This information is derived from the State Department's Office of Investment Affairs' Investment Climate Statement. Any questions on the ICS can be directed to EB-ICS-DL@state.gov
Last Published: 11/14/2016

Panama’s official unemployment rate is 4.5 percent, close to what most economists consider full employment. Economists in Panama estimate that the unemployment rate for skilled workers is negative, indicating a shortage of workers for skilled jobs including accounting, IT, customer service, and specialized construction skills. Employers frequently cite the lack of skilled labor and English language speakers as a limiting factor on growth.

Panama's non-agriculture labor force is approximately 1.5 million persons. Forty-one percent of workers are employed in the informal sector, with a lower rate of informal employment in Panama capital area (37 percent) compared to the indigenous areas (80 percent).

While the government has periodically revised its labor code, including a modest revision in 1995, it remains highly restrictive. Several sectors, including the Panama Canal Authority, the Colon Free Zone, and export processing zones/call centers are covered by their own labor regimes. Employers outside of these areas, such as the tourism sector, have called for greater flexibility, easier termination of workers, and the elimination of many constraints on productivity-based pay. The GOP has issued waivers to the regulations on an ad hoc basis in order to address employers’ needs, but there is no consistent standard for obtaining such a waiver.

Despite spending of approximately 12.6 percent of the central government budget and 2.5 percent of GDP on education, approximately half of students fail their university entrance exam. The 2015-2016 World Economic Forum Global Competitiveness Report ranked Panama 94 out of 140 countries for quality of education and pointed to an inadequately educated workforce as the most problematic factor for doing business. This poor showing underscored the 2010 OECD Program for International Student Achievement (PISA) analysis, which ranked Panama second worst among participating Latin American countries.

The law provides for the right of private-sector workers to form and join unions of their choice subject to the union’s registration with the government.

The law provides for the right of private sector workers to strike except in areas deemed vital to public welfare and security, including police and health workers. All private sector and public sector workers have the right to bargain collectively, and the law prohibits employer antiunion discrimination, and protects workers engaged in union activities from loss of employment or discriminatory transfers. Strikes must be supported by a majority of employees and related to improvement of working conditions, a collective bargaining agreement, or in support of another strike of workers on the same project (solidarity strike).

The law prohibits all forms of forced labor of adults or children. The law establishes penalties of 15 to 20 years’ imprisonment for forced labor involving movement (either cross-border or within the country) and six to 10 years’ imprisonment for forced labor not involving movement.

The law prohibits the employment of children under age 14, although children who have not completed primary school may not begin work until age 15. Exceptions to the minimum age requirements can be made for children 12 and older to perform light farm work if it does not interfere with their school hours. The law does not set a limit on the total number of hours that these children may work in agriculture or define what kinds of light work children may perform. The law prohibits 14 to 18-year-old children from engaging in potentially hazardous work and identifies such hazardous work to include work with electrical energy, explosives, or flammable, toxic, and radioactive substances; work underground and on railroads, airplanes, and boats; and work in nightclubs, bars, and casinos.

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