Labor Markets in Latin America: A Supply-Side Story

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Abstract: One of the main concerns of Latin Americans today is the lack of adequate employment opportunities. This concern is based on the widespread perception that not enough employment is being generated, and that few individuals have access to well-remunerated jobs. This work asks whether there is a supply-side story to be told about these outcomes. We present stylized facts about the connection between the demographic transition and changes in education (the size and quality of the labor force), with labor supply, inequality, and unemployment. The main conclusion is that demographics and education significantly improve our understanding on the overall decline in employment, the changing pattern of unemployment, and the rise in wage inequality. By adding them to the demand and institutional factors behind these outcomes, we obtain a clearer picture about labor markets in Latin America. Although demographics and education move slowly through time and have a strong inertial component, there is still a wide scope for policies that move these variables in a direction that produced better labor market outcomes.

Keywords: Latin America, labor markets, demographics, education, inequality.