ILO urges targeted reforms as Latin America jobs market shifts

The ILO reports that the regional unemployment rate dropped to 5.3 per cent in 2025, the lowest level recorded in the past ten years.

Labour markets across Latin America and the Caribbean have moved beyond the post-pandemic recovery phase and entered a period shaped by deeper structural changes, according to a new International Labour Organization (ILO) report. While unemployment has fallen to one of its lowest levels in decades, the agency says governments now need more focused policies to tackle informality, improve productivity and prepare workers for changing economic conditions.

The report, Labour Market Trends in Latin America and the Caribbean, highlights that demographic change, technological advances and persistent informal employment are becoming the defining forces shaping the region's labour markets.

Low unemployment masks deeper challenges

The ILO reports that the regional unemployment rate dropped to 5.3 per cent in 2025, the lowest level recorded in the past ten years. The employment-to-population ratio also increased slightly from 59.7 per cent to 59.9 per cent, while labour force participation remained largely stable at 63.2 per cent.

Despite these positive figures, the organisation says the labour market is undergoing significant structural changes. Population ageing and demographic shifts are influencing labour supply, making it increasingly important to understand who is finding work, who remains outside the labour force and what kinds of jobs are being created.

Early data for 2026 show employment continuing to grow and unemployment declining in several countries, although performance varies across the region.

Informality requires different solutions

The report stresses that informal employment cannot be addressed through a single policy because businesses face different challenges depending on their size and capacity.

Some small enterprises generate incomes too low to cover the costs of operating formally, while others could formalise but see little benefit in doing so. Informal employment also exists within registered businesses that do not formalise all employment relationships.

ILO Regional Director for Latin America and the Caribbean Ana Virginia Moreira Gomes said effective policies require a clear understanding of these differences so that support can be tailored to the specific needs of each group.

Productivity and formal jobs go hand in hand

The ILO says stronger productivity and greater formalisation reinforce each other. Businesses operating in the formal economy are more likely to access finance, technology, markets and institutional support, while productivity gains create better conditions for enterprises to expand and formalise their operations.

The report recommends combining measures such as skills development, easier access to finance, technology, business support services, stronger social protection and improved market access instead of relying only on lower registration costs or increased labour inspections.

The organisation says governments should continue monitoring labour market trends over the coming months as global economic uncertainty and ongoing structural changes reshape employment across the region.