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Unformatted text preview: of the country (where tradable activities concentrate) are the most affected by the crisis. The evolution of the impacts over time is also important. In Brazil, the early labor market impacts of the crisis were clearly observed in industrial states like Sao Paulo, but are now larger in the urban areas of poorer Northeast states like Recife and Salvador. The impact of the crisis on earnings and wages is mixed. While Brazil and Chile show growing real earnings, Colombia registers falling real wages both in retail commerce and blue‐collar manufacturing (two of the most common occupations). Mexico shows a dual pattern whereby blue‐collar manufacturing workers have steady real wages whereas workers in retail commerce have falling real earnings. A pattern emerges whereby the more open economies like Chile, Colombia and Mexico have all endured an important shock due to the international crisis, but Chile has been able to prevent a fall in real wages, whereas Colombia and Mexico have endured declines in real wages, for at least some sectors. On the other hand, in a less open economy like Brazil the impact in the labor markets appears limited to losses of employment in the export oriented activities with no significant impact on earnings. For other countries (e.g. El Salvador, the Dominican Republic), timely data is lacking but leading indicators from Social Security data suggest major job losses in recent months. However, given the limited size of formal employment, the full impact of the crisis cannot be fully ascertained. Current Policy Responses In relation to the policies actions adopted in response to the crisis, countries like Brazil, Chile or Mexico are taking advantage of labor market policy instruments already in place, such as unemployment insurance, or wage subsidies to keep or hire workers,. In these countries, the duration of unemployment insurance has been extended either in specific sectors or across sectors aiming at protecting formal workers from longer unemployment spells. Wage subsidies are being utilized for targeted and 82 vulnerable groups. In Chile, the wage subsidy is targeted at the youth with earnings below a certain threshold, and with formal employment. In Colombia, the (implicit wage) subsidy is broader since the Government established general payroll tax holidays for new small and medium size firms. Still, the actual coverage of these policy changes (unemployment insurance, wage subsidies) is limited to the formal sector, and it is unclear how much the take up for these measures will be. There is also renewed attention amongst policy makers to finding ways to protect or create jobs, and several are considering temporary employment programs (TEP), although countries are still dealing with implementation issues (Mexico). Minimum wages, a traditional labor market policy variable, have not been a key instrument in managing the current global crisis. Minimum wage increases have responded instead to the planned periodic adjustment, although in some cas...
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