The role of labour market and social protection in reducing inequality and eradicating poverty in Latin America

After an unprecedented period of macroeconomic stability, growth and employment creation between 2003 and 2008, Latin American economies are facing the post 2008-2010 global crisis with the challenge of a jobs-centred recovery. The two previous decades had put behind the role of the labour market as a central social welfare generator. The eighties were identified as the “lost decade” because of the debt crisis, while the Washington Consensus oriented-policies of the nineties yielded a sharp deterioration of labour market outcomes: priorities were the reduction of macroeconomic volatility and the strengthening of pro-poor social policy. The new millennium, however, brought better international conditions, higher economic growth in the region, and changes in perspectives of the role of labour market. The main aim of this paper is to analyze to what extent these more favourable conditions have been an opportunity for these countries to recover their labour markets and conduct a more active social policy. In turn, the paper evaluates the contribution of the labour market and of the social protection system as effective mechanisms to overcome poverty and reduce income inequality in Latin America. This article briefly analysis the processes over the last three decades, tries to assess the role of labour market, and looks at its interactions with both the macro stability policy context and the reforms in social protection. Finally, the article states that, even though the labour market policy framework has changed, and now yields better outcomes, there are many more issues and challenges ahead than the ones that are usually acknowledged.