FEBRUARY 2013  •  NUMBER 6
Labor Markets in Developing Countries Remain Resilient amidst Declining Growth


  • The job market in developing countries continued to improve during the third quarter of 2012.
  • Labor market conditions in Eastern Europe and Central Asia, the region most vulnerable to economic uncertainty in the European Union, proved especially resilient.
  • In Latin America, labor markets also made modest gains despite a difficult macroeconomic environment.

Figure 1. Median GDP Growth 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 12 countries, with complete series up to Q2 2012 (except GDP for Colombia and República Bolivariana de Venezuela; employment growth for Romania; and wage growth for South Africa). The countries included in this figure are Belarus, Brazil, Chile, China, Colombia, Mexico, Romania, Russia, South Africa, Thailand, Turkey, and República Bolivariana de Venezuela.

Employment outcomes in developing countries continued their gradual improvement in the third quarter of 2012. Figure 1 shows median growth rates for output, employment, and wages as well as the median unemployment rate for 12 middle-income countries. The slow decline in gross domestic product (GDP) growth continued, driven in part by the sluggish recovery in the developed world, particularly in the European Union and Japan,
which continued to depress aggregate demand and exports. For
this group of 12 developing countries, however, the impact of
this slowing growth has yet to be felt in the labor market. Employment growth edged up from 2.2 to 2.4 percent, and the median unemployment rate declined from 5.7 to 5.3 percent. Only
median wage growth showed slight signs of losing momentum,
remaining at a respectable 3.6 percent. These indicators do not
capture important labor market outcomes such as underemployment or the types of jobs being created. Nonetheless, based on outward appearances, labor markets in developing countries are continuing their steady recovery following the 2009 financial crisis.
This resiliency in labor markets is particularly apparent in
Eastern Europe and Central Asia, the region most vulnerable to the continued economic uncertainty in the European Union
.
Compared to the third quarter of 2011, GDP growth declined in 9 out of 12 countries in the selected sample. Remarkably, unemployment rates declined or remained unchanged in all but one of the countries for which data are available. However, slower GDP growth did translate into lower employment growth; half of the countries in the sample experienced a decline in the rate of employment growth. Increases in unemployment may follow in the near future, particularly in countries like Turkey and Moldova, where GDP and employment growth both slowed sharply. In these cases, however, factors such as slowing wage growth or shrinking populations may be dampening increases in unemployment.

Table 1. Labor Market Indicators for Selected Developing Countries
Region Countries GDP growth Employment growth Unemployment rate Wage growth
Q3/2011 Q3/2012 Q3/2011 Q3/2012 Q3/2011 Q3/2012 Q3/2011 Q3/2012
EAP China 9.1 7.4 4.3 10.4 4.1 4.1 11.6 16.8
EAP Indonesia 6.5 6.2 1.4 1.0 6.6 6.1 n.a. n.a.
EAP Philippines 3.6 7.1 2.4 1.3 7.1 7.0 1.5 1.0
EAP Thailand 3.7 3.0 1.4 0.6 0.7 0.6 4.9 5.7
ECA Armenia 2.7 6.2 n.a. n.a. 17.8 16.5 -2.0 3.7
ECA Azerbaijan 0.9 1.5 0.5 1.2 n.a. n.a. 12.5 8.9
ECA Belarus 8.8 2.6 -0.5 -1.8 0.7 0.6 -3.5 29.9
ECA Kazakhstan 7.1 5.2 1.1 3.9 5.5 5.4 -1.3 1.0
ECA Kyrgyz Republic 3.9 -6.6 2.1 1.6 2.5 2.5 14.7 9.2
ECA Lithuania 6.7 4.4 4.3 1.4 15.6 13.3 2.5 4.0
ECA Moldova 7.5 0.8 6.5 -4.0 5.3 4.8 -2.9 4.8
ECA Romania 2.6 -0.6 -2.7 2.4 4.9 5.0 4.4 1.2
ECA Russian Federation 5.0 2.9 1.1 0.6 6.2 5.3 3.8 6.3
ECA Tajikistan 6.5 7.2 n.a. n.a. 2.6 2.6 17.2 15.0
ECA Turkey 8.4 1.6 7.3 2.4 9.0 8.8 8.4 5.0
ECA Ukraine 3.9 3.0 0.0 0.4 6.9 6.6 9.6 7.8
LAC Brazil 2.1 0.9 2.0 1.7 6.0 5.4 4.1 1.8
LAC Chile 3.7 5.7 4.5 1.4 7.4 6.5 2.8 3.6
LAC Colombia 7.5 2.1 3.5 3.0 10.1 10.6 0.1 1.3
LAC Ecuador 9.1 4.7 -0.1 3.7 6.1 5.1 4.9 5.3
LAC Mexico 4.5 3.3 1.9 4.1 5.6 5.2 0.5 0.5
LAC Peru 6.7 6.5 2.3 2.0 7.2 6.6 12.2 13.5
LAC Venezuela RB 4.4 5.2 1.3 2.3 8.4 8.0 9.1 3.5
SSA South Africa 3.0 2.3 2.6 2.5 25.0 25.5 3.9 2.9
EAP Region average 5.7 5.9 2.4 3.3 4.6 4.5 6.0 7.8
ECA Region average 5.3 2.4 2.0 0.8 7.0 6.5 5.3 8.1
LAC Region average 5.4 4.1 2.2 2.6 7.3 6.7 4.8 4.2
Source: CEIC database, National Statisical Offices, International Monetary Fund, and CISTAT.
Note: Region averages refer to the countries in this table. For some variables the period of reference is Q2-2012 and Q2-2011. Employment: Armenia, Ecuador, the Kyrgyz Republic, Lithuania, Moldova, the Philippines, Romania, and Ukraine. Unemployment rate: Armenia, Ecuador, Kazakhstan, Lithuania, Moldova, Ukraine, and the Bolivarian Republic of Venezuela. Wage growth: Lithuania and South Africa. GDP growth: Armenia, Colombia, Ecuador, Kazakhstan, Moldova, and Tajikistan. For South Africa, earnings come from a firm survey and only represent the formal sector. For China, earnings are only representative of urban regions. For the LAC region, labor market indicators, except from Mexico, refer to urban areas only.

In Latin America, labor markets also made modest gains despite he difficult global macroeconomic environment. As in Europe and Central Asia, unemployment rates fell virtually across the board. Employment and wage growth were more mixed. For example, employment growth declined slightly in Brazil, from 2.0 to 1.7 percent, while wage growth dropped substantially from 4.1 to 1.8 percent. Employment growth picked up significantly in Mexico, from 1.9 to 4.1 percent, while wage growth remained constant at a modest rate of 0.5 percent. In Colombia, where the fall in GDP growth was the largest, from 7.5 to 2.1 percent, employment growth deteriorated slightly
from 3.5 to 3 percent and wage growth increased from 0.1 to 1.3 percent. Two important caveats, however, are that the indicators do not capture whether workers are shifting to less productive sectors and that, except for Mexico, Latin American labor statistics only cover urban areas.

In the four East Asian countries in the sample, workers are mostly continuing to benefit from brisk growth. Tight labor markets in urban China led to double digit expansions in employment and real wages. Continued strong growth in Indonesia led to further reductions in unemployment, which declined from 6.6 to 6.1 percent, while real wages increased moderately in Thailand, from 4.9 to 5.7 percent. Only in the Philippines was there no sign of labor market improvement, despite the recent uptick in GDP growth. Finally, labor markets in South Africa remained weak: employment growth remained steady at 2.5 percent, wage growth fell from 3.9 to 2.9 percent, and the unemployment rate remain the highes in the sample at 25.5 percent.

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.