Informality in the time of COVID-19 in Latin America: Implications and policy options

Acevedo, Ivonne and Castellani, Francesca and Lotti, Giulia and Székely, Miguel and Picone, Gabriel A. (2021) Informality in the time of COVID-19 in Latin America: Implications and policy options. PLOS ONE, 16 (12). e0261277. ISSN 1932-6203

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Abstract

This paper analyzes the dynamics of the labor market in Latin America during the COVID-19 pandemic. After a decade of a virtuous circle of growth with the creation of formal jobs, the pandemic has had an considerable impact on the region’s labor market, generating an unparalleled increase in the proportion of the inactive population, considerable reductions in informality, and, in contrast, smaller fluctuations in formal jobs. In this context, the formal sector, given its lower flexibility, became a "social safety net" that preserved the stability of employment and wages. Based on the findings presented in this paper, it is projected that, starting in 2021, informality will grow to levels higher than those of the pre-COVID-19 era–with 7.56 million additional informal jobs–as a result of the population returning to the labor market to compensate for the declines in incomes. According to the simulations presented, postponing or forgiving income tax payments and social security contributions conditional on the generation of formal jobs could reduce the growth of informality by 50 to 75 percent. Achieving educational improvements has the potential to reduce it by 50 percent.

Item Type: Article
Subjects: STM Repository > Social Sciences and Humanities
Depositing User: Managing Editor
Date Deposited: 31 Mar 2023 05:07
Last Modified: 19 Jun 2024 11:45
URI: http://classical.goforpromo.com/id/eprint/2304

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