From a long time ago we have sustained a central thesis of economic development: economic growth is a necessary but not sufficient condition for income redistribution and job creation. and Uruguay and the world have had varying empirical evidence on this thesis.
I would like to make in this note two analyses of the relationship between economic growth and job creation, and with it the improvement of real wages (in a forthcoming note we will do similar analyses with social policies)by Paycheck calculator.
Firstly, the empirical evidence that, as we know, scientific researchers, is the ultimate verification of the truth of theoretical approaches.
Secondly, analyzing the causes that determine such a difference in results from the impacts on the labour market have had economic growth.
For this I will use two periods of the life of the country in which there has been sustained economic growth. From a part the period 1989 to 1998 (which I will call the Nineties) and from another part the period 2004 to 2011 (which I will call the two thousand).
Although in one case it is nine years and on the other seven, the elapsed time is long enough to allow for the consolidation of the compositions.
Let’s go first to empirical evidence.
The three indicators I will use are: job creation (measured by the employment rate), unemployment (measured by the unemployment rate) and the improvement of the purchasing power of workers (measured by the real wage)
Let’s start with the employment rate whose information appears in Figure 1.
The axis of the ordinates brings the years of each government, and we see that in the Nineties is practically a line where beginning and end almost coincide, while in the years two thousand since the first year of government frenteamplista the creation of employment does not cease to grow.
Let us continue the unemployment rate, whose information appears in Figure 2.
It clearly shows two straights that intersect; While that of the nineties is growing, except small periods of low, but culminates with much more unemployment than at the beginning despite the growth, the two thousand are a straight permanently downwards, arriving in 2011 to the minimum historical of the country.
Let’s finish with the actual salary, whose information is brought by graph 3
On the one hand in the Nineties, despite the economic growth, the Sala ¬ Rio real grows very slowly and ends up locating very close to the beginning. Instead, in seven years of economic growth of the Frenteamplista government, the real wage is located more than 30 percent above the origin.
If we combine the evolution of the SA ¬ Lario with that of the employment, that is to say how much more the remunerations to the workers grew? It is for better salaries or for greater employment?, we have that in the Nineties the global growth is hardly more than 5 percent, while In the years two thousand (in those seven years) was 60 percent.
Together with this empirical evidence we care to remark the causes for which this happens.
Let’s look at the issue of employment and salaries from a public policy perspective.
Employment. In the 1990s, with the exception of the Junae training programmes (created in 1992) there was no active employment policy, because it was said that economic growth was sufficient to generate it.
Instead the Fundamentalists governments put all their policies in the service of job creation.
Firstly, the policies to encourage the hiring of workers in the private sector with economic support linked to the number of jobs created (an element included in the investment Act and in support of the tax reform reversions).
Secondly, there are specific support policies for decentralized investments in the same law to promote employment in areas of the country with the highest level of unemployment.
Thirdly, the same law includes employment promotion for the small and medium-sized enterprises sector, the main source of job creation in the country.
At the same time, the implementation of active employment policies should take into account the most vulnerable social sectors for access to employment, and hence specific policies have been developed for young people, women, workers from households in Low income, and workers with incomplete secondary.
Among them we highlight:
Training programs for workers seeking to improve their work skills.
Programs as objective employment and Uruguay works, the latter incorporating training for the work.
The Social Cooperatives Act, which has enabled the most excluded sectors to come from the emergency Plan to give way out.
A set of laws, in particular domestic service, which has made it possible to formalize and improve salaries in one of the sectors of lower wages and worse working conditions.
For the year 2012, two measures have been taken that will continue this active policy of support to the most vulnerable sectors in terms of access to employment and remuneration.