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A region known for its volatility, Latin America and the Caribbean (LAC) has suffered severe economic and social setbacks from crises—including the COVID-19 pandemic. These crises have taken their toll on careers, wage growth, and productivity. Employment in Crisis: The Path to Better Jobs in a Post-COVID-19 Latin America provides new evidence on the effects of crises on the region’s workers and firms and suggests several policy responses that can bolster long-term and inclusive economic growth. This report has three key findings. First, crises lead to persistent employment losses and accelerate structural changes away from the formal sector. This change occurs more through reductions in the creation of formal jobs than through job destruction. Second, some workers recover from crises, while others are permanently scarred by them. Low-skilled workers can suffer up to a decade of lower earnings caused by crises, while high-skilled workers rebound fast, exacerbating the LAC region’s high level of inequality. Formal workers suffer smaller employment and wage losses in localities with higher rates of informality. And the reduced job flows caused by crises decrease welfare, but workers in localities with more job opportunities, whether formal or informal, bounce back better. Third, crises’ cleansing effects can increase efficiency and productivity, but these effects are dampened by the LAC region’s less competitive market structure. Rather than becoming more agile and productive during economic downturns, protected sectors and firms gain market share and crowd out others, trapping valuable resources. This report proposes a three-pronged mix of policies to improve the LAC region’s responses to crises: • Create a more stable macroeconomic environment to smooth the impacts of crises, including automatic stabilizers such as unemployment insurance and short-term compensation programs; • Increase the capacity of social protection and labor programs to respond to crises and coalesce these programs into systems that complement income support with reemployment assistance and reskilling opportunities; and • Tackle structural issues, including the lack of product market competition and the spatial dimension behind poor labor market adjustment—a “good jobs and good firms” agenda.

Skills and Jobs in Brazil: An Agenda for Youth is a new World Bank book focusing on the challenge of economic engagement among Brazil’s youth. In the context of a rapidly aging population, Brazil’s greatest economic opportunity is to increase its labor productivity, especially that of its youth. This book documents important new facts about the extent of the youth economic disengagement, while at school and at work. Today, close to half of Brazil’s population ages 15–29 years old, is not fully engaged economically. Either they are not working or studying, studying in mediocre schools, or working in informal and unstable jobs. This book shows how the youth prospects in the labor market are dimmed by existing policies that favor existing workers over entrants. In addition, it shows how youth are often ill-equipped to meet anincreasingly challenging labor market. Skills and Jobs in Brazil offersurgently needed ideas to improve education, job skills, and employment policies that will address the last wave of Brazil’s demographic transition.Included is an in-depth discussion about policies aimed at increasing learning and reducing dropout rates in upper secondary education, andlabor market policies that facilitate quicker and more effective youth transitions from school to work.

Skills and Jobs in Brazil: An Agenda for Youth is a new report focusing on the challenge of economic engagement among the Brazilian youth. In the context of a fast aging population, Brazil’s greatest economic opportunity is to increase its labor productivity, especially that of youth. This report documents important new facts about the extent of the youth economic disengagement, while at school and at work. Today, close to half of the Brazilian youth aged 15-29 years old is not fully economically engaged, because they are neither working nor studying, are studying in schools of poor quality, or are working in informal and precarious jobs. The report shows how the youth prospects in the labor market are dimmed by policies favoring existing workers over new entrants; in addition, it shows how youth are often ill equipped to meet an increasingly challenging labor market. The report suggests new education, skills, and jobs policy changes that Brazil could prioritize moving forward, so that it can take advantage of the last wave of its demographic transition. The report discusses in particular depth policies aiming to increase learning and reduce school dropouts in upper secondary education, and labor market policies that aim to support more effective and faster youth transitions from school to work.

While adoption of new technologies is understood to enhance long-term growth and average per-capita incomes, its impact on lower-skilled workers is more complex and merits clarification. Concerns abound that advanced technologies developed in high-income countries would inexorably lead to job losses of lower-skilled, less well-off workers and exacerbate inequality. Conversely, there are countervailing concerns that policies intended to protect jobs from technology advancement would themselves stultify progress and depress productivity. This book squarely addresses both sets of concerns with new research showing that adoption of digital technologies offers a pathway to more inclusive growth by increasing adopting firms’ outputs, with the jobs-enhancing impact of technology adoption assisted by growth-enhancing policies that foster sizable output expansion. The research reported here demonstrates with economic theory and data from Argentina, Brazil, Chile, Colombia and Mexico that lower-skilled workers can benefit from adoption of productivity-enhancing technologies biased towards skilled workers, and often do. The inclusive jobs outcomes arise when the effects of increased productivity and expanding output overcome the substitution of workers for technology. While the substitution effect replaces some lower-skilled workers with new technology and more highly-skilled labor, the output effect can lead to an increase in the total number of jobs for less-skilled workers. Critically, output can increase sufficiently to increase jobs across all tasks and skill types within adopting firms, including jobs for lower-skilled workers, as long as lower-skilled task content remains complementary to new technologies and related occupations are not completely automated and replaced by machines. It is this channel for inclusive growth that underlies the power of pro-competitive enabling policies and institutions—such as regulations encouraging firms to compete and policies supporting the development of skills that technology augments rather than replaces—to ensure that the positive impact of technology adoption on productivity and lower-skilled workers is realized.

This paper exploits variation in country-level indicators drawn from published data to analyze the relationship between labor regulation and the use of digital technology. The analysis shows a statistically and economically significant association between digital technology use by firms and a country's statutory minimum wage and employment protection regulations. The results are robust to the inclusion of controls for level of development, economic stability, available infrastructure, and trade openness. To ensure the broadest country coverage, the paper develops new indexes of employment protection, using the World Bank's Doing Business indicators, which allow several aspects of labor market regulation—such as restrictions on hours and hiring, dismissal procedures, and severance costs--to be analyzed separately.

This paper exploits variation in country-level indicators drawn from published data to analyze the relationship between labor regulation and the use of digital technology. The analysis shows a statistically and economically significant association between digital technology use by firms and a country's statutory minimum wage and employment protection regulations. The results are robust to the inclusion of controls for level of development, economic stability, available infrastructure, and trade openness. To ensure the broadest country coverage, the paper develops new indexes of employment protection, using the World Bank's Doing Business indicators, which allow several aspects of labor market regulation—such as restrictions on hours and hiring, dismissal procedures, and severance costs--to be analyzed separately.

Over the past 30 years, Vietnam has experienced significant shifts of employment away from agriculture toward manufacturing and services, away from household enterprises toward registered and regulated businesses, and away from state-owned enterprises toward private firms. This paper argues that for these processes to continue in the future, appropriately designed and implemented labor market policies need to be in place, including labor market regulations that protect workers but do not inhibit creative destruction and creation of formal sector jobs; labor market interventions that improve workers' human capital, eliminate information asymmetries, and are fiscally sustainable; and labor market institutions that give voice to workers and employers. As a part of all of these measures, Vietnam will also have to renew its efforts to integrate vulnerable groups into the labor market.

Over the past 30 years, Vietnam has experienced significant shifts of employment away from agriculture toward manufacturing and services, away from household enterprises toward registered and regulated businesses, and away from state-owned enterprises toward private firms. This paper argues that for these processes to continue in the future, appropriately designed and implemented labor market policies need to be in place, including labor market regulations that protect workers but do not inhibit creative destruction and creation of formal sector jobs; labor market interventions that improve workers' human capital, eliminate information asymmetries, and are fiscally sustainable; and labor market institutions that give voice to workers and employers. As a part of all of these measures, Vietnam will also have to renew its efforts to integrate vulnerable groups into the labor market.

The absence of or poorly functioning risk pooling mechanisms and high amounts of out-of-pocket payments for health care expose households to financial risks associated with major illnesses or accidents. The aim of this article is to analyse the extent to which out-of-pocket health spending impoverishes households in Albania. The study augments existing evidence by analysing the dynamics of such payments over different years and the weight that informal payments have in the total out-of-pocket health spending. The data used in the study come from the Albania Living Standards Measurement Survey (ALSMS) for 2002, 2005 and 2008. We measure headcount catastrophic payments using different thresholds and the decomposition of indicators by expenditure quintiles to better understand their effects. We find that out-of-pocket and informal payments have increased in real value throughout the years. Even though their catastrophic effect has gone down (due also to declining trends in absolute poverty), the effect for the poorest expenditure quintiles remains high. Out-of-pocket payments deepen the poverty headcount and also enlarge the poverty gap and again the effect is larger for the poorest quintiles. Future policy interventions should provide better protection mechanisms for the poor by providing exemption criteria or subsidized transport. They should also seek to address the widespread informal payments in the country.

Accroitre la participation dans les dispositifs effectifs de mutualisation des risques de sante dans les pays en developpement est un element essentiel des ensembles de mesures visant a proteger les menages vulnerables des consequences de l'appauvrissement du aux aleas en matiere de sante. Les personnes pauvres, celles presentant des risques eleves et les travailleurs independants et les employes a titre informel constituent trois categories qui soulevent des questions particulieres dans la formulation d'une politique de mutualisation des risques de sante. Cet article examine les grandes options pour l'extension de la mutualisation des risques dans les pays en developpement. Il met particulierement l'accent sur les avantages et les inconvenients a remedier aux insuffisances d'une assurance financee par l'impot sur la masse salariale a travers un role accru du financement du secteur de la sante par le budget de l'Etat.

Aumentar la afiliacion a programas eficaces de cobertura conjunta de los riesgos en los paises en desarrollo es un elemento fundamental del paquete de politicas disenadas para proteger a las familias vulnerables de las consecuencias empobrecedoras de las crisis de salud. Las personas que son pobres, las que tienen un elevado riesgo y los trabajadores autonomos o del sector informal son los tres grupos que plantean cuestiones particulares en la formulacion de la politica de cobertura conjunta de los riesgos de salud. En este articulo se discuten las opciones politicas para extender la cobertura conjunta de los riesgos en los paises en desarrollo, prestando particular atencion a los meritos y desventajas de superar las carencias del seguro financiado con impuestos sobre la nomina mediante un papel mas importante de los ingresos fiscales generales en el sector de la salud.

“Mit dem Begriff ‘Versicherung’ bezeichnen unterschiedliche Menschen unterschiedliche Dinge: ein Instrument, das Individuen Schutz vor Risiken bietet, oder einen versicherungsmathematischen Mechanismus. Im ersten Fall wird Versicherung in Bezug auf ihre Ziele de finiert, im zweiten mit Blick auf einen Mechanismus, mit d em dieses Ziel erreicht werden konnte. Selbst dort, wo Institutionen keine Versicherung im zweiten Sinne sind, konnen sie insofern immer noch als Versicherung betrachtet werden, als sie Schutz vor Risiken bieten.”

Increasing participation in effective health risk-pooling arrangements in developing countries is an essential component of the package of policies designed to protect vulnerable households from the impoverishing consequences of health shocks. People who are poor, those at high risk and self-employed/informally employed workers are three groups that raise particular issues in the formulation of health risk-pooling policy. In this paper, policy options for extending risk-pooling in developing countries are discussed, with particular attention to the merits and disadvantages of overcoming the shortcomings of payroll-tax-financed insurance through a greater role for general tax financing in the health sector.

This paper investigates the occupational mobility and job quality of young people in Indonesia and relates this to the concept of “scarring.” The concept of labor market scarring in this paper is the occurrence of low or zero returns to certain types of work (for example, self-employment). Scarring is expected to occur whenever an individual spends periods working in occupations in which their human capital is either stagnant or deteriorating. Fixed effects estimations using panel data from the Indonesian Family Life Survey reveal that a period in self-employment is associated with negative returns for youth (about 3 to 4 percent per year penalty), but not for older adults. In addition, there are clear patterns of persistence in self-employment over time with few individuals progressing from petty self-employment to businesses with permanent workers.

In the past decade, many Latin American governments have radically restructured their old age income security systems, following the lead of Chile, which undertook its major pension reform in 1981. The defining characteristic of the reforms has been a shift in the basis of public pensions from social to individual responsibility: instead of the widely used system that “collectivized” or pooled the risk of being without the capacity to earn while aged, numerous countries in the region have adopted a system that relies on individual savings accounts. The reforms have maintained a role for a modified version of public pooling; this combination of individual and social savings to finance pensions is known as the “multipillar” approach. This article is based on a report prepared for the Office of the Chief Economist of the Latin America and Caribbean Region of the World Bank (Gill, Packard and Yermo, 2004).1 The report recognizes that the system of individual accounts, the essential aspect of the reform, has been a necessary and positive development, and one that is consistent with the economics of insurance and social welfare objectives. Beyond this recognition, however, the results of reform are much more complex. Each country has implemented its own version of the multipillar system. The article therefore draws on country evidence in order to determine: How has the new approach to public pensions in Latin America fared? In particular, have the changes left workers and their families in reform countries better off? The first section provides a brief description of the reforms. The second discusses the main macroeconomic concerns and effects. The third describes the impact on coverage levels, and other social welfare implications. The fourth evaluates the stagnation of coverage levels and presents various possible explanations. The fifth makes specific proposals to improve the multipillar pension system in Latin America. The last section concludes.

The paper estimates the impact of social security reform – specifically, the transition from a purely public pay-as-you-go (PAYGO) system to one with private individual retirement accounts – on the share of the workforce that contributes to formal retirement security systems. Using a simple model of a segmented labor market, the paper exploits variation in data from a panel of eighteen Latin American countries, observed from 1980 to 1999. Results show a positive incentive effect after the introduction of individual retirement accounts that, ceteris paribus, increases the share of the economically active population who contribute to the reformed system. However, this takes place only gradually as employers and workers become familiar with the set of new social security institutions that reforms put in place.