Peru 2021 General Elections: Labor informality in the candidates' sights

By:

  • Walter Vasquez

  • Daniel Cutimanco

  • Karla Cortez


The problem of labor informality in our country is not a strange issue for Peruvians, we live with it and its relevance stands out only in periods of crisis, as the Pandemic of SARS-CoV2. Nowadays, in the context of general elections, it is really important to understand what the role of the government is, to learn, and to know the candidates’ proposals regarding this topic, in order to enforce our rights and obligations through a responsible vote.


1. The importance of promoting formal employment by the State.


Understanding our economy in times of crisis is essential, even more when we are near to the Presidential Elections, where the decisions that are going to be made by the elected President will define the path to be followed in labor matters, taking as starting point our “Bicentenario de la Independencia” (bicentenary of indepedence).


Informal employment is frequently related to poverty and it is defined as a potential cause of many crucial problems in labor terms as difficult access to financial credits. As well as a limited access to basic public services such as education and health.


It is essential to recognize the predominant proportion of informal employment within our national economy, which stands out the emerging informal transactions, caused mainly by the rigid legislative and tax framework that discourages formal hiring by SMEs and entrepreneurs.


A phenomenon that has been increased by the current crisis, making it harder to reach a social consensus in labor terms. Something that has been seen in the protests in recent weeks, as well as the worrying reduction of the formal market due to the high “expense of formality”. A scenario that complicates the creation of more jobs and decreases the collection of taxes that can be reinvested in a substantial improvement of the public services provided by the State.


The importance of promoting formal employment by the State lies in the urgency of reducing poverty by promoting work and reducing inequality in labor terms, where unfortunately, stands out the precarious working conditions of women, rural areas workers, young people who have just entered the working world and older adults who must still working to continue to subsist.


In this scenario, it is possible to visualize the need to work together on these common objectives in order to eradicate this inequality that is also evidenced in the 2030 SDG , mainly in the areas of Quality Education, Gender Equality, Inclusive Industrialization and Sustainable Communities. Objectives that are aligned with the Plan Bicentenario, which seeks to give greater opportunities and access to services as well as implement growth strategies of economy, competitiveness and work.

2. Pre and post pandemic labor situation


In order to understand the challenges which the next government has to face in terms of promoting formal employment in our country, it is important to review the principal data of the labor situation in the last three years (pre pandemic time) and at the closure of the 2020, nine months into the national health emergency.


From 2017 to 2019, according to CEPAL, though Peru's unemployment rate was the lowest from the Latam region (3.4% on average), the number of formal employees in the urban area went up by 128 thousand, and the informal labor rate stayed at 72.5% on average, in that period. Given this situation, it can be noticed that the efforts to change the informality, both from the public and private sector, have not been enough.


Nowadays, in the beginning of 2021, the challenge to change this reality is more complex. The crisis caused by the pandemic has deteriorated even more the previous data, and to get into detail, the next graphic shows how the employed population is distributed at the end of 2020.

From the graphic it can be highlighted how representative the rate of informality in the Costa and Selva region is and how this is concentrated on the sectors of construction, commerce and services. Therefore, on the eve of the April general elections, it is fundamental to review in detail the candidates' proposals that can improve this new reality that leaves us, based on INEI data, a rate of unemployment of 7.4% and a rate of informality of 76.3%.


3. Evaluation of government proposals on labor issues


In this regard, the government proposals on labor issues of the candidates currently leading the presidential polls (as of March 21): Acción Popular (Yonhy Lescano), Victoria Nacional (George Forsyth), Renovación Popular (Rafael López), and Juntos por el Perú (Verónika Mendoza), were analyzed based on the following five pillars:

  1. Employment promotion

  2. Entrepreneurship formalization

  3. Productive innovation

  4. Financing mechanisms for MYPE's and PYME's

  5. Labor recognition for minorities

Taking the evaluation criteria of the report developed by the School of Public Management of the Universidad del Pacífico as a reference in relation to the associativity of the Government Plans and the Sustainable Development Goals (SDGs) of the 2030 Agenda, the following qualification criteria were established for this article:

  • If the government plan addresses the problems associated with the pillar in question, one point is awarded to that political party.

  • If the government plan sets out a proposal to address the problem, one point for each proposal is awarded to that political party.

It should be noted that the analysis did not consider whether the proposed solutions are sufficient, viable, adequate or pertinent; rather, it takes into account the initiative of the political parties for the generation of formal employment and for the improvement of the current working conditions of all Peruvian citizens.

According to United Peruvian Youth (UPY) principles, as an organization with no particular political orientation, this analysis seeks to share some of the perceptions and interpretations of the authors of this article.


Based on the government plans analyzed and on what it is expressed in the previous graph, the importance of the presence of these three attributes is highlighted:

  1. Balance: It is possible to visualize the importance of a proposal in labor matters that is equally distributed in the 5 determined pillars, with the same orientation of resources and efforts so that no front is left behind, thus avoiding their disarticulation.

  2. Articulation: It is important to consider the proposals as a whole, that is, as a synergy among the five pillars and not as isolated approaches that may have traction in a certain population group, but do not necessarily imply a positive impact on the population in general.

  3. Compatibility: To propose a plan for one pillar, it is vital to consider which other pillars are the basis for the success of the other. For example, to formalize employment it is necessary to take into account financing strategies. Thus, of the sample analyzed, at least two of them do not show consistency between plans.

4. Comments and appreciations


This article seeks to emphasize the impact of the labor policies and guidelines of the State on the lives of Peruvians, in which it is verified the importance of a balanced, articulated labor framework that is compatible with the characteristics of a particular productive environment and that allows to strengthen the innate entrepreneurial strength of Peruvians.


It is also reaffirmed that formal employment is the fundamental tool for reducing inequality, since it provides greater access to fundamental services, such as health and education. Thus, a vehicle towards a better quality of life, through more and better opportunities.


Although the importance of the State in promoting employment is understood, in the opinion of the authors, the role that should be strengthened is the promoter one, where is the State that contributes in providing opportunities to boost formal employment, whether from private or public sources and regardless of the current government in power, with the objective of providing labor projects long-term sustainability .


Finally, it is essential to know our reality and be responsible with our vote, to identify consistent proposals that are really viable and also, not to be overly optimistic with written on paper proposals, considering the recurrence of promises made and forgotten by previous governments.


References


APPENDIX

Appendix 1:

The importance of promoting formal employment by the State.