Economy and Financial Affairs – Wed Jun 03 2009
Source: South-north Development Monitor (SUNS)
Riaz K. Tayob
In its latest Global Employment Trends update of May, the ILO has revised upwards its unemployment projections to levels ranging from 210 million to 239 million unemployed worldwide in 2009. The report notes that the economic crisis is detrimental for both women and men, whether they are at work, looking for work or outside the labour force. Women are often in a disadvantaged position in comparison to men in labour markets around the world.
Geneva, 2 Jun (Riaz K. Tayob) — The International Labour Organization’s ninety-eighth tripartite conference gets under way from 3-19 June amidst the latest ILO labour market projections showing a further increase in the number of unemployed, working poor and those in vulnerable employment. The conference is expected to consider an emergency “global jobs pact” designed to promote a coordinated policy response to the global jobs crisis.
“We are seeing an unprecedented increase in unemployment and the number of workers at risk of falling into poverty around the world this year,” said ILO Director-General Juan Somavia. “This is cause for grave concern. To avoid a global social recession, we need a global jobs pact to address this crisis, and mitigate its effects on people. The choice is ours and the time to act is now.”
Mr Somavia cautioned that past experience suggested a considerable lag of 4 to 5 years on average in the recovery in labour markets after economic recovery. There was a risk of the global jobs crisis “persisting” for the next several years.
Some 4,000 representatives of government, and employers’ and workers’ organizations will be attending the ILO conference (1). The agenda of the conference has been re-organized at short notice in order to focus on the global jobs crisis. The conference will discuss a range of measures and policies to promote employment and enterprise development, and extend social and other protection to persons affected.
Among the highlights of the conference will be a Summit on the Global Jobs Crisis on 15-17 June, which will be addressed by some ten heads of state and government.
In its latest Global Employment Trends (2) Update of May, released ahead of the conference, the ILO has revised upwards its unemployment projections to levels ranging from 210 million to 239 million unemployed worldwide in 2009, corresponding to global unemployment of 6.5% and 7.4% respectively.
The ILO report projects an increase of between 39 and 59 million unemployed people since 2007, as the most likely range. Actual outcomes will depend on the effectiveness of fiscal expenditures decided by governments and on a functioning financial sector.
(The ILO had projected in January that global unemployment could increase by between 18 and 51 million, corresponding to global unemployment rate of between 6.1% and 7.1%. Its March update projected a range of between 24 and 52 million, corresponding to a global unemployment rate of between 6.3% and 7.1%.) The ILO’s projections are based on three scenarios for how the crisis would impact global and regional unemployment in 2009. The first was generated using the historical relationship between economic growth and unemployment at the country level between 1991 and 2008, together with the IMF GDP growth projections for 2009.
The second scenario was generated on the basis of the relationship between economic growth and unemployment during the worst observed economic downturn in each country, by applying this relationship to the 2009 IMF GDP growth projections. The third scenario was generated by taking the worst observed year-on-year increase in each country’s unemployment rate and assumes that this same increase would happen simultaneously in all developed countries in 2009.
The report finds that 2009 will represent the worst global performance on record in terms of employment creation. The global labour force is expanding at an average rate of 1.6%, equivalent to around 45 million new entrants annually, while global employment growth decreased to 1.4% in 2008 and is expected to drop further to between 0 and 1% in 2009.
It projects that 200 million workers across the world are at risk of joining the ranks of people living on less than $2 per day, between 2007 and 2009. The crisis is hitting youth hard, with their unemployment rate projected to increase from 12% in 2008 to a range of 14% to 15% in 2009.
The report states that the unprecedented speed, depth and broad reach of the global economic crisis and the real prospect of an extended global recession – perhaps even depression – has prompted a massive global policy response. The response first targets aggregate demand through fiscal stimulus and low interest rates. Secondly, it targets the financial sector to repair balance sheets and restore credit flows.
As of April 2009, G20 countries’ responses account for close to ninety percent of the $2 trillion committed globally. Among the group, about $692 billion has been committed for fiscal stimulus in 2009, amounting to 1.4% of combined G20 GDP, less than the 2% requirement specified by the IMF, and slightly more than 1.1% of global GDP.
The report underscores that the backdrop to these unprecedented policy measures is an economic outlook for 2009 that is considerably worse than that envisaged in the early months of the year, consequently, the ILO projections used economic growth projections that have been revised substantially downward.
The report notes that the crisis has been transmitted to other countries in a number of ways. Global trade has plummeted faster and further than expected. Indonesia, Malaysia and the Philippines have been hard hit with year-over-year declines in exports, exceeding 30% in recent months. China, the world’s largest exporter, had a 22.6% drop in exports in April from a year earlier and export-oriented industrialized economies, like Germany and Japan have also been hit hard.
Economies reliant on FDI and other forms of external financing have suffered, including Eastern Europe and the Commonwealth of Independent States. As foreign investment has rapidly dried up, exchange rates have come under pressure and property and other asset prices have dropped sharply, leading to a larger-than-expected contraction in economic activity. Plunging commodity prices have also adversely affected economies in Africa, Latin America and the Middle East, exacerbating the effects of global financial market strains and weak exports.
The report notes that the economic crisis is detrimental for both women and men, whether they are at work, looking for work or outside the labour force. Women are often in a disadvantaged position in comparison to men in labour markets around the world.
The ILO cautions that employment quality is declining and the share of vulnerable employment (own-account workers and contributing family workers) is projected to increase from 48.4% to 53% of total global employment in 2009, amounting to between 1.47 to 1.61 billion workers worldwide.
The crisis is also having a serious negative impact on average output per worker, an indicator of labour productivity. Output per worker is expected to decline by between 1.3% and 2.3% this year. Negative growth is projected in all scenarios in all regions except East Asia, South Asia, the Middle East and North Africa.
The report also highlights the impact of the crisis on “working poverty”. It was estimated that in 2007, 624 million workers – 21% of all workers in the world – lived with their families in extreme poverty on less than $1.25 per person per day. The updated range of extreme working poor in total employment for 2008 was between 20.3% and 24.7%. For 2009, the updated range is 20.1% to 28.2% (versus an estimated range in January of 18.8% and 26.8%.) An estimated 1.2 billion workers lived with their families on less than $2 per person per day in 2007, representing more than 40% of all workers in the world. The current projections indicate a range of between 40.1% and 43.7% of workers in the world living on less than $2 per day in 2008, and between 40% and 46.8% of workers below this poverty line in 2009, said the report.
A separate report by the Director-General titled “Tackling the Global Jobs Crisis: Recovery through decent work policies” is expected to be discussed at the labour conference. The report responds to the Governing Body decisions, and proposes elements of the pact as part of the ILO’s contribution to recovery, for national and multilateral decision-making.
The pact is a decent work response to the crisis agreed to by the ILO tripartite constituency, with the strategic objective to place employment and labour market issues at the heart of stimulus packages. It is conceived as an open and evolving portfolio of policy options for use by governments, employers and workers in national decision-making, in international coordination and in development cooperation.
It is global because it seeks to promote better policy coherence among governments and international organizations. At the same time, it is also local, because it is adaptable to diverse national realities, needs and priorities.
The report cites three reasons in which the pact can contribute substantially to reversing the global downturn and hastening recovery.
First, coordinated measures have a stronger effect than isolated action, while reducing the risk of inward-looking solutions. Second, support to small enterprises and well-targeted job-rich infrastructure investment have a direct positive impact on total output and employment. Third, well designed social protection measures will support effective demand, and thus help put a floor under the crisis, given the high propensity to consume among low-income groups.
“…the International Labour Conference is considering a global jobs pact aimed at placing employment creation and social protection at the centre of recovery policies,” said the ILO Director-General.
“The aim of the pact is to make sure that both the extraordinary stimulus measures together with other government policies better address the needs of people who need protection and work in order to accelerate combined economic and employment recovery,” he added.