Market Economy Failed to Generate Jobs


by Gustavo González

Inter Press Service
December 10, 2001
Expectations that adoption of a market- oriented economic model throughout Latin America would lead to the generation of jobs were thwarted in the 1990s, according to a study by the Economic Commission for Latin America and the Caribbean (ECLAC).

Barbara Stallings and Jürgen Weller, researchers with the regional United Nations agency, report that over the past decade, ''jobs grew slowly and unemployment increased,'' while job quality fell and inequality grew in the region.

In a study on the market economy's effect on labour, published in the recently released 75th edition of the ECLAC Review, Stallings and Weller say ''the 1990s were a decade of serious problems on the labour front,'' by contrast to expectations that jobs would be created as a result of the widespread adoption of market-oriented policies.

But while the employment outlook is grim overall, the characteristics of the labour market vary according to subregion, the study points out.

In Mexico and Central America, close ties with the US economy have generated production structures based on traditional manufactured products, especially textiles, electronic goods and cars.

In South America, on the other hand, economic and labour activity is more closely linked to products based on natural resources, such as steel, petrochemicals, cellulose, paper and foodstuffs, which are exported to Europe and other markets.

Meanwhile, the southern cone countries, grouped in the Southern Common Market (Mercosur), began to purchase manufactured goods from each other in the 1990s, Stallings and Weller add.

In terms of employment, the fastest-growing category of jobs in Mexico and Central America was that of wage-earners, with average annual growth of 4.2 percent. That category accounted for two- thirds of all new jobs.

In South America, wage-earning jobs increased just 1.8 percent a year, and represented less than half of all new jobs, while the independent labour force - informal and self-employed workers - expanded at an annual rate of four percent.

As a proportion of all new jobs created in the countries in the northern part of Latin America, the self-employed represented 27 percent, compared to 37 percent in the countries to the south, writes Stallings.

The maquiladoras, or export assembly plants, fuelled the expansion of wage-paying work in Mexico and Central America, the authors note.

Maquiladoras are factories set up in low-tax export processing zones that import materials or parts to make goods like textiles, electronics and other manufactured products for re-export.

Unemployment increased in nearly every Latin American country in the 1990s, according to Stallings and Weller, who point out that unemployment and growing inequality represent major challenges for government social policies.

Unless there is a sufficient number of jobs providing the minimum necessary support for workers and their families, social policies will be overwhelmed by demands that they satisfy the basic needs of the population, writes Weller.

That means government social policies will be unable to play the role they are meant to play, complementing the labour market, helping prepare workers and future workers, and providing a safety net for those who are unable to work, he points out.

The study urges governments in the region to resolve their pressing problems with regards to employment, described as the main link between economic and social development.

The imbalances in the labour market and their implications also pose a threat to the region's democracies, as has been seen in several cases, warns Stallings.

It is governments that must offer incentives for growth of more labour-intensive endeavours, although in market-oriented economic models, it is the private sector that plays a leadership role in the question of investment, the study adds.

Policies must be adapted to the realities of each country, say the authors. But they add that in general terms, the maquiladora sector must be strengthened in Mexico and Central America, and the poor working conditions, including widespread violations of workers' right to organise, must be improved.

In South America, priority must be put on support for small companies, say Stallings and Weller, to complement capital- intensive production structures.

Magdalena Echeverrí­a, a sociologist with the Chilean Labour Office's research department, said a new trend was emerging in the labour market through outsourcing, which leads to a deterioration in labour conditions.

The new trend in subcontracting consists of a large company laying off its personnel and rehiring part of the employees through newer associated companies with less capital.

Outsourcing leads to workers losing benefits like bonuses, health care arrangements and the possibility of setting up a trade union, given the precariousness of their job situation, warned Echeverrí­a.

She said subcontracting would increase in Chile, as a strategy by which businesses seek to evade the obligations incorporated in the latest reforms of the labour code, which went into effect on Dec 1.

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