Improving Job Quality in Latin America: A Long Road Ahead

Job opportunities exist in Latin America and the Caribbean, but the quality of employment remains a significant challenge. According to the Inter-American Development Bank (IDB), urgent measures are needed to ensure workers can escape poverty and enjoy social protection.

Latin America and the Caribbean face a persistent issue: while many people are employed, the quality of those jobs leaves much to be desired. According to the 2024 Better Jobs Index from the Inter-American Development Bank (IDB), the region’s employment quality scores an average of 41.2 out of 100, highlighting the prevalence of informal, low-wage jobs that lack benefits and social security.

Informality is a massive issue—nearly 55% of the workforce is employed without a formal contract, meaning these workers lack access to social protections like health insurance and pensions. Additionally, 3 out of 10 workers do not earn enough to rise above the poverty line. This is a critical issue for a region where 70% of people rely on work as their only source of income.

Take the case of Peru, where street vendors, domestic workers, and other informal sector employees make up a significant portion of the workforce. Many workers lack stable income, health insurance, and retirement benefits, leaving them vulnerable to economic shocks. The pandemic further exposed these vulnerabilities, with thousands losing their livelihoods almost overnight.

The IDB’s report shows that improving job quality is not just about increasing employment rates. It’s about creating jobs, providing economic stability, and protecting social welfare, requiring policy changes and targeted efforts by governments and the private sector.

Gender and Youth Disparities in the Labor Market

The IDB report also illuminates significant inequalities in employment, particularly for women and young people. Women in Latin America consistently find themselves in lower-quality jobs than men, with a 16-point gap in the Better Jobs Index.

In Brazil, for example, women often face additional challenges in the labor market. Despite progress in education, many women remain concentrated in low-paying sectors such as domestic work or informal retail, which often lack benefits. Furthermore, women are more likely to experience wage gaps and struggle with balancing unpaid caregiving responsibilities with paid work. This has resulted in many women taking up part-time or informal work, reducing their access to quality jobs.

Meanwhile, young workers—particularly those between 18 and 24—are also disadvantaged. The report highlights a 15-point gap in job quality between younger and older workers. In countries like Uruguay, which scores relatively well on overall job quality, the disparity between young and older workers is the highest in the region. Young people often find themselves stuck in precarious, low-wage jobs or unemployed, unable to enter the formal labor market.

For instance, many young workers in Argentina are employed in temporary or freelance positions with few protections. This situation makes it difficult for them to save for the future, contribute to pension plans, or access health insurance. As a result, they face a much higher risk of poverty and economic instability compared to their older counterparts.

Efforts to close these gaps must be at the forefront of policies to improve the overall quality of employment. This means promoting gender equality in the workforce, offering vocational training for youth, and ensuring that formal jobs are accessible to all.

Practical Solutions for Improving Job Quality

The IDB report highlights problems and proposes practical solutions to improve regional employment quality. One key recommendation is to invest in human capital by aligning workers’ skills with the labor market’s needs.

Take Costa Rica, for example. The government recently launched programs to improve technical and vocational education to ensure workers are prepared for higher-quality jobs. Costa Rica aims to improve its labor market outcomes and reduce informal employment by upskilling workers in high-demand fields such as technology and green energy.

Another important solution is promoting formal employment by reducing the costs associated with hiring formal workers. Many businesses in the region avoid formal contracts due to the high cost of providing social security and health benefits. Lowering these costs or offering tax incentives for businesses that formalize their workers could help bring more people into the formal labor market.

In Mexico, for example, programs like Seguro Popular have provided health insurance to informal workers. But there is still much to be done in terms of bringing these workers into formal employment, where they can access a full range of benefits. Extending social protections to informal workers—through policies like universal healthcare or retirement savings programs—could help mitigate some of the risks faced by those in precarious jobs.

Finally, strengthening public employment services is essential. Many countries lack effective job placement programs that connect job seekers with formal employment opportunities. In places like Chile, public employment services have been bolstered through digital platforms and partnerships with private companies, which have led to better matching of workers’ skills with available jobs.

The Long Road Ahead for Employment Quality

While the 2024 Better Jobs Index shows some improvements since its inception, progress remains slow. At the current rate of improvement, it could take nearly five decades for Latin America to reach an employment quality score of 70 out of 100, which still falls short of ensuring that all workers have access to decent, formal employment.

Countries like Uruguay, which tops the index, demonstrate that it is possible to achieve higher employment standards, but even there, inequalities persist. The IDB’s data shows that even top performers in the region are grappling with significant disparities between different demographic groups.

As the region moves forward, governments must prioritize labor market reforms that focus not just on job creation but on the quality and sustainability of those jobs. Policies that promote formal employment, protect vulnerable groups like women and youth, and equip workers with the skills needed for a changing economy will be key to improving job quality across Latin America.

While the road ahead is long, the IDB’s report offers a roadmap for progress. Countries that take a proactive approach to improving job quality will be better positioned to foster sustainable economic growth and ensure that all workers can access the benefits and protections they deserve.

Improving the quality of jobs in Latin America and the Caribbean is not only an economic necessity but a social imperative. As countries continue to grapple with high levels of informal employment and inequality in the labor market, targeted efforts must be made to ensure that all workers have access to decent, formal jobs.

Also read: Google’s $850 Million Bet to Transform Latin America’s Digital Future

By investing in education and skills training, promoting formal employment, and expanding access to social protections, governments can help lift millions of workers out of poverty and create a more equitable labor market. The solutions are clear, but the challenge lies in their implementation.

With the right policies, the region can move toward a future where work is not just a means of survival but a path to economic security and personal fulfillment.