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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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Venezuela

Venezuela

Chapter:
(p.417) 22 Venezuela
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/9780198801085.003.0022

Abstract and Keywords

Venezuela experienced slow economic growth during the 2000s. The economy suffered a recession in the early years of the period and during the international crisis of 2008, but most labour market indicators improved and moved along with the business cycle over the period. The chapter shows that the only indicators that did not improve were the composition of employment by occupational position and the percentage of workers registered with social security, which remained essentially unchanged. Most of the labour market indicators were affected negatively by the international crisis, and some of them had not recovered their pre-crisis levels by 2012.

Keywords:   Venezuela, economic growth, recession, labour market indicators, employment, social security

22.1 Introduction

This chapter on labour markets and growth in Venezuela 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 Venezuela 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 de Hogares por Muestreo (EPM), for the second semester of years 2000 to 2012. The nationwide surveys from 2000 to 2006 were processed following a harmonization methodology and incorporated into the SEDLAC—Socio-Economic Database for Latin America and the Caribbean (CEDLAS and World Bank 2014), while we made our own processing of the (p.418) remaining surveys.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 Venezuela’s household surveys, and on comparability issues of these surveys over time.

22.2 Economic Growth

Venezuela experienced slow economic growth during the 2000s. The country underwent a recession at the beginning of the period and during the international crisis of 2008. The Venezuelan economy surpassed its pre-recession GDP level in 2012, but GDP per capita was still below the pre-crisis level by the end of the period studied.(Cruces et al. 2015: figures 1 and 2)

During the period 2000 to 2012, Venezuela experienced low economic growth by Latin American standards. GDP per capita increased by 22.0 per cent, while the average for the eighteen Latin American countries was 36.2 per cent during the same period. GDP (measured in PPP dollars of 2005) grew by 49.7 per cent, and GDP per employed person rose by 28.4 per cent. The annual growth rate of GDP per capita was 1.2 per cent, and it varied from a minimum of −10.5 per cent in 2002 to a maximum of 16.2 per cent in 2004 (Table 22.1).

Table 22.1 Venezuela: 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

9,527

9,667

8,650

7,835

9,104

9,869

10,658

11,396

11,799

11,237

10,894

11,173

11,623

Venezuela

GDP per capita growth rate

1.72

1.47

−10.52

−9.41

16.20

8.40

7.99

6.92

3.54

−4.77

−3.05

2.56

4.02

Venezuela

Employment and Earnings Indicators

Employment-to-population ratio

56.06

58.94

57.98

57.82

58.69

58.80

59.47

60.13

60.75

59.85

59.31

59.65

59.37

Venezuela

Unemployment rate

13.23

12.78

16.17

16.78

13.94

11.35

9.33

7.47

6.85

8.05

8.45

7.84

7.41

Venezuela

Share of low-earnings occupations

53.85

50.78

50.75

50.04

49.83

49.91

49.65

49.03

48.96

Venezuela

Share of mid-earnings occupations

30.90

31.75

32.59

33.24

33.18

32.68

32.28

32.85

31.96

Venezuela

Share of high-earnings occupations

15.25

17.47

16.66

16.71

17.00

17.41

18.07

18.12

19.08

Venezuela

Share of employers

5.10

6.62

5.53

5.08

4.80

4.89

4.49

4.17

4.09

3.78

3.46

3.48

3.26

Venezuela

Share of wage/salaried employees

56.58

56.22

55.17

53.86

55.81

57.79

58.51

59.30

58.43

57.73

56.95

57.19

58.78

Venezuela

Share of self-employed workers

36.60

34.81

36.69

38.34

37.43

35.72

35.77

35.55

36.30

37.72

39.00

38.46

37.19

Venezuela

Share of unpaid family workers

1.71

2.34

2.61

2.72

1.96

1.60

1.22

0.98

1.18

0.77

0.59

0.88

0.77

Venezuela

Share of workers in low-earnings sectors

41.54

41.39

42.58

42.64

41.13

40.39

38.31

37.87

37.52

37.86

37.56

37.03

37.35

Venezuela

Share of workers in mid-earnings sectors

40.56

39.10

37.65

37.63

39.55

39.54

40.74

40.73

40.42

39.83

39.67

39.86

39.60

Venezuela

Share of workers in high-earnings sectors

17.90

19.51

19.77

19.72

19.33

20.07

20.95

21.39

22.06

22.30

22.76

23.11

23.05

Venezuela

Share of low-educated workers

52.55

50.59

50.37

50.25

49.37

46.21

44.18

42.95

41.24

40.02

38.35

36.75

37.19

Venezuela

Share of medium-educated workers

31.73

33.13

33.42

33.35

33.71

35.73

36.20

36.81

37.32

36.60

36.55

37.03

35.30

Venezuela

Share of high-educated workers

15.72

16.28

16.21

16.40

16.92

18.06

19.63

20.24

21.44

23.38

25.10

26.22

27.51

Venezuela

Share of workers registered with SS

68.56

64.82

61.48

58.83

60.16

60.33

60.85

62.86

66.03

71.13

70.83

72.99

69.12

Venezuela

Mean labour earnings

380.4

402.3

346.0

297.0

330.9

398.2

463.0

501.7

500.4

493.0

469.3

455.7

511.0

Venezuela

Poverty and Inequality Indicators

Official extreme poverty rate

13.79

15.72

21.69

27.21

24.20

18.69

10.06

7.41

8.86

8.03

8.45

8.31

7.19

Venezuela

Official moderate poverty rate

37.44

42.77

50.23

58.00

55.07

44.09

31.92

25.83

30.38

28.95

29.99

29.24

23.52

Venezuela

Poverty rate 2.5 dollars-a-day

29.83

27.49

36.96

42.56

36.30

28.25

18.09

12.74

11.92

11.92

12.13

12.42

11.05

Venezuela

Poverty rate 4 dollars-a-day

51.67

49.45

58.52

64.79

59.30

48.52

36.33

29.02

27.77

27.57

28.06

28.99

24.66

Venezuela

GINI of household per capita income

0.440

0.464

0.473

0.460

0.453

0.474

0.433

0.415

0.401

0.400

0.384

0.388

0.402

Venezuela

GINI of labour earnings

0.403

0.437

0.438

0.425

0.412

0.436

0.382

0.365

0.352

0.343

0.310

0.319

0.342

Venezuela

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).

Venezuela is an economy that depends to a great extent on oil revenues and where GDP per capita follows the movements of oil prices. At the beginning of the 2000s, the Venezuelan economy was affected negatively by its political instability and a two-month strike by the state-run oil company (Alvarez and Hanson 2009). The consequence of the strike was a rapid drop in GDP of 8.3 per cent annually from 2001 to 2003. In the following years, rising international oil prices helped the economy to recover. The government regained control over the oil company after the two-month strike. The implementation of changes in the oil revenues’ distribution policy along with changes in taxation allowed the government to obtain a larger amount of oil revenues and to implement an expansionary fiscal policy. Indeed, public spending was the driving force of the economy from 2003 to 2008 (Guerra and Olivo 2009). The expansionary fiscal policy was accompanied by an expansionary monetary policy, and foreign exchange rate, and price controls. GDP and GDP per capita growth rates averaged 10.5 and 8.6 per cent respectively between 2004 and 2008.

(p.419) (p.420) (p.421) (p.422) The economy was affected adversely by the international crisis of 2008, mostly through the drop in international oil prices. The reduced oil revenues prevented the government from instrumenting countercyclical policies (Guerra and Olivo 2009; Weisbrot and Johnston 2012). The public spending was reduced and taxes were increased in 2009 to face the international crisis. Moreover, the government did not increase its debt significantly despite having a low stock of public and external debt (Weisbrot and Johnston 2012). GDP fell by 3.2 per cent in 2009 while GDP per capita dropped by 4.8 per cent that year. The economy returned to its pre-crisis GDP level in 2012, helped by the recovery in oil prices and the increase in public spending starting in 2010. GDP per capita was slightly below its pre-recession value by 2012.

The share of the industry and agricultural sectors in the economy increased, while the share of the service sector diminished between 2000 and 2010 (when data on this variable stopped becoming available). The share of the industry sector, the largest one in the Venezuelan economy, increased from 49.7 per cent in 2000 to 52.2 per cent in 2010 (Cruces et al. 2015: table 2). The increase was led by the growth of the oil subsector which followed the rise in the international oil price between 2004 and 2008. Conversely, the manufacturing subsector lost share over the period due to price and exchange rate controls, and increases in imports driven by an overvalued currency (Guerra and Olivo 2009). The share of the service sector, on the other hand, diminished during the same period from 46.1 per cent in 2000 to 41.1 per cent in 2010. The agricultural sector increased its share in the total economy from 4.2 per cent in 2000 to 5.8 per cent in 2010. Turning to the year of international crisis, 2008, industry was the sector most affected by the turmoil. In 2009, the share of this sector declined by 9.9 percentage points and its value added fell by 5.0 per cent due to both the reduction in oil prices and electricity blackouts (Weisbrot and Ray 2010). The share of the industry sector in the economy and its value added had not regained their pre-crisis levels by 2010. The agricultural and service sectors suffered smaller changes in their value added compared to the industry sector between 2008 and 2009 (an increase of 1.0 per cent and a drop of 0.9 per cent respectively).

22.3 Unemployment

The unemployment rate dropped from 2000 to 2012 following the movements in the business cycle. It decreased for youths, adults, men, and women. During the international crisis, the unemployment rate increased but recovered its pre-crisis level by 2012. (Cruces et al. 2015: figure 3)

(p.423) The unemployment rate (measured as the ratio of unemployment to labour force) decreased from 13.2 per cent in 2000 (1,365,752 unemployed people) to 7.4 per cent in 2012 (1,006,400 unemployed people) and moved along with the business cycle over the period (Table 22.1). Between 2001 and 2003, the unemployment rate increased from 12.8 per cent to 16.8 per cent while GDP was falling. Between 2004 and 2008, the unemployment rate decreased and reached its lowest value for the period (6.9 per cent in 2008). The international crisis of 2008 led to an increase in the unemployment rate, which rose to 8.1 per cent in 2009 and continued its upward trend until 2010. Both the number of persons in the labour force and the number of employed persons increased between 2008 and 2009 by 245,548 and 73,126 respectively. These figures suggest that the increase in the unemployment rate from 2008 to 2009 was explained by the new entrants into the labour market that could not find a job. In 2012 the unemployment rate returned to its 2007 level, but was still above the level of 2008.

The unemployment rate decreased for youth, adults, men, and women between 2000 and 2012. The international crisis hit young workers slightly harder than adult workers, and women more than men. For all population groups, the unemployment rate continued to rise until 2011, when it began declining again. By 2012, the unemployment rates of adults and men had recovered their pre-crisis levels. For youth and women, though, their unemployment rates were above the pre-recession values.

22.4 Job Mix

The composition of employment by occupational group improved from 2004 (the earliest when we can construct the classification of occupations described previously) to 2012, shifting overall from low-earning occupations to better-paying occupations. All population groups benefited, especially women. During the international crisis of 2008, the structure of employment by occupational group slightly worsened for youth and men, improved for women, and remained unchanged for adults. Youth and men recovered the pre-crisis structure of employment by the end of the period. (Cruces et al. 2015: figure 4)

The share of the following occupations shrank between 2004 and 2012: services and sales occupations (drop of 2.4 percentage points); elementary jobs (drop of 1.5 percentage points); and agricultural, forestry, and fishery occupations (drop of 1.0 percentage points). The share of the following occupations grew: professionals (increase of 3.4 percentage points) and plant and machine operators and assemblers (increase of 1.1 percentage points). The share of the other occupational groups remained largely unchanged. (p.424) These changes in the occupational composition of employment can be interpreted as an improvement since the share of low-earning occupations (elementary, agricultural, forestry and fishery, and services and sales occupations) decreased by 4.9 percentage points, while the share of high-earning occupations (armed forces, management, and professionals) increased by 3.8 percentage points (Table 22.1). The international crisis of 2008 did not affect the employment structure by occupational group in the aggregate.

All population groups benefited from the improvement in the employment structure by occupational group, with women benefiting at the fastest rate.

During the international crisis of 2008, the occupational structure of employment slightly worsened for young workers and men, improved for women, and remained largely unchanged for adults. Young workers resumed the downward trend in the rate of working in low-earning occupations in 2010, while the recovery for men took place in 2011.

The employment structure by occupational position remained essentially unchanged between 2000 and 2012 for the employed population as a whole. Adult workers and women exhibited an improvement in their structure of employment by occupational position; men suffered a worsening, while the structure of employment remained largely unchanged for young workers. Within the period, the employment structure by occupational position deteriorated at the beginning of the period, improved in the following years, and worsened once again during the international crisis of 2008. All population groups but young workers were impacted negatively by the Great Recession and only women recovered the pre-recession structure of employment by 2012. (Cruces et al. 2015: figure 5)

Between 2000 and 2012, the share of paid employees in total employment—the largest category—grew from 56.6 to 58.8 per cent. The share of the self-employed also increased but by less, from 36.6 to 37.2 per cent, whereas the shares of employers and unpaid workers fell from 5.1 to 3.3 per cent and from 1.7 to 0.8 per cent respectively (Table 22.1). These changes implied an unchanged structure of employment by occupational position since the shares of low-earning (self-employment and unpaid employment) and high-earning categories (paid employees and employers) exhibited small changes overall (drop and rise of 0.4 percentage points respectively). Within the period, the employment structure by occupational position suffered a worsening in the early years, when the country underwent a serious recession. It improved in the following years and deteriorated once during the international crisis of 2008. By 2012, low- and high-earning positions returned to their pre-crisis shares. In summary, in contexts of increasing unemployment and economic necessity, workers took up free-entry self-employment activities.

Between 2000 and 2012, the employment structure by occupational position deteriorated for men, improved for adult workers and women, and was (p.425) essentially unchanged for young workers. All population groups suffered a worsening in their employment structure by occupational position at the beginning of the period (from 2001 to 2003) that was followed by an improvement. A new deterioration took place during the international crisis for all population groups except young workers.

The international crisis of 2008 led to a deterioration in the employment structure by occupational position for adult workers, men, and women, while there was no change for young workers. By 2012, women reached their pre-recession share of low-earning positions. Adult workers and men had not reached their pre-crisis levels by 2012.

The employment composition by economic sector improved over the period studied, overall and for all population groups (youth, adults, men, and women). Within the period, the employment structure by economic sector deteriorated in the early years (from 2001 to 2003), improved from 2003 to 2008, and the improving trend stalled during the international crisis and resumed in 2010. (Cruces et al. 2015: figure 6)

The share of the following sectors fell between 2000 and 2012: primary activities (drop of 2.3 percentage points); high-tech industry (drop of 1.4 percentage points); commerce (drop of 1.2 percentage points); and low-tech industry (drop of 1.1 percentage points). Workers employed in the oil subsector are included in the primary activities sector in our classification. The increase in the employment share of the oil subsector in Venezuela mainly between 2004 and 2008 was counteracted by the reduction in the employment share of the agricultural subsector, resulting in a decline in the share of the primary activities sector over time. The share of the following sectors grew: public administration (increase of 2.4 percentage points); utilities and transportation (increase of 2.1 percentage points); and education and health (increase of 1.1 percentage points). The share of the other sector remained essentially unchanged. These changes clearly reveal a growth process based on public spending, i.e. the public administration sector exhibited the largest increase among all sectors, along with shrinking industry and agricultural sectors which reduced their production due to higher imports and price controls.

The employment structure by economic sector improved from 2000 to 2012 since the share of workers in low-earning sectors (domestic service, primary activities, and commerce) declined from 41.5 per cent to 37.4 per cent and the share of workers in high-earning sectors (skilled services, public administration, and utilities and transportation) grew over the period, from 17.9 per cent in 2000 to 23.1 per cent in 2012 (Table 22.1). Within the period, the employment structure by economic sector suffered a worsening at the outset (from 2001 to 2003) through an increase in the share of domestic workers (low-earning occupations) and a reduction in the share of industry sectors (p.426) (mid-earning sectors), and improved in the following years (from 2003 to 2008). The improving trend stalled during the international crisis but resumed in the post-crisis period (from 2010 to 2012).

The improvement in the composition of employment by economic sector during the period took place for all population groups—that is, young and adult workers, men, and women. Within the period, all population groups suffered an initial worsening in their employment structure by economic sector (from 2001 to 2003) through an increase in the share of low-earning sectors in total employment and a decrease in the share of high-earning sectors (young workers and women), or through a larger increase in the share of low-earning sectors compared to the increase in the share of high-earning sectors (adult workers and men). An improvement took place in the following years up to 2008. The employment structure remained essentially unchanged during the international crisis of 2008 for adult workers, men, and women, while there was a slight worsening for young workers. The improving trend resumed in 2010 for adult workers, men, and women. For young workers, the worsening trend continued up to 2012.

The educational level of the employed population improved over the period overall and for all population groups, and especially among young workers. The economic crisis did not have an effect on this trend. (Cruces et al. 2015: figure 7)

The share of employed workers with low educational levels (eight years of schooling or less) dropped from 52.6 per cent in 2000 to 37.2 per cent in 2012, while the share of employed workers with medium and high educational levels (nine to thirteen years of schooling and over thirteen years of schooling) grew from 31.7 per cent in 2000 to 35.3 per cent in 2012 and from 15.7 per cent to 27.5 per cent respectively (Table 22.1).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 improvement in the educational level of the employed population took place for all population groups, and primarily among young workers.

(p.427) The pattern of improvement in the level of education of the employed population in Venezuela continued even during the international crisis of 2008. This was also the case for all population groups.

The share of wage/salaried employees registered with the social security system changed only slightly from 2000 to 2012. The registration rate fell in the early years of this period and increased in the later years. This pattern of change held overall and for all population groups. The international crisis of 2008 did not interrupt the upward trend that the share of registered workers exhibited in the second half of period studied (Cruces et al. 2015: figure 8).

Social security in Venezuela is provided by two types of institutions which serve different segments of the population. The Instituo Venezolano de los Seguros Sociales (IVSS) is the main provider of social security for public and private workers in the country; the Instituto de Prevision Social de las Fuerzas Armadas (IPSFA) provides social security for military personnel (Fernandez Salas 2010). These institutions provide pension insurance, health insurance, and occupational hazard insurance. Coverage is voluntary for self-employed workers, unemployed pregnant women, and persons who were previously covered (ISSA 2014). The Venezuelan social security system combines contributory and non-contributory schemes. Under the contributory scheme, social security benefits are financed through contributions from employees, employers, and the government. The non-contributory scheme (pensiones asistenciales) covered persons who lack contributory capacity or receive an insufficient pension from the contributory scheme (Fernandez Salas 2010). The non-contributory scheme is funded totally by the government.

The percentage of wage/salaried employees registered with the contributory scheme of the social security system changed slightly from 2000 to 2012, when it increased from 68.6 per cent to 69.1 per cent (Table 22.1). Within the period, the share of registered workers fell from 68.6 to 60.3 per cent between 2000 and 2005. From 2005 to 2011, a period that included the Great Recession, that share grew steadily and reached 73.0 per cent in 2011. A downward trend began at the end of the period and the percentage of registered workers was 69.1 per cent in 2012.

All population groups exhibited small changes in the share of workers registered with the social security system, but this variable moved erratically over the period. For all population groups, the percentage of registered wage/salaried employees fell at the beginning of the period, then increased, and then dropped again in 2012.

The international crisis of 2008 did not affect the upward trend in the percentage of registered wage/salaried employees that took place in the second half of the period analysed. Between 2008 and 2009, the share of workers registered with the social security system increased overall and for all population (p.428) groups. In the following years, that share stabilized at a high level and finally fell in 2012.

22.5 Labour Earnings

Labour earnings increased from 2000 to 2012 overall and for all population groups and employment categories. Low-earning categories had larger percentage income gains than high-earning categories. Workers were affected negatively by the 2008 crisis and not all of the groups recovered the pre-crisis level of incomes by 2012. (Cruces et al. 2015: figure 9)

Average monthly earnings, expressed in dollars at 2005 PPP, increased by 34.3 per cent, going from US$380 in 2000 to US$511 in 2012 (Table 22.1).4 Labour earnings followed the movements of GDP over the period. They decreased in the first years, reaching a minimum of US$297 in 2003, increased steadily from 2003 to 2007, and then decreased up to 2011. In 2012, labour earnings surpassed the level of 2008. Part of the increase in labour earnings over the period can be explained by regular increases in the minimum wage which impacted mainly on the lower tail of the wage distribution (Boada and Mayorca 2011).

All population groups and employment categories experienced increases in labour earnings between 2000 and 2012. Low-earning categories (low-earning occupations, low-earning positions, and low-earning sectors) had larger percentage income gains than high-earning categories (high-earning occupations, high-earning positions, and high-earning sectors), while workers with low educational levels benefited the most from the increase in labour earnings over the period studied compared to workers with medium and high levels of education.

The evidence of larger earnings gains for workers with low and medium educational levels compared to workers with high educational levels can be interpreted in light of previous findings of improving employment structure by occupational group and economic sector over the period. The improving employment structure by occupational group and economic sector implied an increase in the share of occupations and sectors that can be expected to use workers with high and medium educational levels, such as professional occupations, and public administration, and utilities and transportation sectors, and a reduction in the share of occupations and sectors that employ workers (p.429) with low educational levels, such as elementary, agricultural, services and sales occupations, and primary activity and commerce sectors. 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 (or from 2004 to 2012 according to our classification of occupations). On the other side, the educational levels of persons 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). The prediction of a supply and demand analysis is that the relative wages of workers with high and medium educational levels 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 Venezuelan labour market, the relative wages of workers with high and medium educational levels relative to those with low educational levels fell over the period, and the relative 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 larger reductions for workers with medium and low levels of education (Cruces et al. 2015: table 9).

The international crisis of 2008 had a negative impact on labour earnings overall and for most population groups and employment categories. Young, adult workers, and men suffered income reductions during the international crisis, while women were not affected negatively. Both young and adult workers and also men surpassed their pre-crisis levels of income by 2012. Among occupational groups, the categories most affected by the international crisis were management, professionals, and agriculture, forestry, and fishery workers. None of these groups regained their levels of earnings of 2008 by the end of the period. Among occupational positions, workers in high-earning categories suffered a reduction in labour earnings between 2008 and 2009, and by 2012 only wage/salaried workers returned to their pre-recession levels of income, while employers were still below that level. Workers from low-earning occupational positions were not impacted by the Great Recession. Among economic sectors, labour earnings of workers from the construction sector and high and low-tech industries exhibited the largest reductions. Workers from the construction sector had not recovered their pre-crisis level of incomes by the end of the period studied. All of the educational groups suffered income losses during the international crisis. Labour earnings of workers with high levels of education exhibited a larger reduction compared to earnings losses of workers with medium and low levels of education. High-educated workers had not recovered the pre-crisis level of earnings by 2012, while medium- and low-educated workers recovered the pre-crisis level of income that year.

(p.430) 22.6 Poverty and Inequality

Poverty fell over the period studied for all poverty lines used. The rate of working poor households also exhibited a decreasing trend. The pattern of poverty reduction over time was interrupted by the international crisis of 2008 but poverty indices were again declining by 2012.(Cruces et al. 2015: figure 10)

The moderate poverty rate (measured by the country’s official poverty line) decreased from 37.4 per cent in 2000 to 23.5 per cent in 2012, and the extreme poverty rate declined from 13.8 per cent to 7.2 per cent (Table 22.1). The rate of working poor households (defined as the proportion of persons in the population living in a poor household in which at least one member works) fell from 36.2 per cent to 15.3 per cent over the same period. The evolution of these indicators shows a negative association with GDP: poverty increased from the beginning of the period and up to 2003 while GDP was decreasing; fell from 2003 to 2007 while the economy was growing steadily; rose in 2008 and stabilized in the following years when the economy of Venezuela suffered the effects of the international crisis; and finally dropped in 2012 when economic growth resumed. The analysis based on the 2.5 and 4 dollars-a-day PPP international poverty lines also shows a drop in the poverty rate from 2000 to 2012 and a negative association between the poverty rate and the growth of the economy. Starting in 2009, all of the poverty indicators stopped falling, but in 2012 they were again declining.

The poverty patterns reported in the last paragraph can be interpreted by examining incomes from various sources. The analysis of sources of household total income indicates that labour incomes suffered a decline between 2001 and 2003 when all poverty indicators peaked; increased steadily from 2003 to 2007 when all poverty indicators fell; stabilized by the time of the international crisis when poverty indicators stopped decreasing; and recovered the upward trend by the end of the period when poverty indicators declined again (Cruces et al. 2015: figure 11). Incomes from capital followed a similar pattern over the period. Income from pensions did not suffer a major decline during the crisis of 2003, showed a clear upward trend between 2003 and 2006, and finally a decline that determined a similar level of pensions at the household level in 2012 compared to 2000. Finally, incomes from government transfers exhibited an erratic pattern at the beginning of the period studied, between 2000 and 2004, a stable level between 2005 and 2009, and an upward trend by the end of the period. The erratic pattern in the first years of the period can be explained by the erratic pattern of the number of beneficiaries from government transfers. Despite this erratic pattern, a clear finding emerges. The number of beneficiaries from government transfers increased dramatically after the crisis (p.431) of 2003. The social programmes introduced by mid-2003 (misiones) were primarily focused on education, health, and work opportunities and were accompanied by a monetary transfer component that allowed the beneficiaries to escape extreme poverty and move into moderate poverty. As a result, the extreme poverty rate exhibited a drastic reduction between 2003 and 2007 (Viloria 2011).

Household per capita income inequality and labour earnings inequality decreased over the period. The international crisis of 2008 did not affect the downward trend in the inequality indices immediately, but an upward trend began in 2010. (Cruces et al. 2015: figure 12)

Between 2000 and 2012, the Gini coefficient of household per capita income inequality fell from 0.440 to 0.402. The Gini coefficient of labour earnings among employed workers also decreased from 0.403 in 2000 to 0.342 in 2012 (Table 22.1); this reduction in labour earnings inequality is in accord with the evidence presented in section 22.5 showing larger earning increases for low-earning categories in comparison to high-earning categories. Disaggregating for different years, the inequality of household per capita income and labour earnings increased from 2000 to 2002 while GDP was decreasing, and they decreased from 2002 to 2008 when GDP was increasing with one exception: 2005 was a growth year in which inequality increased. During the international crisis, both inequality indices decreased while GDP was also falling. From 2010 until the end of the period studied, the Gini coefficient of household per capita income and labour earnings began an upward trend.

The decreasing trend in labour earnings inequality in Venezuela has been analysed by Gallo (2010). Through a decomposition approach, the author found that most of the change in labour earnings inequality (measured by the Theil index) between 1997 and 2007 remained unexplained. Among the observable factors he used in the analysis, those with greater explanatory power were the level of education, the occupational group, and the occupational position. This result implies that changes in labour earnings inequality are partly explained by changes in labour earnings inequality between educational groups, between occupational groups, and between occupational positions. Gasparini et al. (2011) analysed the period 2002–6 and found a significant fall in the education wage premium in Venezuela which is explained by an increase in the relative supply of highly educated workers (those with some college education), and a decrease in their relative demand. Some institutional factors were also at play in the decreasing trend in labour earnings inequality in Venezuela. Boada and Mayorca (2011) claimed that the continuous increases in the minimum wage mainly impacted the lower tail of the earnings distribution.

(p.432) 22.7 Conclusions

By Latin American standards, Venezuela experienced slow economic growth during the 2000s. The country underwent a recession in the early years of the period and during the international crisis of 2008. The Venezuelan economy returned to pre-recession GDP level in 2012, but GDP per capita was still below the pre-crisis level by the end of the period studied.

The evidence regarding the changes in labour market indicators shows that most of these improved between 2000 and 2012 and moved along with the business cycle, with a worsening at the beginning of the period (from 2001 to 2003), a following improvement, and a deterioration during the international crisis of 2008. Specifically, the unemployment rate exhibited an increase in the early years of the period, a downward trend in the following years, and a new increase during the international crisis, falling overall between 2000 and 2012. The composition of the employed population by occupational group improved from 2004 (the earliest year of that time series) to 2012, shifting overall from low-earning occupations such as elementary, agricultural, forestry and fishery, and services and sales occupations to better-paying occupations such as professional occupations, and did not suffer any impact from the international crisis in the aggregate. The employment composition by economic sector improved overall between 2000 and 2012 and exhibited a worsening at the beginning of the period and an improving trend in the following years which stalled during the international crisis and resumed in the years that followed. The educational level of the employed population improved steadily over the period. Finally, labour earnings fell in the early years of the period, improved from 2003 to 2007, deteriorated once again during the international crisis, and recovered the upward trend by the end of the period, improving overall from 2000 to 2012. The only employment and earnings indicators that did not improve over the period studied were the employment structure by occupational position and the share of registered workers with the social security system which remained essentially unchanged overall between 2000 and 2012. The moderate and extreme poverty rates, the rate of working poor households, and the Gini coefficient of household per capita income and labour earnings all decreased over the period following the movements of the business cycle.

Looking specifically at the international crisis of 2008, most labour market indicators were affected negatively by the crisis. The unemployment rate increased but then fell, recovering the pre-recession level by 2012. The employment structure by occupational position worsened during the international crisis and only some of the population groups recovered the (p.433) pre-recession level by 2012. The improving trend in the employment structure by economic sector stalled during the crisis. Labour earnings were affected negatively by the crisis and, as of 2012, earnings of some employment categories had not returned to pre-crisis levels. The international crisis led to an interruption in the pattern of poverty reduction over time that was recovered in 2012 and to an increase in the Gini coefficient of household per capita income and labour earnings in 2010 that continued to the end of the period. The comparison between the effects of the international crisis of 2008 on labour market indicators and the effects generated by the domestic crisis of 2003 reveals that the crisis at the beginning of the 2000s impacted Venezuela more strongly. The crisis of 2003 generated a larger reduction in GDP, a larger increase in the unemployment rate, a larger increase in the share of low-earning positions in total employment, a decrease in the share of unregistered workers with the social security system, and a larger decrease in labour earnings compared to the Great Recession. Moreover, all poverty indicators reached a peak during the recession of 2003, while they stabilized during the international crisis of 2008.

Young workers and women had 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 were more negatively affected by the crises compared to women. The unemployment rate was higher for young compared to adult workers, the shares of young employed workers in low-earning occupations and economic sectors were larger than the shares of adult workers, the percentage of young workers registered with the social security system was lower when 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 adversely affected by the episodes of crises. Disaggregating by gender, we found that men had better labour market outcomes than women, with the only exception being the share of workers registered with the social security system which was larger among women. However, men were hit hardest by both crises in most labour market indicators, with the increase in the unemployment rate during the crisis of 2003 and during the international crisis of 2008 being the only exceptions to this pattern.

In summary, notwithstanding Venezuela’s massive downturn from 2001 to 2003 and the international crisis of 2008, Venezuelan labour market conditions were, in general, in a better state in 2012 than they were at the start of the millennium.

(p.434) References

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Notes:

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

(2) The most frequent value of years of education for employed workers in Venezuela was six from 2000 to 2007 (around 21.0 per cent of employed workers had six years of education) and eleven from 2008 to 2012 (around 22.2 per cent of employed workers had eleven 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 Venezuela in section 22.5.

(4) The domestic currency of Venezuela was changed from bolivar to bolivar fuerte in January 2008 at the rate of 1 bolivar fuerte = 1000 bolivares due to inflation. We considered this change in our calculations.