By Francesco Maria Chiodi, Social Policies Area Coordinator
In order to face the crisis that hit the European and Latin American economies as a result of the COVID-19 pandemic, the countries in the two regions have implemented mainly fiscal and social protection measures: cash and in-kind (food) assistance transfers to sustain the consumption of the poorest families; subsidies to protect income; expansion of unemployment cover and schemes whereby the government pays part of the wages of workers in companies forced to reduce or interrupt work activities. Other measures have included the extension of deadlines for tax obligations, state guarantees for loans, the suspension of social security contributions and incentives and subsidies to the business sector, also to prevent closures and lay-offs.
Financial aid has been and still is necessary to prevent the recession from leading to a social crisis of enormous proportions. But such aid is necessarily of a temporary and limited nature, and not only for reasons of fiscal constraint. In this regard, although while the situation dictates it is necessary to maintain the mechanisms established to preserve employment and replace earnings, it is essential to move to active employment policies, or rather to appropriately coordinate passive and active policies focused on the insertion/reinsertion into the workforce of people who are able to work.
The debate in Latin America on employment policies is not new, but, because it is unresolved, it is an on-going discussion. In most countries, in can be seen that these policies are relatively undeveloped, except, partially, in the field of training.
However, the magnitude of the crisis makes it necessary to think of a radical shift to ensure that employment policies have a greater impact on labour markets[1], and this essentially means two reforms: a substantial increase in investment and the adoption of an organic design to comprehensively address the labour market’s variable structural.
I am now going to refer only to the fundamentals of an integrated service system, which is the foundation of an organic design. These consist of the following services: (1) orientation; (2) training and education, including continuing education; and (3) intermediation.
An employment services system must necessarily have all three components, but it is their interconnection that determines the value of the system. This value also depends on the effective functioning of the services, for which qualified personnel, adequate infrastructure facilities, etc. are needed.
The issue of interconnection is not straightforward. Despite its being one of the most touted principles, putting it into practice is very difficult. Commonly in Latin America, orientation, intermediation and training and education constitute three separate blocks. Furthermore, relative importance is given to one over the others. The first two services are quite modest and are usually managed within the orbit of the Ministries of Labour and their services, which also intervene with specific programmes for employment (first job, training for vulnerable groups, etc.). Training on the other hand has a specific institutional framework and a technical and economic force that gives it a self-sufficiency from the others as a system in itself.
The weakness of the interconnection between the services undermines their potential. Each service provides a partial response that does not take advantage of the resources of the whole system. This happens, to give an example, when a person completes a training course but does not access the service that could provide orientation and accompaniment in finding a job or the service that could intermediate to identify job vacancies and arrange contacts.
Thus, investing in the growth and quality of each service, and in a logical system, clearly seems a pressing need in a context such as the current one in which the main labour indicators are deteriorating. If action is not taken quickly, the risk is that the most vulnerable people will be trapped in a vicious cycle of exclusion.
The services should function as a network, or be reorganised under one centre (e.g. the training system) that is responsible for the whole. However, also due to the multidimensional nature of the current crisis, it is important to add two further strands to the three that we have indicated as fundamental to an employment system: (4) connections with businesses; (5) coordination of employment policies with economic recovery plans.
The first involves opening or reinforcing collaboration with businesses. In relation to training, this will cement the range of training opportunities available and plug gaps. In relation to job centres, this will aim to result in an ever-increasing number of businesses turn to them to fill their vacancies. This last point is one of the great problems for the employment services in Latin America (and also in some European countries), taking into account, furthermore, that job providers are primarily micro and small companies, which use informal means to search for personal. In order to gain the trust of many more businesses, job centres must provide prompt and effective responses to their demands for people with particular professional profiles. It may also be useful to broaden the range of services they offer: information, access to credit, a bridge to specialised consultancies, etc.
The other strand shifts the employment systems towards the field of productive development. The reactivation and recovery plans that are being developed in the countries represent a space to capture and take advantage of the occupational opportunities that are going to be generated. Another window could be opened as a result of the processes of geographic and strategic reconfiguration of global value chains. Several European companies, for example, could look with interest to the Latin American countries in their attempt to reduce their dependence on China.
The labour market is the hinge point between economic development and employment. In this regard, active employment policies should be repositioned as labour market policies. The leap to this perspective cannot be taken for granted, because the sector has historically concerned itself almost exclusively with the supply side, seeing economic development above all as a backdrop to be taken into account, and assigning to businesses the role of partners and seeing employers as users. This leap involves the central actors in active employment policies participating in the round tables where development plans, investments, fiscal and economic decisions are defined and discussed. And also conducting permanent dialogues at the regional level with businesses, chambers, training centres, research and innovation centres, as well as intermediate bodies and social agents. In short, a proactive attitude is required from employment systems, which must play a central role in economic matters in order to better serve their employment objectives.
In the post-COVID scenario, with the coexistence of a health emergency and reactivation, we will witness a relocation of many economic activities, inevitably many companies will close and at the same time new vectors of development will come into existence (I’m thinking for example of the green economy and services). A growing mass of people are now in need of public support to find work again or improve their earnings (the self-employed, for example), or to retrain and acquire new skills. Thus, this time of deep crisis is the time to accelerate reforms that at other times would meet insurmountable resistance: in addition to combining passive and active policies, in addition to strengthening and integrating the three essential components of employment systems, employment policies must extend their operations to the business sector and accompany the recovery plans. The vision is that of an ecosystem that seamlessly links social income protection, labour market policies and economic policies.
[1] The relevance of these policies is clear if one takes into account that 73% of total household income in the region is obtained through work and that the labour market continues to be responsible for a large part of the inequality that exists. (Busso, M., Messina, J. and Silva, J. (2020), “The Transforming Role of Labour Markets”, in Busso, M. and Messina, J. (eds.), The Inequality Crisis. Latin America and the Caribbean at the Crossroads, IDB)
