Are the Countries with the Best Working Conditions also those with the Most Unemployment?

Recently, the opposition in Colombia said it was against the labor reform of the Government of that country, accusing that suddenly increasing workers' benefits would only bring more unemployment. How true is this?.

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LatinAmerican Post | Christopher Ramírez Hernández

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Leer en español: ¿Los países con mejores condiciones de trabajo también son los que tienen más desempleo?

In mid-March, the Colombian government filed a bill before the Congress of the Republic to establish a labor reform that, according to President Gustavo Petro himself, should "allow people to be happier in this society and enjoy more free time."

To achieve this, the reform brings several points that would benefit Colombian workers, such as the guarantee of having more and better contracts, changes in the payment of nighttime over time and the return of the 100% Sunday and holiday surcharge; prioritization of security issues for work on digital platforms, among others.

Now, what for the Government is an impulse to improve the working conditions of Colombians, for the opposition, led by the Democratic Center and its top leader, former President Álvaro Uribe, what the reform represents is a more significant economic burden for business people which could lead to a higher unemployment rate in the country.

"It creates an increase of more than 30% in the labor costs of the small business that employs 78% of Colombian workers," Uribe said during an act of his political party.

Seeing this debate at LatinAmerican Post, we decided to look for the Latin American countries with the best employment conditions and see if this reality negatively affects their employability rate or if, on the contrary, it boosts it.

In this sense, it is vital to start by saying what the unemployment outlook is in the region. According to the International Monetary Fund (IMF), an entity that projected what unemployment will be in Latin America at the end of 2023, in the case of South American countries, those that will be least affected will be: Ecuador with 3.8 %, followed by Bolivia (4%), Paraguay (6.4%) and Argentina (6.9%).

On the other side of the scale appears Uruguay with 7.9%, Chile (8.3%), Brazil (9.5%), and Colombia, which would register an unemployment rate of 11.1%. However, in the case of Central America, the figure increases a bit, with Costa Rica projecting a rate of 12.5%, the highest in the entire region.

You can also read: Colombia: ABC of Gustavo Petro's labor reform

Minimum Wage in Latin America

With the unemployment data, we can specify if the unemployment rates are higher in countries with better working conditions, beginning with analyzing the minimum wage in Latin America.

According to Statista, the list of countries with the highest minimum wage is led by the country with the highest unemployment rate: Costa Rica. In 2023, this country approved a minimum wage of 603 dollars. The second and third places are occupied by Uruguay and Chile (also with high unemployment figures in the region) with 540 and 475 dollars, respectively.

This scenario does not reflect an absolute truth since Ecuador, the country with the lowest unemployment rate in South America, has the best minimum wage: $450. The opposite is the case in Argentina, which occupies the penultimate position in the list of minimum wages with only 189 dollars. Still, it, even so, has one of the lowest unemployment rates (6.9%).

On the other hand, there is Colombia, which not only suffers with a rate of more than 11% of unemployed people but also those who have a job do not enjoy a high minimum wage: $242 per month.

Nightly Payments in Latin America

Another item to take into account is the nightly surcharge and the overtime that is paid for it. As in the previous point, the situation shows several peculiarities without reaching an absolute truth. For example, According to a Bloomberg Online report, Ecuador has high employability, with 11-hour night shifts (the second best in the region, Nicaragua, Paraguay, Bolivia, and Mexico), although with overtime payments of only 25%. 

Otherwise, they are Costa Rica and Argentina since both countries do not grant remuneration for work at night, although with some exceptions. Thus, it is possible to say that, in the case of the Central American country, it ensures that its citizens have a high minimum wage so that they do not feel the blow of not receiving extra payments at night.

Argentina, for its part, is an example that greater employability does not mean better conditions: not only does it have one of the lowest minimum wages, but it also does not pay overtime at night.

In conclusion, saying that better conditions are synonymous with a more significant threat to the business sector and, therefore, a higher unemployment rate is a half-truth that works in some countries but not all. External factors such as public debt and inflation must be considered to recognize the best labor strategy in the specific case of each country.

For example, some countries like Paraguay and Bolivia have balanced their unemployment rate (concerning others in Latin America), with minimum wages oscillating between the regional average (325 -350 dollars) and extra payments that do not exceed 30 %. In short: they offer living wages that do not burden the budget of the business sector but with additional fees that allow workers to earn a better salary based on their effort. This shows no clear correlation between wages or surcharges and unemployment in the region. Undoubtedly other variables affect the number of employed people. Additionally, everyday work was not considered either, which in several countries even exceeds formal work.

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