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What happens with informal employment in Uruguay?

What happens with informal employment in Uruguay?
September 13, 2023 – 1:32 p.m.

High hiring and firing costs would be the reasons for the increase in informal work in the region.

Photo: Freepik

The International Federation of Pension Fund Administrators (FIAP) published a note reporting on the state of informal work in the region, where the Uruguay It has 34% of its total employees outside the system.

The FIAP note aims to expose the difficulties in increasing pension savings in the labor market in Latin America and the caribbean. From this, they determined that the system “requires defining coverage objectives, pension amounts, replacement rates and redistribution that society seeks to obtain through the operation of the different pillars that make it up” in order to perfect itself.

In this sense, they assured that it is essential to “gradually increase contribution rates and pension ages in the mandatory contributory pillar to finance better benefits” At the same time, savings volumes must be increased and workers who are in a situation of informality must be incorporated. At the same time, they stressed the importance that “the objectives must be related to the line of the poverty and with the wages”.

Informality, a problem in Uruguay that is increasing

In the search to determine the difficulties for pension systems, a hot topic arises that involves the Uruguay: the informality in their workers. In this sense, the FIAP document assures that this is due to “the high cost of hiring and dismissal, especially among lower-income workers.”

According to the report, the rate of informality At the beginning of the pandemic it was around 50% to 60% in the region, where the Uruguay had 34% of its total workers outside the labor system At the same time, there is 28% of non-salaried workers within the total occupation. On the other hand, the organization establishes that it is essential to strengthen supervision since the weakness of the control exercised by the organizations is another element that explains the non-compliance with the labor regulations.

During the month of July, according to the latest report from the National Institute of Statistics (INE)there was a new increase in informality that is, the number of workers who – declaring that they are employed – also indicate that they are not making the corresponding contributions to social security. This situation covered almost 22% of employees.

Although the informality remains at relatively low levels in historical terms, the trend towards a persistent improvement in this indicator was interrupted, which turns on a yellow light in terms of the sustainability of the social security system and surely reflects a problem of competitiveness.

Source: Ambito

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