Conditions of labor markets in Latin America worsened slightly in 2012, specially in Chile, Guatemala and Honduras. That is the main conclusion that can be drawn from the Latin Business Chronicle Labor Index. The Index fell 2.3 percent to 178.9 from 183.2.
The index evaluates 18 factors to assess national labor markets. It considers fundamentally the difficulty of hiring, the difficulty of firing and of extending work hours. The variables include, flexibility of conditions for fixed term contracts, minimum wages, premiums for night or holiday work, vacations, redundancy, cooperation in labor-employer relations, education, brain drain and life expectancy.
Chile still has the best labor market in the region, but its index lost almost 4 percent this year compared to 2011. It reached 318.2 from 329.1 the previous year. This country lost ground in flexibility of wage determination, cooperation in labor-employment relations and brain drain.
Mexico, the second most attractive labor market in Latin America, remained almost the same compared to its 2011 standing. It gained 0.5 percent, exactly in the areas that Chile lost strength this year, flexibility of wage determination, cooperation in labor-employment relations and brain drain.
Guatemala, the third best on the list was also a major looser this year. Its Labor Index dipped 7.6 percent. An increase in the minimum wage which makes hiring more difficult, weighted down the result for this Central American country. The increase in minimum wage had a similar effect in the case of Honduras, where the Index fell 12 percent.
Brazil was also a notorious looser. The index dropped 4.5 percent to 139.8 from 146.4 last year. The worsening has to do with wage increases. There are surveys and anecdotal evidence to prove that Brazilian labor, unskilled and skilled, has increased its cost this year due to greater demand and to currency appreciation.
Labor market conditions are now better in Ecuador. Its LBC Labor Index rose 3.5 percent, the largest increase in this year´s classification. Nevertheless, the increment was not enough to move the country up in the ranking. It remained as the 14 most attractive labor market in the region.
The Labor Index reflects fundamental conditions of the labor market and not necessarily the current conditions of supply and demand in those economies. The LBC Index gives a good indication of the relative attractiveness of the market. That explains why a lower index may at times coexist with reductions in unemployment.
That would be the case this year. According to Eclac, urban unemployment in the ten countries that report quarterly labor statistics fell 0.4 percentage points over the period 2H11 to 2H12.
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