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APRIL 2012  •  NUMBER 3
Despite Sluggish Growth, Labor Markets in Developing Countries Continue Their Gradual Recovery

  • Recovery from the financial crisis continued for workers across most of Eastern Europe and Central Asia, with overall improvements in GDP, unemployment and employment figures.
  • In Latin America and the Caribbean, small average gains in growth and unemployment were balanced by stagnant employment growth.
  • Four East Asian countries and South Africa showed slightly improved employment outcomes despite slowing growth.

Figure 1. GDP and Labor Market Indicators in Selected Developing Countries

Source: CEIC Data Company, National Statistical Offices, and the International Monetary Fund (IMF).
Note: The series are median values for a subsample of 11 countries with complete series up to Q4 2011 (except for GDP growth for Colombia, Russia, and Turkey). The countries included in this series are Armenia, Belarus, Brazil, Chile, Colombia, Kyrgyzstan, Mexico, Romania, Russia, Thailand, and Turkey.

In a sample of developing countries, growth in the fourth quarter of 2011 slowed amidst considerable economic uncertainty. Figure 1 shows median growth rates of output, employment, wages, and the median unemployment rate for 11 countries with complete series on all four indicators. Median growth in gross domestic product (GDP) weakened slightly over the fourth quarter in the previous year, from 4.5 to 4.1 percent, most likely reflecting continued uncertainty over financial and fiscal conditions in parts of the European Union. The median unemployment rate also fell significantly, down to 5.2 percent from nearly 7 percent the previous year and 6 percent the previous quarter. Formerly unemployed workers were absorbed into the workforce as employment growth rose from 1.9 percent the previous quarter to 3 percent. Employment also partially benefited from moderate wage growth, which weakened slightly from the previous quarter.

The recovery continued for workers in most parts of Eastern Europe and Central Asia. Table 1 shows how labor markets have evolved over the past year, for a larger set of 24 countries with data. On average, over the 11 countries in Eastern Europe and Central Asia, growth improved nearly a percentage point, and unemployment fell significantly, from 6.7 to 6 percent. Unemployment fell in nine of the eleven countries in Eastern Europe and Central Asia. Lithuania continued its strong recovery from the financial crisis, as employment growth rose 7 percentage points and the unemployment rate fell by 3 percentage points. Increased growth in Turkey, and to a lesser extent, Russia and Armenia, led to sizeable declines in unemployment and increased wage growth. Meanwhile, in Kyrgyzstan and Tajikistan, solid growth led to remarkable wage increases. Only Romania and Azerbaijan continued to struggle. In the Romanian case, rising wages amidst a period of slowing exports to Europe and fiscal austerity led to increased unemployment and falling employment.

Developments in Latin America and the Caribbean (LAC) were more mixed, as small average gains in growth and unemployment were balanced by stagnant employment growth. Unemployment declined in six of the seven countries. However, there is also a small deceleration in employment growth and a heterogeneous performance in wages. In Brazil, unfavorable weather shocks and slackening demand from China slowed growth and led to declines in both employment and wage growth. Ecuador's performance was also disappointing; although growth doubled and reduced unemployment considerably, employment stagnated and wage growth fell. In Peru, slowing growth and a large rise in wages caused employment growth to slow as well, falling 2 percentage points. Developments were more positive, however, for other countries in the region such as Colombia, the República Bolivariana de Venezuela, and especially Mexico. Despite slowing economic growth, Mexican workers benefited from accelerating employment and wage growth, as well as reduced unemployment.

In the four East Asian countries and South Africa, despite slowing economic growth, outcomes generally improved slightly. In China, wage growth increased slightly, with little change in unemployment and only a slight decline in employment. Meanwhile, employment growth increased in the Philippines, with a small corresponding decline in unemployment. Thailand also benefited from a rise in employment growth, despite a huge drop in growth due to large-scale flooding, suggesting a lagged effect of natural disasters on labor market outcomes. Finally, in South Africa, slowing wage growth contributed to slightly higher employment growth, but had little effect on the country's persistently high unemployment rate.

Table 1. Labor Market Indicators for Selected Developing Countries
Region Countries GDP growth Employment growth Unemployment rate Wage growth
Q4/2010 Q4/2011Q4/2010 Q4/2011Q4/2010 Q4/2011Q4/2010 Q4/2011
EAP Region average 6.7 2.5 2.3 2.5 4.9 4.6 6.5 7.5
ECA Region average 4.2 5.1 0.3 1.5 6.7 6.0 5.6 8.3
LAC Region average 4.7 5.2 3.2 2.9 7.4 6.9 1.7 4.5
EAP China 9.8 8.9 4.9 4.3 4.1 4.1 13.1 14.7
EAP Indonesia 6.9 6.5 3.2 1.4 7.1 6.6 0.3 3.9
EAP Philippines 6.1 3.7 0.3 2.9 7.4 7.2 na na
EAP Thailand 3.8 -9.0 0.7 1.2 0.9 0.6 6.2 3.9
ECA Armeniaa 2.1 5.0 1.0 1.9 6.8 5.9 -4.4 1.2
ECA Azerbaijana 5.0 0.1 1.3 1.1 na na 10.6 3.0
ECA Belarusa 7.7 5.3 0.5 -1.7 0.7 0.6 15.8 -3.5
ECA Kazakhstana 7.5 7.2 2.8 1.1 5.8 5.4 8.1 10.8
ECA Kyrgyzstana -1.4 5.7 -1.0 3.7 2.7 2.5 0.1 29.6
ECA Lithuania 4.8 4.3 -5.1 2.1 17.5 14.3 0.4 0.8
ECA Moldovaa 6.9 6.5 -1.8 3.9 6.5 5.3 1.2 0.9
ECA Romania -0.6 1.9 -0.5 -2.6 7.2 7.5 -7.4 4.5
ECA Russian Federation 3.1 4.8 0.9 1.1 6.9 6.3 4.2 8.5
ECA Tajikistan 6.5 7.4 na na 2.2 2.6 10.5 19.5
ECA Turkey 5.3 8.2 5.0 5.9 9.9 8.3 17.9 14.8
ECA Ukraine 3.3 4.6 0.2 0.0 7.1 6.9 10.1 9.3
LAC Brazil 5.3 1.4 3.5 1.6 5.7 5.2 8.0 2.3
LAC Chile 5.8 4.5 7.7 3.0 7.3 7.0 2.1 2.0
LAC Colombia 3.3 7.7 2.8 6.8 10.4 9.9 2.2 -1.3
LAC Ecuador 4.5 9.0 3.2 0.0 7.4 5.5 6.5 4.3
LAC Mexico 4.4 3.7 1.0 5.5 5.3 4.8 -1.1 1.0
LAC Peru 9.2 5.5 4.2 2.3 7.4 7.2 -0.3 15.3
LAC Venezuela RBD 0.6 4.9 0.0 1.3 8.2 8.4 -5.4 7.6
SSA South Africa 3.8 2.9 -0.9 2.8 24.0 23.9 6.6 0.0
Source: CEIC database, National Statisical Offices, International Monetary Fund.
Note: Region averages refer to the countries in this table. Wage growth refers to the same quarter of the previous year. For some variables, the period of reference is Q3/2011 and Q3/2010: employment -- Armenia, China, Ecuador, Indonesia, Kazakhstan, Lithuania, Moldova, Peru, Romania, Ukraine and Venezuela RBD; unemployment rate -- Azerbaijan, Ecuador, Indonesia, Kazakhstan, Lithuania, Peru, Ukraine, and Venezuela RBD; wage growth -- China, Lithuania, and South Africa; GDP growth -- Colombia, Ecuador, Kazakhstan, Russia, and Turkey. Data sources for wage growth: Peru, Central Reserve Bank of Peru; Kyrgzystan, IMF; Tajikistan, State Committee on Statatiscs of Tajikistan.
a For these countries, the period of comparison is between January–December 2010 and January–December 2011. South Africa earnings come from a firm survey and only represent the formal sector; for China, earnings are only representative of urban regions.

JobTrends is a regular series monitoring labor markets in developing countries. It is a collaborative effort between the Human Development Network (HDN) and the Poverty Reduction and Economic Management (PREM) Network of the World Bank. This note was prepared by Javier Arias-Vazquez, Gladys Lopez-Acevedo, and David Newhouse. For more information on this series, contact David A. Robalino, Lead Economist in the Social Protection Unit of HDN, or Gladys Lopez-Acevedo, Senior Economist of the Poverty Reduction and Equity Group of the PREM Network. The team gratefully acknowledges financial support from the governments of Austria, Germany, the Republic of Korea, Norway, and Switzerland through the Multi-Donor Trust Fund on Labor Markets, Job Creation, and Economic Growth.