Chile, with the Pacific Ocean to the west, the Andes to the east and the Atacama Desert to the north, is often regarded as something of an island, with characteristics that differ from its Latin American neighbours. We caught up with Alfred Budschitz, general manager, of Agest, the Chilean association of Human Resource companies, to discuss what is driving labour markets in his country.
What are the main challenges and opportunities currently facing your labour market?
Since the return to democracy 30 years ago the Chilean economy has progressed on many levels and citizens have felt increasingly more prosperous as the decades progressed. Unlike many markets around the world, Chile was not too badly hit by the 2008/9 financial crisis as it had been a recipient of investment money – similar to the BRIC countries.
This all changed with the civil unrest that took place in the last quarter of 2019. Its origins lie in a wide range of social frustrations, a tone-deaf government, inequality, a widening gap of an economically ever advancing country and the fact that little of the new wealth made it into the pockets of the middle and lower classes. In addition, a largely unregulated immigration from Venezuela and Haiti placed significant strain on the labour market and the wider economy. The arrival of young, inexpensive labour, many of whom – particularly the Venezuelan’s – are well educated and skilled – resulted in falling wages as the newcomers were willing to work for less. Â
At the same moment that we were experiencing downward pressure on wages, there was an upward pressure on other areas of the economy, such housing, rent and healthcare, and prices rose. This was tough on the Chilean people and the result of the unrest has been the call for a plebiscite held this October in which people voted favourably on the creation of a new Constitution. At least with this issue now settled, the uncertainty that weighed on the economy has been removed and the nation can start to rebuild.
WEC is promoting social innovation as a way of accommodating new challenges. What does this mean in your market and how prepared is it for the post-Covid world of work?
This year’s Covid crisis has of course dealt a further blow to the economy. Chile has a population of 19 million people and a workforce of some 8.3 million. While the population is relatively young by European standards it is certainly not the youngest in Latin America. The birth rate has fallen steadily for some years as more women have entered the workforce and, at the end of last year, 55% of women were active in the labour market – up from just 29% in the early 1990’s. For men, the participation rate is around 75%.
Before the crisis hit, the unemployment rate was less than 8%, whereas now it is 12.9%. But even this figure hides the true picture as some 30% of the Chilean workforce works informally. While this is significantly less than many other Latin American markets where it is up to 70%, the impact of Covid has nevertheless been hard on these people as they have no safety nets to cushion the impact. The government’s Covid paycheck protection is only applicable to the formal labour market.
There are currently three million Chilean’s unemployed – including both people who used to have a job, the long-term unemployed and those that have had their jobs suspended due to the crisis. Some 700,000 people – 8% of the formal workforce – have been furloughed since the start of the pandemic.
One macro trend resulting from Covid has been a new appreciation of formal work and the protection it offers in the form of unemployment benefits, healthcare, pension etc. Agency work is of course formal work, and as such is attractive to the government and worker’s as it is a channel to bring people, and particularly young people, into the labour market and also into the formal economy. A recent member survey revealed that 3 out of 4 people hired in an agency work position did not previously have a job, or only an informal job. The same research showed that wages paid by agencies and in outsourcing are some 20-30% above the average wage paid in Chile.
Our industry is increasingly acknowledged as offering a valuable service to the labour market – providing workers with employability and job prospects and affording companies the flexibility they need to put their toe in the water and hire new people in growth areas. Nevertheless, it will take a while for the formal labour market to reabsorb and digest all the unemployed.
How do you see the industry’s role evolving in both the short and longer-term? What is the outlook for flexible staffing?
Recently, our industry has witnessed a change in its image and is now seen as more relevant. This has helped a great deal in fostering dialogue and cooperation with the authorities. Agest has strong and longstanding working relationships with government and authorities at all levels. We recently held an event that gathered speakers including the national under-secretary for work, the director of the local public employment service and a director of ILO.
The national job exchange has asked us to advise them on improving their public job exchange portal and we are working in partnership with them to streamline the service. We are also on the advisory board of the public employment services and have helped them in rolling out programmes and webinars aimed at getting people back to work.
We are proud of this excellent PPP in the labour market. It enables us to forge strong relationships and gain access to key people when we need them. It also provides us with credibility with both customers and workers.
In the short term, the private employment sector is likely to be a beneficiary of the ongoing economic uncertainty as it provides business with flexible staffing solutions and supports workers to remain employed.
In the long term our sector will need to demonstrate its value to different industry sectors. Historically, agency work is a service used mostly by large companies, but this is trickling down and we now see smaller organisations, who perhaps want to hire just a handful of people, turning to the private employment sector.
When it comes to flexibility, according to the OECD, Chile is one of the world’s least flexible labour markets. There are essentially just two, standard labour market contracts: open-ended and fixed term. Agency work though is separate, and governed by its own, specific legislation. As such it offers employers the chance to hire more flexibly. Retail (except food) is struggling, while logistics, healthcare and IT have seen continued growth and our members have been working round the clock to shift people out of shrinking sectors and into areas of growth. Agest companies hire and train between 100,000 and 150,000 people each year.
What actions are you taking to support your members and their client companies to lead in the new normal?
Throughout the pandemic we have supplied Agest members and their clients with timely information on the emerging rules and regulations. We have held virtual seminars with the relevant state agencies where clients can raise specific issues and get direct answers to their questions.
We also helped to design ‘Safely back to work’ protocols for the retail sector and others, working with health and safety experts to advise on spacing, hygiene measures etc.
In addition to maintaining regular job fairs to match supply with demand in the labour market (now held virtually of course), our industry provided some 500,000 hours of training in 2019. Not only does this equip people with new skills, but it raises the quality of the workforce we can offer to client companies and allows them to integrate successfully into their permanent
staff.
