In the last days the National Statistics Institute (INE) disclosed the data of employment and wages corresponding to the month of April, which closes the performance of the labor market for the first quarter. They are very relevant data because work is the great social integrator; beyond the concern for macro balances, commercial and technological development, and investments, it is in employment and its quality where a large part of society’s well-being and its future projections are settled.
On this level, the news is not bad: employment has resumed dynamics and has recovered to levels similar to those prior to the pandemic. In fact, the employment rate in this first four-month period of the year (57.5%) is the highest since 2017, overcoming the blows of the pandemic. As the number of people offering their work (activity rate) increased, the unemployment rate also rose; However, here we must refine the analysis: at the beginning of 2022 we were going through the post-pandemic recovery and the activity rate was not yet what it is today. Employment rose and unemployment fell. In the following year until today, employment increased, but there is more job offer and the unemployment rate rose (8.5%). Even so, 2022 aside, it is the lowest rate since 2017.
On the other hand, there is a process of real wage recovery, after the setback of the years 2020 and 2021, which had various causes. It must be remembered that when the virus broke out, the government, employers and workers agreed on the so-called bridge period with a modest annual salary increase of 3%, which implied a drop in real wages; the objective was to preserve as much employment as possible. Then a recovery process began, but the increase in the inflation (with global causes) delayed the expected recovery. Only in recent months are wages approaching their pre-pandemic levels, with some sectors having already reached it. Pre-pandemic levels that (it is important to remember) were maximums of several decades). Now inflation is trending downward, and that also helps the increase in real wages.
Wage bill at all-time high
By combining the salary trajectory with that of employment, also incorporating the population evolution, the so-called wage bill (total wage income) is calculated. The attached graph shows its estimated evolution, based on the year 2010. For the calculation, the average of the four-month period January-April of Average Nominal Wage Index (IMSN) in real terms, for each year, the average employment rate for the same periods, and the INE population estimate. From the combination of these factors it emerges that the wage bill is at all-time high levels.
Overcoming the pandemic, a good tourist season and investment in housing and other constructions (which offset the drop in employment in PSU 2) explain the trend. The challenge now is to maintain that salary mass and – if possible – increase it. That will depend on the performance of the economy itself, some particular issues in the labor market and how salary negotiation incorporates criteria of productivity and adaptation to new technologies.
Regarding the economy, the impact of the drought It has been tremendous, and it will surely worsen in the coming months, when the collapse of the agricultural harvest is fully felt, as well as the rest of the impacts at the productive and urban level, with the problems with running water. These problems -hopefully- would be transitory and by the end of this year and next year -if the weather is good- production will recover.
In turn, the new investment projects at all levels, as well as the dynamics in housing construction, will largely compensate for the completion of the construction of UPM 2. In addition, the new pulp mill begins to export, which will also generates employment throughout the entire forestry chain.
But the labor market in Uruguay is a diverse mosaic of situations, in many cases with extremely different realities. In a recent report by the consulting firm Advice (specialized in Human Resources), the difficulties in generating employment in two areas with very different dynamics were accurately diagnosed. On the one hand the technology companies They continue to demand personnel and have difficulties obtaining it, despite the fact that they offer good remuneration, because the supply of suitable workers for this sector is scarce. If educational centers graduated more professionals in the area, there would be more employment in the sector (and indirectly in other areas of the economy).
At the other extreme, Advice argues that in the low-skill jobs, associated with general tasks in commerce and services, companies there also have difficulties in finding jobs, but in this case because the levels of remuneration and working conditions offered were not sufficient to meet the aspirations of potential workers. In this sense, it is known for the high level of turnover, low productivity, and promotion difficulties for workers who start their career in this type of job. Here, too, there are opportunities for improvement, both for potential employees and employers. It must be remembered that unemployment problems in Uruguay are especially focused on young people. The youth employment law it is an interesting tool to compensate for the problem, but it is a modest advance.
Also, in addition to these differences by area of employment, it must be remembered that the coast is going through a particularly critical situation. If it were not for the diversion of activity to Argentina (by exchange difference) employment data would be even better than the national average.
These are issues to be taken into account in the new round of Salary Tips, which is already underway. From the Ministry of Economy and Finance (MEF) and the Central Bank (BCU) – concerned about inflation – is raised by the Ministry of Labor (MTSS) moderate nominal increases, to help lower inflation. It is a logical claim although difficult to specify; In any case, wage negotiations are also the opportunity to incorporate productivity and bring the parties closer together in cases such as those mentioned, in order to specify more employment and with a better congruence between wages and productivity. There are many companies that do a very good job of differentiating the profiles of the employees, their aspirations and their training, remunerating accordingly; others -perhaps with fewer resources- have serious difficulties in incorporating these criteria. There are also few unions that manage to incorporate them into their own claims. In summary, the labor market in Uruguay has recovered, but there is still a lot to be done.
Source: Ambito
