Informality, labour transitions, and the livelihoods of workers in Latin America

Abstract

Despite the increasing trend in labour formality over the 2000s in Latin American countries, informality continues to be one of the most distinctive features of the labour markets in this region. This chapter studies the incidence and heterogeneity of labour informality in six Latin American countries from a comparative and dynamic perspective. Two contrasting labour mobility patterns appear: on the one hand, the proportion of formal workers who maintain the work status of origin or move up the job ladder is significantly higher than those who transition into lower-paying work status groups; on the other hand, despite the high labour turnover experienced by lower-tier informal wage-employees, most of them failed to move up the wage ladder. Wages are the highest for formal workers and the lowest for lower-tier informal jobs. Education raises the probability of transiting into a better job and the chances of better wages within informal occupations.