Labor Markets in Developing Countries Resilient in the Face of Slowing Growth

  • Continued uncertainty over economic conditions in the European Union and other factors have kept GDP growth sluggish in developing countries, but have not halted labor markets' slow and steady recovery from the impacts of the financial crisis.
  • Labor market conditions in Europe and Central Asia, Latin America, and South Africa showed continued improvements, even in countries where GDP growth declined sharply.
  • A more mixed picture emerged in East Asia, although labor markets there continued to perform reasonably well.

Figure 1. Median Growth Rates for Sample of Middle-Income 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 continued to improve in the second quarter of 2012 in a sample of 12 middle-income countries, despite weakening economic growth. Figure 1 shows median growth rates for output, employment, and wages as well as the median unemployment rate for 12 middle-income countries. Gross domestic product (GDP) growth continued to slow down, due in large part to continued uncertainty over economic conditions in the European Union. Despite these headwinds, labor market indicators in these countries continued to slowly improve. Median employment growth nudged upward to 2.3 percent, while median unemployment fell to 5.7 percent, resuming its steady decline from the heights of the financial crisis. The continued sluggishness in the global economy has not halted the slow but steady recovery of these countries' labor markets from the impacts of the financial crisis.

Labor markets in Eastern Europe and Central Asia have been resilient, often in the face of sharp drops in growth. Compared to the second quarter of 2011, declines in growth were particularly striking in the Kyrgyz Republic, Belarus, Moldova, Turkey, and, to a lesser extent, in Lithuania. Even in a few of these countries, however, unemployment declined sharply, such as in Moldova, Turkey and Lithuania, or held steady, such as in Belarus and the Kyrgyz Republic. The sharply slowing growth was also not reflected in employment growth, which fell only mildly in Belarus, Moldova, Turkey and Romania, and increased slightly in Lithuania and the Kyrgyz Republic. Wage growth, meanwhile, increased in most of these countries, with particularly large increases in the Kyrgyz Republic, Belarus, Tajikistan and Ukraine, while falling only slightly in Turkey and Moldova. The Russian Federation also experienced strong declines in unemployment, with rising wage growth, despite only a small increase in GDP growth.

Labor markets also continued to improve in Latin America despite slowing growth. Unemployment rose only slightly in Colombia, and fell in the other six countries in the sample. The decline in unemployment generally translated into increased employment, except for Chile and Brazil, where employment fell as workers exited the labor market. Meanwhile, wage growth remained stable in most countries, with the exception of Peru, where wages increased considerably.

In the four East Asian countries in the sample, labor markets continued to perform reasonably well. China, in particular, saw a dramatic increase in employment growth despite a moderating growth rate. On the other hand, GDP growth remained reasonably high in Indonesia and picked up speed in Thailand and the Philippines. These growth increases did not necessarily translate into improved labor market conditions, however, except in Thailand. Thai wages continued to rise steeply, increasing 13 percentage points over the previous year, as wages continued to recover following the severe flooding in 2011. Finally, in South Africa, labor market conditions improved despite middling GDP growth. Employment growth increased a full two percentage points, and the unemployment rate, while remaining one of the highest in the world, fell 0.8 percentage points.

Table 1. Labor Market Indicators for Selected Developing Countries
Region Countries GDP growth Employment growth Unemployment rate Wage growth
Q2/2011 Q2/2012Q2/2011 Q2/2012Q2/2011 Q2/2012Q2/2011 Q2/2012
EAP China 9.5 7.6 4.1 10.3 4.1 4.1 12.1 15.5
EAP Indonesia 6.5 6.4 3.6 1.4 6.8 6.3 n.a. n.a.
EAP Philippines 3.1 5.9 0.8 3.0 7.4 7.2 3.2 1.0
EAP Thailand 2.7 4.2 1.5 1.6 0.6 0.9 1.0 14.5
ECA Armenia 1.9 4.7 n.a. n.a. 17.8 16.5 -2.0 3.8
ECA Azerbaijan 0.8 0.5 0.5 1.2 n.a. n.a. -0.7 7.4
ECA Belarus 12.0 3.0 0.0 -2.0 0.7 0.7 8.6 15.7
ECA Kazakhstan 6.8 5.6 1.1 3.9 5.5 5.4 2.1 12.4
ECA Kyrgyz Republic 3.9 -6.6 0.4 2.7 2.6 2.6 5.4 21.7
ECA Lithuania 6.5 2.2 0.9 1.9 17.2 14.5 2.4 2.8
ECA Moldova 8.4 1.0 0.8 -0.6 9.4 7.2 7.9 4.2
ECA Romania 0.3 1.7 1.5 -0.5 5.1 4.6 -4.6 2.6
ECA Russian Federation 3.4 4.0 1.0 1.4 6.6 5.5 2.8 11.2
ECA Tajikistan 6.5 7.2 n.a. n.a. 2.5 2.6 8.7 15.6
ECA Turkey 9.1 3.2 6.3 3.0 9.5 8.6 8.1 6.4
ECA Ukraine 3.9 3.0 0.1 -0.3 8.7 8.4 5.7 16.5
LAC Brazil 3.3 0.5 2.4 2.1 6.3 5.9 4.4 3.2
LAC Chile 6.3 5.5 6.7 2.0 7.1 6.6 2.3 3.0
LAC Colombia 5.0 4.7 3.3 5.3 11.0 11.1 0.4 0.7
LAC Ecuador 8.8 4.8 -0.1 3.7 6.1 5.1 5.6 5.2
LAC Mexico 3.2 4.1 0.6 4.5 5.2 4.8 -0.6 1.7
LAC Peru 6.9 6.1 1.0 1.0 9.1 8.6 5.8 12.1
LAC Venezuela RB 4.8 5.6 1.3 2.3 8.4 8.0 5.4 5.6
SSA South Africa 3.3 3.0 0.5 2.5 25.7 24.9 5.4 0.5
EAP Region average 5.5 6.0 2.5 4.1 4.7 4.6 5.5 10.3
ECA Region average 5.3 2.5 1.1 0.2 7.8 7.0 3.7 10.0
LAC Region average 5.5 4.5 2.2 3.0 7.6 7.2 3.3 4.5
Source: CEIC database, National Statisical Offices, International Monetary Fund.
Note: Region averages refer to the countries in this table. For some variables the period of reference is Q1-2012 and Q1-2011, employment: Ecuador, the Kyrgyz Republic, Lithuania, Moldova, the Philippines, Romania, and Ukraine; unemployment rate: Armenia, Ecuador, Kazakhstan, Lithuania, Moldova, Ukraine, and República Bolivariana de 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.

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.