OBJECTIVE
Publicize unemployment in Ecuador in the last decade and determine the influence that the adoption of the dollarization model has generated on unemployment and other macroeconomic variables,
unemployment-in-the-equatorINTRODUCTION
Unemployment, forced unemployment or unemployment of employees who can and want to work but cannot find a job. In societies where the majority of the population lives by working for others, being unable to find a job is a serious problem. Due to the human costs of deprivation and the feeling of rejection and personal failure, the amount of unemployment is usually used as a measure of workers' well-being. The proportion of unemployed workers also shows whether the country's human resources are being properly used and serves as an index of economic activity.
General considerations about unemployment.
Throughout the world, but even more in Latin America unemployment has been a topic of daily life. Although the deepest depressions appear to have ceased to be a threat to economies, unemployment continues to haunt modern market economies.
One of the main concerns of governments is to combat unemployment or at least keep it low, since this ensures that economic well-being goes hand in hand with social well-being.
Definition.
"Situation in which people who, having age, ability and desire to work, cannot find a job, are subjected to a situation of forced unemployment."
Causes of Unemployment.
Unemployment is the involuntary leisure of a person who wants to find a job, this common statement reached can be due to several causes. The same that we quote below:
- When there is a temporary decrease that experiences economic growth characterized by the decrease in demand, investment and productivity and by the increase in inflation. Economic activity has a cyclical behavior, so that periods of boom in the economy are followed by a recession or slowdown in growth, at the moment that a situation occurs in which the number of people who demand employment exceeds the offers of existing jobs, since high real wages attract more unemployed people to look for work and make it impossible for companies to offer more jobs, when in certain regions or industries where the demand for labor fluctuates depending on the time of year in When there are changes in the structure of the economy,such as increases in the demand for labor in some industries and decreases in others, which prevents the supply of employment from adjusting at the speed it should. Additionally, this situation can occur in certain geographical areas and due to the implantation of new technologies that replace the workforce, when for reasons beyond the control of the worker it prevents their incorporation into the world of work.
How is unemployment measured?
Variations in the unemployment rate are obtained through the procedure known as the random sampling of the population, it is done in order to divide the population into groups according to their employment situation.
Unemployment rate.
This is the percentage of the working population that is unemployed, actively looking for work and who have not been temporarily laid off, hoping to be quickly hired again. Unemployment rates vary considerably due to changes in the volume of movement in the labor market, as a result of technological change, which leads to a change in employment from one company to another, from one sector to another and from one region to another; in addition also according to age, sex and race. The global unemployment rate is one of the most frequently used indicators to measure global economic well-being, but given the dispersion of unemployment, it should be considered as an imperfect indicator of said well-being.
Effects of unemployment.
Undoubtedly, unemployment can have profound effects on both the individual and the society in which he lives, which has a direct impact on a country's economy. For this reason, in our study we considered it necessary to analyze, in general, two of the effects of unemployment, such as:
Economic Effects.
Unemployment imposes a cost on the economy as a whole, because fewer goods and services are produced. When the economy does not generate enough jobs to hire those workers who are willing and able to work, that service of the unemployed labor is lost forever.
In an economic system, one of the fundamental factors is the supply of human resources (work). To determine precisely, we place the two most important agents of productive activity face to face: family units that include all the individuals who, directly or indirectly, participate in productive activities and consume the finished goods and services produced and the production units. production that are represented by companies and are responsible for revitalizing the economic activity of a country.
This existing relationship deteriorates when the number of family units that participate in the productive activities is lower (unemployment), which means that the presence of buyers who are willing and can buy a product or service at the price offered is not They have sufficient income because they do not have a job, this causes the productive units to lower their production levels and it is not possible to continue with the normal economic cycle because there is a gap in demand.
Additionally, unemployment brings with it a loss in the level of income in governments, as it stops receiving taxes that the worker and the company normally contributed while they were doing their job. Added to this is the expenses that the public administration has to make in order to subsidize the unemployed.
Social Effects.
The economic cost of unemployment is certainly high, but the social cost is enormous. No monetary figure satisfactorily reflects the human and psychological burden of long periods of persistent involuntary unemployment. The personal tragedy of unemployment has been proven over and over again. "
The loss of a fixed income is the cause of a number of problems both in the individual and in the society in which it develops. So we have the following:
- Deterioration of physical and psychological health Loss of self-esteem Destruction of the family nucleus Neglect of job skills Insecurity to look for a new job High rates of student desertion (in children) Increase in crime rates
Some studies by public health experts indicate that unemployment impairs physical health as well as psychological: higher levels of alcoholism and suicide. Psychological studies indicate that dismissal is generally as traumatic as the death of a close friend or school failure.
Economic Interpretation of unemployment.
Interpreting unemployment economically is looking for the different reasons that being unemployed implies, for this we will consider the types of unemployment that exist, we will also distinguish between voluntary and involuntary unemployment as well as the reasons for rigidity of wages and salaries.
Types of unemployment.
In order to better interpret unemployment, it will be useful to determine the types of unemployment that exist in a market. The distinction between the types of unemployment helps economists to diagnose the health of the labor market. In general, this division presents us with three fundamental types of unemployment, such as:
- Frictional, Structural, and Cyclic.
Microeconomic Foundations of Unemployment.
At first glance, the cause of unemployment seems clear: excessive numbers of workers seeking few jobs. In all market economies, similar symptoms of labor market failure are observed.
Economists have turned to microeconomics to understand the existence of unemployment, and many analyzes share the common observation that unemployment rates are due to wages not being flexible enough to empty markets. To carry out the microeconomic analysis of the causes of unemployment, the following are considered: voluntary unemployment and involuntary unemployment.
The Unemployment of Ecuador.
In any economy, the labor supply is conditioned by several factors: the productive system, the legal environment, natural wealth, population growth, the economically active population (EAP), internal and external migration, and growth of the informal sector.
The characteristics of the job offer can give guidelines on the indicators of the type of economy, its development and the constitution of society.
Annual Evolution of Unemployment. Nineties decade
In Ecuador in the 1990s unemployment increases in two ways:
First. Due to the restriction of the demand for employment in the modern sector of the economy, which reflects the little or no capacity of the market to generate sources of work in accordance with its need.
Second. Due to the growth of the population of working age.
For the nineties, the EAP has undergone growth, the same that responds to the constant worsening of the economic crisis that affects Ecuador, so that an increasing number of people enter or seek to enter economic activity.
The lack of competitiveness of Ecuador, in the course of the nineties, has been a fundamental factor in the increase in unemployment. The Ecuadorian economy has depended on very few export products: oil, shrimp and seafood, bananas and plantains, cocoa and coffee. In 1999, these represented 81.7% of the country's total exports.
In addition, the concentration of production in Ecuador is found on the Coast, since 92.8% of the companies that export products are located in this region and mainly in Guayas.
The Ecuadorian economy of this last decade, to generate employment, has been subject to the evolution of the aforementioned goods, since the drop in the price of a barrel of oil, the appearance of pests in the plantations, has been a determining factor in the increase in unemployment.
In this decade, there is a tendency to stagnate the demand for our export products in the international market: oil has had an average growth of 2.63%, the
Banana 4.23%, banana 4.23%, cocoa 2.5% and coffee 1.12%; as a consequence of this stagnation for 1999, the participation in the GDP - with the exception of oil - and in the generation of employment has been very low
Unemployment indicator
Percentage of economically active people 12 years of age and older who are unemployed. It refers to the same period of each year. Unemployed persons are those who during the week prior to the measurement did not have
employment and were willing to work. It includes both those workers who have been fired or quit (unemployed), and those who enter the labor market for the first time (new workers).
Definition:
Employment is a means for people to obtain the income they require to satisfy their basic material needs.
It is also a basic need in itself, as it gives the human being a sense of recognition and utility in society.
Ecuador's unemployment in relation to the rest of Latin American countries after the dollarization process.
Latin America and the Caribbean experienced economic growth of close to 1% for the year 2000. This rate is significantly lower than originally forecast, which was expected to be 4.5%.
Despite this sharp drop in economic expectations, the level of employment has been maintained. The 2001 projection of unemployment is 8.3%, maintaining the same level as last year.
In global terms, the average unemployment rate is maintained as a result of the drop in the participation rate (varies from 56.8% to 56%) in a greater proportion than the reduction in the employment rate (decreases from 52% to 51.5%) between 2000 and 2001, respectively.
However, unemployment increased in all countries, except in Brazil and Ecuador, which explain why the region's average rate remained unchanged. The data show, on the one hand, a reduction in the unemployment rate in Brazil (1.0 percentage point) and Ecuador (3.9 percentage points) between the two years and, on the other hand, an increase in the unemployment rate in most countries analyzed: Argentina (1.0 percentage point), Chile (0.1 percentage point), Colombia (1.5 percentage points), Mexico (0.2 percentage points), Peru (2.1 percentage points) and Uruguay (2.0 percent points). Under these conditions, the fact that regional unemployment is maintained was basically due to the reduction of the unemployment rate in Brazil.
The evolution of the unemployment rate by sex was different between countries. In Argentina, Colombia, Peru and Uruguay, the male and female unemployment rates increased, with the increase in the rate of women being much higher than that of men. In Chile and Mexico these rates also increased, with the increase in the male unemployment rate increasing. In Brazil and Venezuela, unemployment rates by sex fell. Brazil registers a significantly greater decrease in unemployment for women than for men.
Even though the youth unemployment rate decreases in most countries in the period considered, it continues to be high this year: Argentina (43%), Brazil (12.7%), Chile (19.5%), Colombia (33.9 %), Mexico (4.6%), Peru (15.3%) and Uruguay (36.2%). The average of these youth unemployment rates represents two (2) times the general unemployment rate in the region.
Changes in the structure of employment
The four processes identified in previous issues of the Labor Overview remain valid in the short term. The employment structure is privatized: 95 out of 100 new jobs are generated by the private sector. The outsourcing and informalization processes also continue. Of every 100 new jobs, 66 are generated in the service sector, decreasing the participation of goods-producing sectors in job creation. Likewise, of every 100 new jobs, 88 are informal, which represents a significant increase in the participation of this sector in the creation of new jobs (the medium-term trend indicates that the informal sector contributes 60 of every 100 new places to create jobs).
Unemployment is expected to rise in 2002
For the year 2002, a regional product growth of 1.5% is forecast: that is, 0.6 percentage points more than the estimated growth for 2001. Despite the increase in this indicator, it is estimated that the unemployment rate for the year 2002 will be of
8.8%, which is equivalent to an increase of 0.5 percentage points of the estimated unemployment rate for 2001.
In Ecuador, migrants support the country
The increase in emigration was a fundamental pillar in Ecuador for the economic recovery and the decrease in unemployment, and this scenario could be repeated in other Latin American countries.
Remittances sent to Ecuador by emigrants totaled $ 1,425 million last year, $ 100 million more than in 2000 and $ 400 million more than in 1999, a contribution of foreign currency only exceeded by oil exports, according to data from the Central Bank.
Money transferred by Ecuadorians living abroad played an important role in the "relative economic stability" achieved, since, for example, it was much greater than foreign direct investment.
Emigration helped alleviate various social problems, such as unemployment, which according to the official National Institute of Statistics and Censuses (INEC) fell from 14.4 percent in 1999 to nine percent in 2000.
INEC indicated that almost one million of the 12.5 million inhabitants it had in Ecuador in 1999 settled abroad between that year and 2000, a record in Latin America.
Those resources gave oxygen to the economy, especially to the southern provinces of the Sierra region, such as Azuay, Cañar and Loja, where six out of 10 inhabitants have family members living abroad. 648 million dollars of the more than 1,000 million entered in 2000 went to that area.
Construction is one of the sectors favored with the foreign exchange earnings of immigrants. Emigration has transformed the world in former times, and something similar can now happen in other Latin American countries.
The IDB report adds that in 2000 the money sent by Latin American emigrants to their countries of origin exceeded 23,000 million dollars, equivalent to one of the foreign investments and much higher than the foreign aid received by the region as a whole.
COMMENTARY:
The year 1999 closed with an unprecedented unemployment rate in the country: 14.4%; This proportion represents more than twice as many unemployed Ecuadorians as in November 1995.
Although a first increase in unemployment was observed between 1995 and 1997 (from 6.9% to 9.2%), it was the sharp contraction of the economy during 1998 and 1999 that produced the greatest increase of the decade. The number of people aged 12 years and over without work in the main cities of Ecuador increased significantly: it went from 9.2% in November 1997 to 14.4% in November 1999.
The increase in unemployment is mainly due to unemployment or job loss. The financial crisis and the subsequent freezing of bank deposits led many companies to lay off workers. The number of layoffs in the country's cities rose from 4.1% in November 1995 to 9.7% in November 1999.
Recent unemployment affected men and women equally. Since 1997, the percentage of unemployed women has been 1.8 times higher than that of men. The unemployment rate for men rose from 7% in 1997 to 11% in 1999, while the rate for women increased from 13% to 20% in the same period.
Lack of employment has affected more the very young population (between 12 and 24 years of age) and those over 50 years of age. For example, in November 1999, the unemployment rate of the economically active population 18-24 years of age was around twice the average rate (26% and 14%, respectively).
Unemployment affects people differently depending on their education. For example, in 1999, 18.5% of those who had completed or were in secondary school had no job, compared to 12% of those with primary education.
Ecuador's unemployment rate reached 9.2% in May 2002, below the 10.6% registered in the same month of the previous year, according to data from the central bank.
Underemployment, the percentage of Ecuadorians employed in the informal sector of the economy or who work occasionally - reached 31.9% in the month, below the 50.9% registered in May 2001.
In April 2002 unemployment was 8.7% and underemployment was 32.1%.
Ecuador's economically active population is approximately 3.56 million.
Bibliography.
- ANDERSON, Arthur (1999), "Dictionary of Economics and Business". Page 181 Integrated System of Social Indicators of Ecuador -SIISE.SAMUELSON, Paúl, A., NORDHAUS, Willam, D. (1998), “Economía”. Page, 574SACHS, Jeffrey, LARRAIN, Felipe, (1993), “Macroeconomics”, Page 486.EKOS Economy No23 (December 1995) «The Job Offer through the ages.» Page 65inec.gov.ecsiise.gov.ecbce.fin.ec LIDERES economics weekly, various editions EL FINANCIERO economic weekly, various editions.
