Population struggles to survive high cost of living

Rising unemployment and cost of living are amongst the two most important factors driving the increase in informal unemployment in Panama, according to experts.

Data from the office of the Comptroller General show that 39.9% of the employed population works in the informal sector, compared to 36.9% in 2011.

The latest polls published by Dichter & Neira confirmed that the high cost of living and rising unemployment constitute the primary challenges facing ordinary Panamanians.

According to economist Juan Jovane, the low quality of available jobs is a key factor in the growth of informal employment, as is the deficient implementation of social laws and regulations. Faced with hard choices, ordinary Panamanians are obliged to resort to survival strategies to make ends meet.

The latest statistics on the labor market compiled by the Comptroller General's office show that, as as at March 2016, the number of self-employed workers had increased by 25,717 year on year, reaching 434,950. At the same type, the rate of unemployment increased 0.4% over the year, reaching 5.6% in March 2016.

According to Mr. Jovane, many of those working in the informal sector have no choice but to do so, given their inability to enter the formal job market. In his view, the economic slowdown the country is experiencing is one major factor behind the increase in informal unemployment. He highlighted how many informal workers putting in 8 hours a day are unlikely to reach even minimum wage in the current circumstances.

On the other hand, labor consultant Rene Quevedo pointed out that the informal economy offer some attraction in the form of quick cash payments, no educational requirements, lower operating costs, as well as of course the avoidance of tax and social security costs.

Mr. Quevedo highlighted the real impact that informal businesses have on the economy in general, and especially on the formal trade sector: “Informal commerce affects first of all our economic development as a result of tax avoidance, which deprives the state of the capital needed for the construction and maintenance of public infrastructure, ironically the same infrastructure used by the tax dodgers', he explained.

Secondly, he pointed out how those operating in the black economy businesses put compliant businesses at a disadvantage given their higher cost structure, which sometimes can result in business closures and job losses.

The labor survey highlighted that of the 1,157,990 employees polled, 68.8% worked in the private sector, 23.6% in government, 6.1% in the domestic sector, 1% in nonprofit organizations and 0.4% in cooperatives.

By contrast, the distribution of total population in employment showed the greatest concentration the private sector at 45.2%, followed by self-employed at 26.2%, government employees at 15.5%, people working in family owned companies for no salary at 4.4%, and finally domestic workers at 4%.

According to the president of the National Union of Consumers and Users (Uncurepa), Pedro Acosta, people working in the informal labor sector can actually make substantial amounts of money.

However, he explained that 'to the extent that the black economy does not contribute to state coffers, informal unemployment hits the middle classes hardest', adding that 'it is up to them to support the rest of the population'.