Experts debated regarding the issue of labor informality at the 3rd CAF-Oxford Conference

Academics and experts from Europe and Latin America debated labor informality, one of the main challenges to Latin America's development, and highlighted the need for effective public policies to mitigate it during the III CAF-Oxford Conference, held today in the United Kingdom.

The conference, called the "The Challenges of Informality in Latin America: political, economic, and social dimensions," was opened by Enrique Garcia, Executive President of CAF - Development Bank of Latin America, Diego Sanchez-Ancochea, director of the Latin American Centre (LAC) of the University of Oxford, and Roger Goodman, head of the Department of Social Sciences at Oxford.

President García noted that despite advances during the last decade in terms of growth and poverty reduction in the region, informality has not changed, something he attributed to the region's comparative advantages development model based on commodities exports.  

"The right path to address informality is a competitive advantages model, based on technology, innovation and non-traditional productive sectors," he said. He stressed the importance of "an education for the 21st century, not the 20th."

"Skills development is very important and it's something that starts when you are born. Many people remain in the informal economy because they do not have the skills needed in the formal sector. This issue requires the coordination of all the actors: government, private sector, educational centers and society", he added.

Goodman talked about informality globally. Informality "changes the dreams and the nightmares of young people as they think who they are and what life is going to be like in the future," he said. "It's a global phenomenon. The changes in the informal economy explain what happened with Brexit, they explain what's happening in the US with the elections."

Through the various discussion panels, the conference focused on exploring the impact of labor informality in Latin America in the political and distributive dimensions, which have not been the subject of such prolific academic output as the economic one.

José Antonio Ocampo, former Executive Secretary of the Economic Commission for Latin America and the Caribbean (ECLAC) and current professor at Columbia University, discussed the impact of informality in terms of social policy.

"The main problem we face is that there's an asymmetry between what we have achieved in terms of incorporating more people into the social security system and the incapacity of labor markets to generate quality jobs, which translates in (high levels) of informality," he said.

Researchers Roxana Maurizio (UNGS-Conicet), Sonia Gontero (ECLAC) and Angel Melguizo (OECD) then did a historical review of the evolution of labor informality in the region during the boom period of raw materials, highlighting the impact it has had over different countries.

After commenting on how the world's workforce has gone through radical changes since the 19^th century, Melguizo explained why informality, which impacts 55% of workers in Latin America is "normal" in the region.

"We have social protection systems that were conceived in the 19th century for full-time manufacturing workers, for a different society, for a different family composition. That's the reason why informality is normal in Latin America - because the system does not address this new reality of independent workers, innovation and flexible informal relations," he said.

Gontero, Economic Affairs Officer at ECLAC, talked about the pervasiveness of "own-account" workers in the region and the need for "a high level of institutional coordination" and "flexible structures" to incorporate those workers into the formal economy. 

"There is a certain group that will never be able to pay the cost of formality. We need to give incentives to contribute for those who can, and own-account workers may be in this group," she said. She also stressed the need to have "special structures for rural workers who are still very relevant in Latin America".

 Lastly, Maurizio talked about the strong impact of high levels of informality over productivity.

The political implications and long-term perspectives of labor informality were issues addressed by academics Clarisa Hardy (Chile), Cecilia Lopez (CiSoe) and David Doyle (Oxford University).

Doyle talked about the fact that many governments are hesitant to tax citizens, fearing a voters' backlash or a cool down in investment, and how this ties into informality levels.

"We need to understand how somebody's position in the labor market might shape his attitude towards tax compliance, tax trade-offs and forbearance and how this might translate into electoral behavior," he said.

The conference's closing panel was dedicated to analyzing the evolution of public policies intended to combat the problem of informality in the labor market, with the participation of Daniel Ortega, director of Impact Evaluation and Knowledge Policy at CAF and researchers Carlota Perez (London School of Economics) and Fabiana Machado (IDB).

The CAF-Oxford conference is part of the collaboration program signed in 2011 between CAF and the University of Oxford in order to promote the creation and dissemination of knowledge regarding Latin America as a fundamental tool for the region's economic and social development.

This strategic alliance-which, aside from conferences, also includes joint research, seminars, scholarships and student exchanges-contributes to CAF's efforts to promote the exchange of ideas and experiences among academics and public actors in Latin America and other regions in the world.