Global Policy Forum

By Gustavo Gonzalez

Globalization has not contributed to correcting the existing social inequalities of Latin America, according to Victor Tokman, regional director of the International Labour Organisation (ILO), and Emilio Klein, an ILO researcher.

In a study published in the latest edition of the Economic Commission for Latin America and the Caribbean (ECLAC) journal, Tokman and Klein analyse globalization's effects on employment, income and equality, as well as the changes occurring in social structures as a result of the process.

The complete text (in Spanish) of the study "La estratificacion social bajo tension en la era de la globalizacion" (Social Stratification under Stress in the Globalization Era) by the ILO experts can be found at the ECLAC website (www.eclac.org).

Will globalization foment greater social integration within each country? Or will it lead to social breakdown as only a limited few reap the benefits while the majority is increasingly excluded? These are the key questions in Tokman and Klein's analysis.

The authors identify globalization, privatisation and deregulation as the central characteristics of the emerging scenario in Latin America as the neoliberal-inspired structural reforms become widespread.

The globalization process is largely considered beneficial, to the extent that it creates more open economies and is based on rapid technological advances, which optimise the insertion of Latin American countries into the world market. But these benefits, while obvious on the surface, are difficult to identify in their social repercussions, and their distribution has tended to reflect or reproduce, rather than correct, the inequalities existing in the region, according to the ILO experts. In theory, the changes brought about by globalization should improve productivity, boost workers' real income and, as a result, improve the general welfare of the population.

By gaining space on the international market, it is expected that export-focussed economies in Latin America and other developing regions will concentrate on goods that require the intensive use of an unskilled workforce, which would drive up demand and reduce the gap between unskilled and highly skilled workers. But the existing differences between countries as far as wages and labour regulations may also fuel the expansion of unfair practices toward workers, warn Tokman and Klein.

Situations are thus created in which there are further limits to pay raises as developing economies pursue ways to be more competitive internationally and succumb to internal pressures for greater flexibility in the workforce.

"This set of policies has produced greater macroeconomic equilibrium and has improved the international integration of Latin American countries, but its other effects are more problematic," write the researchers.

Only five Latin American countries (Brazil, Chile, Colombia, Costa Rica and Uruguay) have achieved higher per capita income than the levels recorded prior to the recent financial crises.

Irregular growth rates and conditions specific to the region's economies have also played a role in these discouraging results.

"In most Latin American countries, the minimum wages in 1999 were less than 26% of wages in 1980, but in the manufacturing sector they increased 2.9%," says the study.

The non-salary costs of production ranged from 38% to 68% of costs in wages. In Chile and Argentina, the non-salary costs are higher than those of South Korea, similar to those of the United States, and much lower than in European countries.

These figures, as well as other indicators, underscore the importance of improving productivity "as a top priority for increasing the competitive ability" of the Latin American economies, maintain the experts.

Another negative effect of globalization is its insufficient creation of jobs in relation to the expansion of the workforce, influenced by the growing incorporation of women into the labour arena. Latin America's average unemployment rate rose from 6.7% in 1980 to 8.8% in 1999.

Alongside that phenomenon, Tokman and Klein indicate that privatisations have modified the employment structure by displacing workers from the public to the private sector, where larger companies lower their production costs by reducing the number of jobs.

On average, large corporations contribute 17 of every 100 new jobs in the region.

In this new globalization scenario, the labour force is being displaced from the production of goods to the production of services. In the 1990s, the manufacturing sector's portion of employment shrank by 4-6% in Bolivia, Costa Rica, Ecuador, Peru and Uruguay.

This evolution of the workforce also involves the "informalisation" of employment, as 70% of new jobs are found in the informal economy, where there are no contractual ties between worker and employer.

"Given the inexistence of labour insurance, unemployment is a luxury that few can afford" in Latin America, say the authors, who also warn of another new phenomenon: job insecurity.

Globalization and the policies that accompany it favour those who are already members of the higher-income sectors of society, Tokman and Klein indicate in the conclusion of their study.

The low-income population suffers greater negative impacts and the middle class also sees its welfare jeopardised, not only by the retreat of the public sector but also by the narrowing of social programmes to focus exclusively on the poor.

There is a great imbalance in the region's existing social relations, characterised by income concentrated in the hands of a few, a dynamic that appears to have eliminated the benefits promised by the globalization process, say the ILO experts.