lines of 2.5 and 4 dollars a day. We also calculate the Gini coefficient of household per capita income and labour earnings.

All the statistics in this chapter are obtained using microdata from the Encuesta Continua de Hogares (ECH) for the years 2000 to 2012. Until 2005, the ECH encompassed solely urban areas; since 2006, it has been nationwide in scope. The surveys were processed following a harmonization methodology and incorporated into the SEDLAC—Socio-Economic Database for Latin America (p.398) and the Caribbean (CEDLAS and World Bank 2014).1 The resulting labour market indicators were compiled into a large number of tables and figures, which are available in an earlier version of this study (henceforth, Cruces et al. 2015). Chapter 1 of this book provides the definition for each of the indicators we analyse here, while Cruces et al. (2015) includes details on definitions and classification systems used by Uruguay’s household surveys, and on comparability issues of these surveys over time. For consistency, the analysis in this chapter focuses on the same set of urban areas for the entire period studied, although we also make remarks on the statistics at the national level for the period 2006–12.

21.2 Economic Growth

Uruguay experienced rapid economic growth from 2000 to 2012. While economic performance slowed down following the international crisis of 2008, overall GDP and GDP per capita continued to grow in 2009.(Cruces et al. 2015: figures 1 and 2)

From 2000 to 2012, Uruguay experienced rapid economic growth by Latin American standards. GDP per capita increased by 44.7 per cent, while the average for the region’s eighteen countries during the period was 36.2 per cent. GDP (measured in PPP dollars of 2005) grew by 48.0 per cent, and GDP per employed person rose by 4.5 per cent. Annual GDP per capita grew in real terms by an average of 2.8 per cent, ranging from a low of −7.8 per cent in 2002 to a high of 8.6 per cent in 2010 (Table 21.1).

Table 21.1 Uruguay: Evolution of growth and labour market indicators over the 2000s

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

Growth Indicators

GDP per capita

9,551

9,168

8,457

8,530

8,962

9,626

10,006

10,634

11,361

11,577

12,569

13,344

13,821

Uruguay

GDP per capita growth rate

−2.28

−4.02

−7.75

0.87

5.05

7.42

3.94

6.28

6.84

1.89

8.57

6.17

3.58

Uruguay

Employment and Earnings Indicators

Employment-to-population ratio

52.59

52.30

49.99

49.26

51.76

52.37

54.79

57.44

58.51

59.36

59.35

61.55

60.74

Uruguay

Unemployment rate

13.54

15.24

16.91

16.81

13.05

12.12

11.31

9.55

8.00

7.63

7.04

6.60

6.35

Uruguay

Share of low-earnings occupations

53.17

53.78

52.63

53.76

52.59

52.60

53.95

53.24

52.88

51.62

52.41

50.25

Uruguay

Share of mid-earnings occupations

24.74

24.37

25.00

23.65

24.23

24.38

24.38

24.05

24.52

24.66

24.69

25.00

Uruguay

Share of high-earnings occupations

22.09

21.86

22.37

22.59

23.19

23.03

21.67

22.71

22.60

23.72

22.90

24.75

Uruguay

Share of employers

3.71

3.94

3.70

3.42

3.53

3.94

4.32

4.43

4.62

4.48

4.52

4.59

4.25

Uruguay

Share of wage/salaried employees

72.86

71.04

69.98

70.15

70.27

71.22

71.28

71.16

71.48

71.84

72.46

73.94

74.24

Uruguay

Share of self-employed workers

21.99

23.65

24.81

25.07

24.65

23.53

22.97

23.00

22.60

22.31

21.95

20.61

20.59

Uruguay

Share of unpaid family workers

1.44

1.37

1.50

1.35

1.56

1.31

1.43

1.41

1.29

1.37

1.06

0.87

0.92

Uruguay

Share of workers in low-earnings sectors

26.48

26.10

24.68

24.93

23.60

24.05

24.30

24.70

24.27

23.60

24.12

23.38

21.70

Uruguay

Share of workers in mid-earnings sectors

50.28

49.67

50.33

50.55

52.61

52.44

53.49

53.53

53.78

54.00

54.12

53.68

50.25

Uruguay

Share of workers in high-earnings sectors

23.24

24.23

24.99

24.52

23.79

23.51

22.21

21.76

21.95

22.39

21.76

22.94

23.55

Uruguay

Share of low-educated workers

43.99

39.78

38.87

38.72

37.10

36.85

39.21

39.10

41.22

39.07

40.25

35.39

34.67

Uruguay

Share of medium-educated workers

40.61

41.84

41.62

41.75

42.36

42.22

42.12

41.98

40.81

42.07

42.06

43.61

45.76

Uruguay

Share of high-educated workers

15.40

18.38

19.52

19.52

20.54

20.93

18.67

18.92

17.97

18.86

17.69

21.00

19.57

Uruguay

Share of workers registered with SS

64.14

62.88

60.56

59.39

61.32

64.78

65.24

66.53

67.90

68.37

72.37

73.83

Uruguay

Mean labour earnings

723.6

654.0

582.6

483.8

483.5

486.7

524.2

554.5

591.9

641.2

627.0

668.2

661.3

Uruguay

Poverty and Inequality Indicators

Official extreme poverty rate

2.4

3.2

3.8

4.9

7.0

6.3

4.6

4.8

3.9

3.6

2.9

2.8

2.8

Uruguay

Official moderate poverty rate

21.4

25.8

30.4

39.1

40.0

37.5

35.4

35.7

33.1

31.8

30.9

26.9

24.9

Uruguay

Poverty rate 2.5 dollars-a-day

3.59

4.78

6.41

7.73

9.78

8.90

7.25

6.25

4.18

3.51

2.84

2.57

2.61

Uruguay

Poverty rate 4 dollars-a-day

11.22

13.92

17.78

22.76

23.72

21.60

20.76

18.94

14.17

12.00

11.28

8.85

8.32

Uruguay

GINI of household per capita income

0.444

0.462

0.466

0.462

0.471

0.459

0.473

0.478

0.465

0.464

0.454

0.436

0.415

Uruguay

GINI of labour earnings

0.462

0.485

0.495

0.500

0.505

0.499

0.504

0.507

0.502

0.495

0.479

0.450

0.420

Uruguay

Note: The shaded figures of labour market indicators represent statistical significant improvements at 5 per cent between the initial and final years for all the employment and earnings indicators and poverty and inequality indicators. The only exceptions are the share of mid-earnings occupations, share of mid-earnings sectors, and share of medium-educated workers for which we did not assign welfare evaluation criteria.

Source: SEDLAC (CEDLAS and World Bank 2014) and World Development Indicators (World Bank 2014).

At the beginning of the 2000s, from 2000 to 2002, Uruguay was affected by the devaluation of the Brazilian Real in 1999, which led to a loss of competitiveness, and by the collapse of the Argentine economy at the end of 2001, which led to a financial crisis. Uruguay was extremely vulnerable to shocks stemming from Argentina and Brazil due to the strong commercial and financial linkages between the countries (Sosa 2010). The crisis disrupted the Uruguayan banking system and caused the collapse of its currency, generating a credit crunch and a steep contraction of GDP (IMF 2003; Hausmann et al. 2005). From 2000 to 2002, average annual GDP growth was −4.5 per cent and the rate of GDP per capita annual growth was, on average, −4.7 per cent.

A package of fiscal, monetary, and banking reform measures helped the country to stabilize and to start a trend of positive growth. The external position of the country improved considerably, the peso stabilized, the inflation was brought under control, capital flight was stopped and partially reversed, and (p.399) (p.400) (p.401) bank credit to the private sector began to recover (IMF 2005). From 2003 to 2008, average annual GDP and GDP per capita growth rates were 5.2 and 5.1 per cent respectively. While the international crisis of 2008 led to a slowdown in the Uruguayan economy, it continued to grow throughout the global recession. The Uruguayan economy was better prepared to face the international crisis of 2008 than it was at the beginning of the decade when it faced the Brazilian and Argentine crises. The strengths stemmed from a well-regulated banking system, a reduced debt-to-GDP ratio, and a stabilized macroeconomic scenario (IMF 2010). The rate of GDP growth dropped from 7.2 per cent in 2008 to 2.3 per cent in 2009, and GDP per capita growth rate diminished from 6.8 per cent to 1.9 per cent. The relatively mild impact of the crisis was concentrated in some export-oriented sectors; the agriculture, livestock, and energy sectors also suffered as a result of a severe drought. By 2010, though, GDP and GDP per capita growth rates had surpassed their pre-crisis levels.

All of the preceding macroeconomic data are for the Uruguayan economy as a whole. The following labour market and income distribution data focus on urban Uruguay. Some remarks are presented regarding the statistics at the national level for the period 2006–12.

21.3 Unemployment

The 2000–12 period witnessed a significant drop in the aggregate unemployment rate and in the unemployment rate for all population groups. Within this period, the unemployment rate increased in the early years of the period and exhibited a steady downward trend in the later years. The international crisis of 2008 led to a slowdown in the downward trend in the unemployment rate. (Cruces et al. 2015: figure 3)

The urban unemployment rate (measured as the ratio of unemployment to labour force) dropped from 13.5 per cent in 2000 (158,585 unemployed persons) to 6.4 per cent in 2012 (98,719 unemployed persons) (Table 21.1). Initially, the unemployment rate increased in conjunction with a fall in GDP from 2000 to 2002, growing from 13.5 to 16.9 per cent (30,625 new unemployed persons). The downward trend in the unemployment rate began in 2003 and continued through the end of the period studied. The international crisis of 2008 did not impact adversely on the unemployment rate, but led to a drop in the pace of reduction. Between 2003 and 2008 the unemployment rate fell by 1.5 percentage points a year, while from 2009 to 2012 the reduction was only 0.4 percentage points annually. The evolution of the national unemployment rate from 2006 to 2012 exhibits the same pattern as the urban unemployment rate with a slightly lower level.

(p.402) Between 2000 and 2012, the unemployment rate decreased for all population groups. All population groups exhibited the same trend as the aggregate unemployment rate with an increase at the beginning of the decade, from 2000 to 2002, and a reduction afterwards.

The international crisis of 2008 led to a slowdown in the downward trend in the aggregate unemployment rate and in the rate for all population groups.

21.4 Job Mix

The composition of employment by occupational group improved from 2000 to 2011 (the last year for which we can construct the classification of occupations described previously) as workers moved from service and sales, and craft and trade occupations to better paying occupations such as management, professional and technical jobs. All demographic groups—youth and adult workers, men, and women—benefited from this improvement. This trend was not affected by the international crisis of 2008.(Cruces et al. 2015: figure 4)

The share of the following occupations shrank from 2000 to 2011: craft and trade occupations (drop of 3.5 percentage points); service and sales occupations (drop of 0.7 percentage points); armed forces (drop of 0.7 percentage points); and agriculture, forestry, and fishery occupations (drop of 0.5 percentage points). The share of the following occupations grew: professional jobs (increase of 1.4 percentage points); elementary occupations (increase of 1.3 percentage points); clerical positions (increase of 1.1 percentage points); and technical occupations (increase of 0.9 percentage points). The share of the other occupational groups remained largely unchanged. These changes in the composition of employment by occupational group can be interpreted as an improvement since the share of low-earning occupations (elementary, service and sales, and craft and trade occupations) diminished by 2.9 percentage points between 2000 and 2011, while the share of high-earning occupations (management, professional, and technician jobs) grew by 2.7 percentage points during the same period (Table 21.1). The structure of employment by occupational group at the national level also improved from 2006 to 2011. When the rural sector is included in the statistics, the share of mid-earning occupations in total employment is larger compared to urban figures, the share of high-earning occupations is lower, and the share of low-earning occupations is essentially the same as in urban areas. The larger share of mid-earning occupations in total employment at the national level compared to the urban area is explained by the larger share of agriculture and forestry and fishery occupations once the rural area is considered.

(p.403) The improvements in occupational composition between 2000 and 2011 were observed for young and adult workers, men, and women.

The international crisis of 2008 did not have an adverse effect on the improvement in the composition of employment by occupational group. Between 2008 and 2009, the share of low-earning occupations fell in the aggregate and for all population groups, while the share of high-earning occupations increased.

The employment structure by occupational position improved between 2000 and 2012 as the share of paid employees and employers in total employment increased and the share of self-employed and unpaid workers decreased. Within the period, the structure of employment by occupational position deteriorated from 2000 to 2003 and then improved steadily. While this trend towards improvement in employment structure by occupational position benefited young and adult workers, and men, the employment structure for women remained largely unchanged. The international crisis of 2008 did not have an adverse effect on the improvement in the structure of employment by occupational position. (Cruces et al. 2015: figure 5)

Between 2000 and 2012, the share of paid employees in total employment—the largest category in urban Uruguay—grew from 72.9 to 74.2 per cent. The share of employers also increased from 3.7 to 4.3 per cent. The shares of the self-employed and of unpaid workers, on the other hand, fell from 22.0 to 20.6 per cent and from 1.4 to 0.9 per cent respectively (Table 21.1). These changes can be characterized as an improvement in the employment structure by occupational position insofar as the share of low-earning categories (self-employment and unpaid employment) dropped by a total of 1.9 percentage points and the share of high-earning categories (paid employees and employers) increased correspondingly. Within the period, the employment structure by occupational position deteriorated from 2000 to 2003 through an increase in the share of self-employed workers and a reduction in the share of wage/salaried employees, and improved steadily in the following years. The worsening at the beginning of the decade is in keeping with the increase in the unemployment rate, as economic necessity may compel workers to look for free-entry self-employment activities. The structure of employment by occupational position at the national level also exhibited an improvement from 2006 to 2012. When the rural sector is included in the statistics, the share of low-earning positions in total employment is larger compared to urban figures, due to the larger share of both self-employed and unpaid workers.

The employment structure by occupational position improved between 2000 and 2012 for young and adult workers, and for men, while for women the structure remained largely unchanged. All population groups suffered a worsening in the employment composition by occupational positions at the beginning of the period, from 2000 to 2003, and an improvement in the following years.

(p.404) The international crisis of 2008 did not bring about a reversal in the improvements that had been taking place overall and for youth, adults, and male workers. The share of paid employees increased from 2008 and 2009, while the shares of unpaid workers and of the self-employed diminished. The share of employers also decreased, though the share of that occupational position resumed growth after the crisis. When broken down by population group, the improving trend in the structure of employment by occupational position was not interrupted in 2009 for young or adult workers, or for men. Likewise, the employment structure by occupational position was largely unchanged for women through 2009.

The employment composition by economic sector improved over the course of the period studied. While all population groups benefited from the improving trend, the improvement was larger for young workers than for adults and for women than for men. The international crisis of 2008 did not interrupt the pattern of improvement in the employment composition by economic sector. (Cruces et al. 2015: figure 6)

The period 2000–12 witnessed a drop from 26.5 per cent to 21.7 per cent in the share of workers in low-earning sectors (domestic service, construction, and low-tech industry). During the same period, there was a slight increase (from 23.2 per cent to 23.6 per cent) in the share of high-earning sectors (public administration, skilled services, and utilities and transportation) along with a larger increase (from 50.3 per cent to 54.8 per cent) in the share of mid-earning sectors (commerce, primary activities, high-tech industry, and education and health) (Table 21.1). The structure of employment by economic sector at the national level also improved from 2006 to 2012. When the rural sector is included in the statistics, the share of mid-earning sectors in total employment is larger compared to urban figures, while the shares of low- and high-earning sectors are lower. The larger share of mid-earning sectors in total employment at the national level compared to the urban level is explained by the larger share of the primary activity sector, which increases when the rural area is considered in the statistics.

Employment composition by economic sector in urban Uruguay improved between 2000 and 2012 for men, women, and for young and adult workers, though the improvement was mild in the case of adults.

The international crisis of 2008 did not reverse the downward trend in the share of employment in low-earning sectors at the aggregate level and for any population group, nor did it reverse the upward trend in the share of employment in high-earning sectors at the aggregate level and for young workers, men, and women. Indeed, there was a slight increase in the share of employment in high-earning sectors for adult workers during the crisis.

(p.405)

The educational level of the urban Uruguayan employed population improved from 2000 to 2012 for the entire population and for all population groups. Within this period, there was an increase in the share of employed workers with high education levels and a reduction in the share of employed persons with low levels of education from 2000 to 2005. In the mid years of the period, between 2005 and 2010, a worsening in the educational level of the employed population took place, and a new improvement closed the period. During the international crisis of 2008, the share of employed persons with high educational levels continued with the downward trend overall and for all population groups. (Cruces et al. 2015: figure 7)

The share of employed persons with low educational levels (eight years of schooling or less) dropped from 44.0 per cent in 2000 to 34.7 per cent in 2012, while the share of employed persons with medium and high educational levels (nine to thirteen years of schooling and over thirteen years of schooling) grew from 40.6 per cent in 2000 to 45.8 per cent in 2012 and from 15.4 per cent to 19.6 per cent respectively (Table 21.1).2 We interpret this result as an improvement for the employed population as the level of education is an important predictor of labour earnings. Consequently, the changes in the employment structure by educational level implied an increase in the share of workers that tend to have high levels of earnings and a decline in the share of workers with low earnings levels.3

The evolution of the shares of employed workers with low and high educational levels was not steady over the period. From 2000 to 2005, the share of employed persons with low educational levels decreased, while the share of employed workers with high levels of education increased. Between 2005 and 2010, the shares of workers with low and high educational levels grew and fell respectively. From 2010 to 2012, the trend of the first half of the decade resumed and the shares of workers with low and high educational levels fell and increased respectively. The increase in the share of employed workers with low educational levels between 2005 and 2010, and the corresponding decrease in the share of employed workers with high levels of education, reflects the change in the structure of employment by economic sector over this period. From 2005 to 2010, the share of the primary sector exhibited the largest increase among all economic sectors due to the boom in soybean production. As the primary activity sector employs mainly workers with low educational levels, the change in the structure of employment in (p.406) the Uruguayan labour market between 2005 and 2010 can explain the deterioration in the educational level of the employed population over the same period.

The educational level of the employed population, considering both rural and urban areas in Uruguay between 2006 and 2012, exhibited the same trend as that of statistics for urban areas. However, the share of employed workers with low levels of education is larger in national statistics compared to urban statistics, while the shares of employed workers with medium and high levels of education are lower at the national level compared to the urban level.4

The educational level of the employed population improved between 2000 and 2012 for all population groups (young and adult workers, men and women).

During the international crisis of 2008, the structure of employment by educational level continued with the worsening trend that had started in 2005, overall and for all population groups. This trend was associated with the increase in the share of the primary activity sector in total employment. By 2011, the share of employed workers with high educational levels surpassed the pre-crisis value in the aggregate and for all population groups. The recovery was related to the reduction in the share of the primary activity sector in total employment due to the fall in the international prices of Uruguayan products. However, a new decrease took place in 2012 that was compensated for by the increase in the share of employed workers with medium levels of education.

The share of workers registered with the social security system increased from 2001 (the earliest year with data on this indicator) to 2012 in urban Uruguay. Within this period, the registration rate fell between 2001 and 2004 but increased in the following years. This upward trend, starting in 2004, held for all population groups; it was not interrupted by the international crisis of 2008. (Cruces et al. 2015: figure 8)

The pension system in Uruguay is composed of a contributory scheme and a non-contributory scheme. The contributory scheme comprises two regimes. First, a mandatory pay-as-you-go regime, which is funded through payroll taxes, other taxes, and government contributions. Second, an individual capitalization regime, which is also compulsory but only for workers whose earnings are above a certain threshold. The non-contributory scheme provides economic support to all persons who lack a monetary income and who cannot (p.407) support themselves due to old age or disability. The health system also comprises two regimes. First, the public health regime which provides services through the Administración de Servicios de Salud del Estado and is funded by both budgetary allocations and the contributions of people registered with the social security administration. Second, the private regime which is composed mostly of mutuals (mutual societies—similar to Health Maintenance Organaizations in the United States), which are funded by the monthly fees paid by affiliated members and transfers received through the social security system. Insured members under the public regime may opt between the services provided by the mutuals or the Administración de Servicios de Salud del Estado (Filgueira and Hernandez 2012).

The percentage of workers registered with the contributory scheme of the social security system increased by 9.7 percentage points from 2001 to 2012 (Table 21.1). Interestingly, both the number of registered and unregistered workers increased over the period. The number of workers registered with the social security system grew by 446,005 while the number of unregistered workers increased by 29,317. From 2001 to 2004, the period of the economic downturn, the share of registered workers fell from 64.1 to 59.4 per cent. From 2004 to 2012, a period that included the Great Recession, that share grew steadily, reaching 73.8 per cent in 2012. The share of workers registered with the social security system at the national level between 2006 and 2012 exhibited the same level and trend as urban figures. In 2005, the government of Uruguay started to implement a group of economic and social protection policies that can explain the increase in the percentage of registered workers (Cruces and Bergolo 2013; ILO 2014). These policies included the reactivation of collective bargaining, a tax reform that included increases in the social security contributions for some economic sectors and reductions for others, and the revision of social protection programmes which led to the extension of health insurance coverage to dependent children and spouses of registered workers. Starting in 2005 there was also a greater control exerted by the Banco de Previsión Social (the social security administration) and Dirección General Impositiva (the tax authority) on firms to detect situations of non-compliance with the registration of workers and the payment of social security contributions (Mazzuchi 2009).

The share of workers registered with the social security system increased over the period for young and adult workers, men and women. The percentage of workers registered decreased from 2001 to 2004 for all population groups, and grew in the following years.

The international crisis of 2008 did not affect the upward trend in the percentage of registered workers. Between 2008 and 2009, the share of workers registered with the social security system increased overall and for all population groups.

(p.408) 21.5 Labour Earnings

Three years of falling labour earnings were followed by ten years of rising labour earnings, but the increases were not large enough in 2012 to drive labour earnings back up to where they had started (2000). The pattern of falling labour earnings between 2000 and 2003 and rising labour earnings between 2003 and 2012 held for all population groups, but while men, women, and adults had lower labour earnings in 2012 compared to 2000, young employed workers enjoyed a rise. Workers in high-earning categories experienced a larger drop in labour earnings than did workers in low-earning categories. Earnings were not affected adversely by the 2008 crisis.(Cruces et al. 2015: figure 9)

Average monthly earnings in urban Uruguay, expressed in PPP dollars of 2005, fell by 8.6 per cent, from US$724 in 2000 to US$661 in 2012 (Table 21.1). Labour earnings fell at the beginning of the period (from 2000 and 2004) and rose in most of the following years.5 The recovery of labour earnings in 2005 was associated with the reactivation of collective bargaining at the sector level, which meant an increase in real wages (Mazzuchi 2009). The upward trend was interrupted in 2010 when labour earnings fell by 1.2 per cent and in 2012 when they dropped by 1.0 per cent. Average monthly earnings at the national level exhibited the same level and trend as urban monthly earnings from 2006 to 2012.

Labour earnings of adult, male, and female employed workers decreased between 2000 and 2012, while labour earnings of young employed persons increased. The pattern of falling labour earnings at the beginning of the period (2000–3) and rising labour earnings in the following years (2003–12) held for all population groups.

Mean earnings fell between 2000 and 2012 for workers in both low- and high-earning categories, but earnings of workers employed in high-earning categories dropped more than labour incomes of workers employed in low-earning categories. Employed workers from all employment categories suffered an earnings reduction from 2000 to 2003–4 and a steady earnings increase from 2004–5 to 2012. When broken down by occupational groups, labour earnings of workers in low-earning occupational groups (elementary occupations, services and sales jobs, and craft and trade occupations) decreased by less (in percentage terms) than earnings of employed workers in high-earning occupations (management, professional, and technical jobs). A breakdown of the aggregate statistics on (p.409) labour earnings by occupational position reveals that labour earnings of the self-employed (low-earning positions) dropped by less (in percentage terms) than labour incomes of paid employees (high-earning positions). In terms of economic sectors, earnings of workers in low-earning sectors (domestic service, construction, and low-tech industries) remained largely the same during the period, while the earnings of workers in high-earning sectors (skilled services, utilities and transportation, and public administration) dropped between 2000 and 2012. Finally, labour earnings of employed workers with high educational levels fell by more (in percentage terms) than earnings of employed persons with medium and low educational levels.

The evidence of falling labour earnings for all educational groups can be interpreted in light of previous findings of improving educational levels of the Uruguayan urban employed population and improving employment structure by economic sector and occupational group over the period. The improving employment structure by economic sector and occupational group implied an increase in the share of sectors and occupations that are more likely to use workers with high and medium educational levels, such as skilled services, education and health, and professionals and technical occupations, and a reduction in the share of sectors and occupations that employ workers with low educational levels, such as domestic services, construction and low-tech industry, and elementary activities, service and sales, and craft and trade occupations. This evidence indicates that the demand for workers with high and medium educational levels relative to those with low educational levels increased between 2000 and 2012. On the other hand, the educational levels of people in the labour force improved over the same period, indicating an increase in the relative supply of workers with high and medium levels of education (Cruces et al. 2015: table 8). It is interesting to notice that between 2007 and 2010 the share of workers with low educational levels in the labour force increased. However, that share was always below the level of 2000. The prediction of a supply and demand analysis is that the relative wages of workers with high and medium levels of education relative to those with low educational levels will rise or fall depending on which effect dominates (increase in the relative demand versus increase in the relative supply). In the Uruguayan labour market, the wages of workers with high and medium educational levels relative to those with low educational levels fell over the period, while the wages of workers with high educational levels relative to those with medium educational levels also decreased (Cruces et al. 2015: table 7). The adjustment process also led to a reduction in the unemployment rate of all educational groups with a larger reduction for workers with low levels of education (Cruces et al. 2015: table 9).

The international crisis of 2008 did not have a negative effect on the upward trend in labour earnings that began in 2004; a trend that held true for the (p.410) aggregate and for all demographic groups. Some occupational groups, however, were adversely affected by the 2008 crisis. Earnings of workers in agricultural, forestry, and fishery occupations and in armed forces dropped during the crisis. By 2011, the labour earnings of both occupational groups had returned to pre-crisis levels. The incomes of the other occupational categories were not adversely affected by the international crisis of 2008.

21.6 Poverty and Inequality

All poverty indicators increased in the early years of the period studied (from 2000 to 2004) but fell steadily in the later years (from 2004 to 2012). Comparing 2012 with 2000, Uruguay registered more poverty for some poverty lines, and less poverty for others. Despite the international crisis of 2008, the downward trend in poverty indicators during the second half of the period analysed was not reversed. (Cruces et al. 2015: figure 10)

The moderate poverty rate in urban Uruguay (measured by the country’s official poverty line) increased from 21.4 per cent in 2000 to 24.9 per cent in 2012; the extreme poverty rate rose from 2.4 per cent to 2.8 per cent; the percentage of working poor (defined as the proportion of persons in the population living in poor households where at least one member works) increased from 11.9 per cent to 15.5 per cent over the same period (Table 21.1). Consistent with the U-shaped pattern of GDP, the figures for all these poverty indicators increased between 2000 and 2004 while GDP was falling, and then began a steady downward trend that was not abated by the international crisis of 2008. Notwithstanding, by 2012 the levels had failed to fall below the figures for the beginning of the period. When the poverty rate is analysed on the basis of the 2.5 and 4 dollars-a-day PPP international poverty lines, there is a drop in poverty from 2000 to 2012. When the 2.5 dollars-a-day poverty line is used, the poverty rate drops from 3.6 per cent in 2000 to 2.6 per cent in 2012; when poverty is calculated using the 4 dollars-a-day poverty line, the drop is from 11.2 per cent to 8.3 per cent over the same period. According to these indicators, the period witnessed an increase in poverty from 2000 to 2004, followed by a downward trend that, by 2012, had reduced poverty rates to below the 2000 level. The post-2004 downward trend in the poverty rate and in the rate of the working poor was not interrupted by the international crisis of 2008. Poverty indicators at the national level exhibited the same trend as urban poverty indicators from 2006 to 2012, and a slightly lower level.

The poverty patterns reported in the last paragraph can be understood by examining incomes from various sources as well as government programmes. (p.411) The analysis of sources of household total income indicates that labour income, pensions, capital income, and government transfers fell at the beginning of the period, while poverty indicators increased. Labour earnings dropped from 2000 to 2003, capital income fell from 2000 to 2006, government transfers were lower in 2004 than in 2001 (the earliest year with data on this source of income), and pensions fell from 2000 to 2005 (Cruces et al. 2015: figure 11). Incomes from labour and government transfers led the recovery of household income. Among government transfers, the PANES emergency programme was implemented between 2005 and 2007 to reduce the effects of the economic crisis. This programme is credited with a reduction in the extreme poverty rate. In the absence of the programme, the extreme poverty rate would have been 50 per cent higher in 2006 (Reuben et al. 2008). In 2008 the government of Uruguay replaced the PANES with the Plan de Equidad. Plan de Equidad comprises the main conditional cash transfer programme of Uruguay, the Asignaciones Familiares. The implementation of the Plan de Equidad explains the increase in government transfers between 2008 and 2010.

Household per capita income inequality and labour earnings inequality increased from 2000 to 2004, then stabilized and started a downward trend in 2007 that allowed both inequality indices to fall in 2012 below the level of 2000. The international crisis of 2008 did not affect the downward trend in inequality indices that was observed in the last years of the period. (Cruces et al. 2015: figure 12)

From 2000 to 2012, the inequality of household per capita income gauged by the Gini coefficient fell from 0.444 to 0.415. The Gini coefficient of household per capita income increased between 2000 and 2004, from 0.444 to 0.471, then stabilized around that level and began a downward trend in 2007. The Gini coefficient of labour earnings among employed workers was higher than the Gini coefficient of household per capita income over the whole period under study. The inequality of labour earnings measured by the Gini coefficient also decreased between 2000 and 2012, from 0.462 to 0.420, and exhibited a similar trend as the Gini coefficient of household per capita income (Table 21.1). The reduction of the inequality of labour earnings started in 2007, coinciding with the increase in the share of workers with low levels of education in total employment that took place from 2007 to 2010. This reduction in labour earnings inequality is also in keeping with the fact that the reduction in earnings for high-earning categories was greater than the reduction for low-earning categories. Consequently, the reduction in labour earnings inequality in Uruguay occurred at the expense of income losses for all employment categories. The Gini coefficient of household per capita income and that of labour earnings at the national level exhibited essentially the same values as the coefficients at the urban level.

(p.412) Changes in household per capita income inequality in Uruguay have been related mainly to changes in labour income. Azevedo et al. (2013b) decomposed the change in the Gini coefficient of household per capita income for the period 2000–10 and found that changes in labour incomes contributed to the inequality increase over this period (the Gini coefficient of household per capita income increased from 0.444 to 0.454 between 2000 and 2010). On the other hand, changes in non-labour incomes, such as government transfers, and demographic changes (e.g. the share of adults per household) were inequality-reducing. Other studies have analysed the factors behind the evolution of labour income inequality. Azevedo et al. (2013a) used a decomposition approach and found that changes in the education wage premium (or the ‘price effect’) were inequality-increasing in Uruguay between 2000 and 2010, while the distribution of the stock of education (the ‘quantity effect’) was inequality-reducing. Gasparini et al. (2011) found a reduction in the wage premium in urban Uruguay between 2000 and 2010 that was associated with an increase in the relative supply and a decrease in the relative demand of skilled workers. Finally, the reduction in labour earnings inequality from 2007 to 2012 has been associated with different policy measures implemented by the government of Uruguay, such as the reactivation of collective bargaining in 2005, the increase in the national minimum wage in 2005, and a tax reform implemented in 2007 (Amarante et al. 2007; Amarante et al. 2011).

21.7 Conclusions

Overall, Uruguay experienced rapid economic growth by Latin American standards between 2000 and 2012. Within the period, the pattern of economic growth was U-shaped: GDP fell during 2000–2 and grew steadily during 2003–12. Growth slowed following the international crisis of 2008, but it was not reversed.

Most labour market indicators followed the U-shaped pattern of economic growth over the period. The unemployment rate exhibited an increase in the early years of the period and a downward trend in the later years, falling overall between 2000 and 2012. The composition of employment by occupational group improved from 2000 to 2011—the last year for which we can construct a consistent times series on occupations—as workers moved from service and sales, and craft and trade occupations to better-paying jobs like professional and technical positions. The employment structure by occupational position deteriorated at the beginning of the period and then improved steadily as the share of paid employees and of employers increased and the share of self-employed and unpaid workers decreased. The employment (p.413) composition by economic sector improved slightly over the course of the period studied as workers moved from low-earning sectors like domestic service, construction, and low-tech industry, to better-paying sectors like education and health, skilled services, and commerce. The educational level of the Uruguayan employed population increased between 2000 and 2012, but the evolution was not steady. There was a worsening in the structure of employment by educational level in the mid-years of the period studied. The share of workers registered with the social security system increased from 2001 (the first year with data on this variable) to 2012. Within this period, there was a reduction in the percentage of registered workers at the beginning of the period and a steady upward trend from 2004. The only labour market indicator that did not improve between 2000 and 2012 is labour earnings, which dropped. The earnings of workers in high-earning categories dropped more than earnings of workers in low-earning categories. Labour earnings fell in the early years of the period and then started an upward trend, but by 2012 real labour incomes were still below their level in 2000. Poverty rates rose and then fell; whether they were higher or lower in 2012 than in 2000 depends on the poverty line used. The moderate and extreme poverty rates calculated using official poverty lines and the rate of working poor households increased between 2000 and 2012. Following the pattern of GDP growth, poverty indicators grew at the beginning of the period and then started a downward trend. However, they were still above the value of 2000. The same pattern over time appears for poverty indicators using international poverty lines, but these indicators reached a lower value in 2012 than they had in 2000. The Gini coefficient of household per capita income and of labour earnings decreased over the period. Inequality indices increased in the early years of the period and fell in the later years.

The labour market indicators that were affected negatively by the international crisis of 2008 were the unemployment rate and the employment structure by educational level. The downward trend in the unemployment rate abated and a reduction in the share of employed workers with high educational levels took place after the crisis (between 2009 and 2010) with a recovery in 2011. The reduction in poverty and inequality underway during the second half of the period analysed was not reversed by the international crisis. The comparison between the effects of the international crisis of 2008 on labour market indicators and the effects generated by the crisis at the beginning of the period, from 2000 to 2002, reveals that the crisis at the beginning of the 2000s had a stronger negative impact on Uruguay. The crisis of 2000–2 generated a reduction in GDP, increases in the unemployment rate, the share of workers in low-earning positions, and the share of unregistered workers, a decrease in labour earnings, and increases in poverty (p.414) and inequality indicators. On the other hand, during the Great Recession, GDP continued to grow although at a slower pace, whereas the unemployment rate, the share of workers in low-earning positions, and the share of unregistered workers fell, labour earnings increased, and poverty and inequality indicators dropped. The Uruguayan economy seemed to be better prepared to face the international crisis of 2008, which was relatively severe, than it was at the beginning of the decade when it faced the crises of Brazil and Argentina, its main trading partners.

Young workers and women experienced worse labour market outcomes over the period compared to adults and men respectively, and while young workers seem to be more vulnerable to macroeconomic crises compared to adults, men and women were similarly affected by the episodes of crises. The unemployment rate was higher for young compared to adult workers, the share of young employed workers in low-earning occupations was larger than the share of adult workers, the share of workers in high-earning sectors and the share of workers registered with the social security system were lower for youth compared to adults, and labour earnings of young workers were below those of adults. On the other hand, the share of young workers in low-earning occupational positions was lower compared to adults. In addition to the generally inferior situation of young workers in the labour market compared to adults, youth labour market indicators were more affected by the crisis at the beginning of the 2000s and by the slowdown in the pace of reduction in the unemployment rate during the international crisis of 2008. Disaggregating by gender, we found that men had better labour market outcomes than women, with the exceptions of the share of workers in low-earning positions that was larger among men and the share of workers in low-earning occupations that was similar between men and women. Both genders were similarly affected by the crisis at the beginning of the 2000s, although the slowdown in the reduction of the unemployment rate during the Great Recession affected women more than men.

In summary, Uruguay was able to improve most labour market indicators between 2000 and 2012 despite the economic crisis at the beginning of the 2000s and the international crisis of 2008. The only exceptions were labour earnings and poverty indicators based on the official poverty lines.

References

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Notes:

(1) See Cruces et al. (2015: table 1) for details on the size of Uruguay household surveys.

(2) The most frequent value of years of education for employed workers in urban and national Uruguay was six over the entire period (around 19.6 per cent of urban employed workers and 20.6 per cent of workers at the national level had six years of education).

(3) The improvement in the employment structure by educational level is related to changes in the relative demand and supply of workers with high educational levels with corresponding implications for the wage gap by educational group and the unemployment rate of each educational level. We introduce a discussion about the role of these factors in Uruguay in section 21.5.

(4) The most frequent value of years of education for employed workers in urban and national Uruguay was six over the entire period (around 19.6 per cent of urban employed workers and 20.6 per cent of workers at the national level had six years of education).

(5) Official statistics show a recovery of real labour earnings in 2012 compared to the level they had in 2000. This difference with respect to our statistics can be explained by the imputation of the health insurance as part of labour incomes by the statistical institute of Uruguay. We do not follow the imputation procedure to favour the comparability of statistics across countries.