High unemployment: don’t blame the Venezuelans

COLOMBIA - Report 23 Jul 2019 by Juan Carlos Echeverry, Andres Escobar and Mauricio Santa Maria

What started as a minor concern likely to correct itself has now become one of the greatest sources of concern, for the government and analysts alike. But the government seems to be ignoring the real problems plaguing the labor market, and therefore the solutions it will propose probably won’t be the best ones. In effect, labor market figures since mid-2018 and in 2019 have been disappointing, to say the least. Colombia is now completing more than a year with increasing unemployment rates, which are not consistent with what is expected from a recovering economy. This report analyzes the possible real causes behind this phenomenon, while analyzing both the small and bigger picture in terms of labor market variables. We say “real causes” because the government has been quick in saying that this problem is created by the large influx of Venezuelans into the country, but we find that this phenomenon only explains a tiny part of the problem. Other structural issues are driving the increase in unemployment, and other negative labor market developments -- the most important caused directly by government decisions. That is, in the end, we find that a deterioration of the labor market responds to more structural causes, rather than to recent shocks and conditions.

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