Venezuela: Current Climate and the Contingent Labor Market

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The Contingent Workforce landscape has evolved significantly over the past few decades. When most manufacturers established operations in Venezuela decades ago, the country was vastly different across a variety of metrics than it is today. So too was the way we measured contingent workforces at a country level around the globe. We had fewer resources, tools and far less reporting and statistical data at our disposal to measure Contingent Workforce cost efficiencies, as well as productivity and the impact of Workforce regulations in each market.

Today, measuring only the cost of labor and even the overall cost of doing business in a national market simply isn't enough to allow us to fully assess the broader picture. Some of the most cost efficient countries for Contingent labor are often the most politically dynamic, and in terms of risk factors such as terrorism, the most unstable.

Foreign business regulation, corruption, economic and financial risk factors are all metrics that are measurable by today's advances in data recording and analysis. ManpowerGroup Solutions considers these and other geopolitical factors when compiling the Total Workforce and Contingent Workforce Indices. With regards to Venezuela, in the 2016 Contingent Workforce Index (CWI) the country came in last place overall (when ranked among 75 countries) for relative ease of sourcing, hiring, retaining and managing contingent labor.

Q1 2017 Quarterly Market Report | ManpowerGroup Solutions

Venezuela has become a very heavily regulated labor market for foreign businesses. To avoid penalties and due to the country’s strict labor laws, major manufacturers have elected to keep thousands of workers on the payroll despite the suspicion that their Venezuelan factories have been shuttered for months. Despite average market maturity in terms of contingent labor engagement and a ranking of 46th globally for Workforce Availability, every other indicator paints a bleak picture for future engagements in the country.

As Venezuela’s agricultural sector continues to suffer, workers may be required to leave their posts to perform up to 60 mandatory work hours in the countries fields while being paid by their regular employers, if current circumstances persist. While the market was once home to a robust and healthy agricultural industry, nearly 20 years ago the shift to import more food as opposed to investing in agricultural initiatives and instead export more oil from this oil-rich country. This decision has led to less and less investment in agriculture over time and a now languishing food production pipeline.

The minimum wage was raised earlier this year amid soaring inflation. This has resulted in hardships on many employers with engagements in Venezuela. It is anticipated that these raises will eventually result in the closure of businesses who can no longer afford to employ workers. Which will attribute to an even higher unemployment rate within the country as it grapples with a lack of jobs in addition to inflation and political turmoil. Even the oil firms with expatriate employees in the country are further reducing their already-dwindling ranks.

Situations such as these substantiate the need for continuous evaluation of the global talent 'marketplace' by businesses for Contingent labor engagement opportunities that meet their strategic priorities. It is essential business practice in today’s dynamic global landscape to be sure they are not leaving-money-on-the-table or exposing themselves to unnecessary risk both geopolitically or by the ignorance of changing foreign business regulations.

Employers will be extremely hard pressed to receive any compensation for the assets under suspicion of seizure by Venezuelan public officials. Many employers with operations within the region will suffer tremendous financial loss this year. This problem is only compounded by the fact that employers can not convert the local currency (bolivars) to any other currencies for commerce beyond the borders of Venezuela.

ManpowerGroup Solutions offers monthly and quarterly updated data through their consulting services to aid organizations with the development of their Contingent Workforce strategy. Fully customizable reporting and workshops are valuable to businesses working towards expanding into new markets. The 2016 CWI is available for download, and detailed infographics may also be found on the CWI Microsite for each of the 75 global markets. Expect the 2017 Total Workforce Index to be released in the third quarter of 2017.