the impact of icts on employment in latin america

School of Information StudiesSchool of Information StudiesThe impact of ICTs on employment in Latin America: A call for comprehensive regulation

Martha Garcia-MurilloTPRC, September 2014Washington, DC

School of Information Studies

Research Question

• Will ICTs negatively affect employment in Latin America?

• Is the region ready for a digital world?


Distribution of employmentA

RG

BR

B

CH

L

CO

L

CR

I

CU

B

DO

M

EC

U

SLV

HN

D

JAM

ME

X

NIC

PA

N

PR

Y

PE

R

PR

I

UR

Y

VE

N

Ar-gen-tina

Bar-bados

Chile Colombia

Costa Rica

Cuba Do-mini-can Re-

public

Ecuador

El Sal-

vador

Hon-duras

Ja-maica

Mexico Nicaragua

Panama

Paraguay

Peru Puerto Rico

Uruguay

Venezuela, RB

0

20

40

60

80

100

120

Employment in agriculture (% of total employment) Employment in industry (% of total employment)Employment in services (% of total employment)

57.2 %

24%18%


Technology and employment



• The rate of unemployment is greater than in previous periods of technology advancement. (Chorafas, 2011)

• In the last two decades employment in the European Union has increased substantially for those with limited skills (Chorafas, 2011)


Martha Garcia-Murillo ([email protected])

Less than 1.4 11.2 or more Less than 59.9 66.1 or more

LABOR FORCE PARTICIPATION RATE (% OF TOTAL POPULATION AGE 15+)

FIXED BROADBAND INTERNET SUBSCRIBERS (PER 100 PEOPLE

(2011)




Contributing factors


Hypothesis

• H1: ICTs will negatively affect employment• H2: A more highly educated population is more likely to find

employment• H3: The higher the amount of research and development the

higher the levels of employment• H4: New businesses will positively affect employment levels.• H5: Capital investments will negatively affect employment as

they are more likely to be labor saving• H7: The more bureaucratic a country, the lower the level of

employment.• H6: Labor regulation in Latin America negatively impacts

employment


Education

• Education reduces the risk of unemployment (Mincer, 1991).

• A high level of education has been found to result in three benefits: a higher wages, greater upward mobility in both income and occupation as well as greater employment stability (Sicherman, 1990)

• A difficulty: unemployment may deter education


H2: A more highly educated population is more likely to find employment


PUBLIC SPENDING ON EDUCATION, TOTAL (% OF GDP)

LABOR FORCE PARTICIPATION RATE (% OF TOTAL POPULATION AGE 15+)


Negative: Elementary education

Bolivia

Chile

Argentina

Uruguay

Peru

Haiti

Panama

El Salvador

MexicoCubaColombiaTrinidad and Tobago

Puerto Rico

BrazilCosta Rica

Ecuador

JamaicaDominican Republic

Venezuela, RB

GuatemalaHonduras

ParaguayNicaragua

2040

6080

Empl

oym

ent i

n se

rvice

s (%

of t

otal

em

ploy

men

t)

20 30 40 50 60Labor force with primary education (% of total)

bandwidth = .8


Research and development

• Latin America generated 8.7 percent of world GDP in 2013 but it only generated 0.19 percent of patents (Ketelhöhn & Ogliastri, 2013) and the entire region produced the same number of patents as those in Spain.

• More research and development in the region country can be beneficial at a time when technology is evolving rapidly

School of Information StudiesH3: The higher the amount of research and development the higher the levels of employment

Less than 0.3 2.2 or moreResearch and development expenditure (% of GDP)


Business

• ICTs can make operations more efficient and potentially displace workers.

• In the US large companies generated most of the jobs created and destroyed in manufacturing in the 1972-1988 period. They also find that the amount of jobs created increases as the company also increases in size (Davis & Haltiwanger).


Less than 0.6 5.3 or more

NEW BUSINESS DENSITY (NEW REGISTRATIONS PER 1,000 PEOPLE AGES 15-64

H4: New businesses will positively affect employment levels.H5: Capital investments will negatively affect employment as they are more likely to be labor saving


Government: Labor laws

• Countries with few if any protection are also not good for job creation due to job destructions and lack of desire to invest in education (Charlot & Malherbet).

• In Latin America employers in the region would increase the workers by 2% if labor regulations were more flexible (Kaplan, 2009).


Government: Labor laws

• Labor rigidities also reduce productivity of workers because they are not able to change jobs more rapidly to firms where their skills will make them more productive Caballero et al. (2006), Gonzaga (2003), Haltiwanger et al. (2006), and Micco and Pagés (2007).

• That the majority (83.2%) do not hire or fire workers as a result of rigid labor regulations.



PAID ANNUAL LEAVE FOR A WORKER 5 YEARS OF TENURE (IN WORKING DAYS)

MINIMUM WAGE FOR A 19 YEAR OLD OR APPRENTICE (US$/MONTH)

H6: Labor regulation in Latin America negatively impacts employment


Bureaucracies

• Regulation, can be intrusive, and overwhelming to the point of discouraging business creation or forcing employers to hire people informally, for example, in order to avoid paying the costs of labor compliance (Mazumdar, 1976).

School of Information StudiesH7: The more bureaucratic a country, the lower the level of employment.

Less than 53 134 or more Less than 480 892 or more

EASE O DOING BUSINESS INDEX (1=EASIEST ,185=MOST

DIFFICULT)

TIME REQUIRED TO ENFORCE A CONTRACT (IN DAYS)


Negative: Bureaucracies

Cuba

Puerto Rico

Mexico

UruguayJamaicaChilePanamaColombia

Honduras

El Salvador

Dominican Republic

Argentina

Peru Paraguay

Guatemala

Nicaragua

Trinidad and Tobago

Bolivia

Ecuador

Costa RicaBrazil

Haiti

Venezuela, RB

2040

6080

Empl

oym

ent i

n se

rvice

s (%

of t

otal

em

ploy

men

t)

-50 0 50 100 150Time required to start a business (days)

bandwidth = .8

Running mean smoother


Negative: capital formation

Puerto Rico

Cuba

El Salvador

Guatemala

Paraguay

Trinidad and Tobago

Bolivia

Brazil

Argentina

UruguayJamaicaCosta Rica

MexicoVenezuela, RB

Nicaragua

Chile

ColombiaPanama

Peru

Honduras

Dominican Republic

Haiti

Ecuador

2040

6080

Empl

oym

ent i

n se

rvice

s (%

of t

otal

em

ploy

men

t)

10 15 20 25 30Gross fixed capital formation, private sector (% of GDP)

bandwidth = .8


Mobile

Cuba

Haiti

Mexico

Bolivia

Nicaragua

Puerto Rico

Dominican RepublicCosta Rica

Venezuela, RBColombia

ParaguayEcuador

Honduras

Jamaica

Peru

Brazil

Chile

Guatemala

El Salvador

Trinidad and Tobago

Uruguay

Argentina

Panama

2040

6080

Empl

oym

ent i

n se

rvice

s (%

of t

otal

em

ploy

men

t)

0 50 100 150 200Mobile cellular subscriptions (per 100 people)

bandwidth = .8


Business

Internet

Broadb

and

Labo

r Prim

. Edu

c.

ICT Im

ports

Gross

Cap

ital F

ormatio

n

Self-e

mploym

ent

Paid le

ave afte

r 5 yr

s

Ease o

f doing b

usine

ss

Paymen

t to G

ov.

Popula

tion 1

5-64

GDP per ca

pita

-0.6

-0.4

-0.2

0

0.2

0.4

0.6

0.8

1

ICTs Education

R&D

Business

Labor

laws

Bureaucracy

Economic


Conclusions

• The region • Its bureaucracies need to improve to facilitate business

creation.• Businesses are generating employment• Inequality may be creating service employment at both

ends of the spectrum (very rich and very poor)• The region needs to invest in education to improve both

employment and inequality• All these issues are interconnected and will need a

more comprehensive regulatory/policy approach


Conclusions

• The region is low in broadband. The effect is positive as this being a multi-purpose technology opens multiple opportunities for employment.

• Mobile phones are a coordination technology not a job creation technology.

• Education does not appears alleviate unemployment



Thank YouMartha Garcia-Murillo

Syracuse UniversitySchool of Information

StudiesUSA

[email protected]

the impact of icts on employment in latin america

Economy & Finance