According to a new ILO report ( Note 1), active labour market policies, which comprise an array of training and job creation measures, enhance the security of workers and contribute to fair globalization.
The report sees a clear relationship between workers' subjective perception of employment security and government expenditure on active labour market policies. The degree of protection workers enjoy once they lose their job is therefore one of the factors that increase perception of security in the jobs that workers presently hold and is an important element of decent work.
The study finds, for example, that Dutch or Danish workers experience more labour market security than Japanese or US workers because more money is spent in these countries on active labour market policies. While countries like the Netherlands and Denmark spend about 1.6 per cent of their GDP on training and job creation, the United States and Japan only invest about 0.2 per cent of their GDP on measures that provide security in case of job loss.
According to the study, France, Germany and Sweden also spend significantly on labour market policy, but the percentage of people feeling that their jobs are secure is lower than in Denmark or the Netherlands. "This is due to a variety of reasons. For example in Germany the consequences of reunification and recent reforms in the labour market, as well as persistent high unemployment are important", explains Peter Auer, ILO employment expert and co-author of the study. "It also shows that active labour market policies are only one factor among many others that influence workers ' perceptions of labour market security", he adds.
While globalization creates opportunity and new jobs, its positive effects are usually of little consolation to those who are suffering from its negative effects, says the report.
"Indeed, one of the biggest fears that accompany globalization is the worry of being displaced, made redundant and unemployed", says Peter Auer, adding that "in Germany, on a single day in October 2004 16,500 job cuts were announced by leading multinational and national firms, which triggered a wild-cat strike in one of the autoplants concerned".
Job losses are not limited to any particular region in the world. In the United States some 5.3 million workers with prior job tenure of more than 3 years were displaced from their jobs between January 2001 and December 2003. Forty-three per cent of these workers lost their jobs due to plant closings or moves, including outsourcing. While many of those displaced find other jobs - around 65 per cent of the 5.3 million US workers were reemployed at the time of the survey in 2004 - the fear of being displaced is real. And with quickly shifting foreign direct investment, jobs flow on from one "emerging" economy to another, as witnessed by jobs outsourced from Mexico to China.
The report - which is part of the follow-up to the ILO's global employment agenda - also finds that the countries' that are most open to global markets, Belgium, Denmark, Ireland, the Netherlands and Sweden (measured by the trade share in GDP), are also those that have a tight network of labour market institutions and policies. In other words, these are the countries that spend most on their workers to protect them from the adverse employment effects of globalization.
According to the study, labour market policies, particularly active measures, do not only have a positive effect on worker's welfare but also on the economy. They create a macro- and microeconomic virtuous cycle at work that gives powerful support to spending on these policies. "In fact", says Umit Efendioglu, co-author of the study, "active labour market policies of any significant size act as an automatic stabiliser in the economy, with spending up during recessions and/or waves of structural change and down in economic booms."
While there are striking differences in the extent, structure and functions of active labour market policies around the world, they exist today in most countries. They show varying degrees of effectiveness that are partially due to poor programme design, poor implementation but also to some flaws in programme evaluation. The report says that evaluations often concentrate solely on direct labour market effects but leave aside the impacts on social cohesion, poverty reduction and goods and services created by programme participants. One reason for the alleged ineffectiveness of active labour market policies is that they are often considered as temporary emergency measures only, while the problems they deal with are resilient and recurrent and call for more permanent intervention.
The report therefore concludes that active labour market policies should shed their ad hoc nature as a quick fix crisis solution and become a permanent, but adaptable instrument to cope with changes linked to globalization. In such a way they would become an important instrument for coping with redundancies and for more effective labour market governance while being also one steady element of an employment friendly macroeconomic policy.
Note 1 - " Active labour market policies around the world: Coping with the consequences of globalization", by Peter Auer, Umit Efendioglu and Janine Leschke, International Labour Office, Geneva, 2004.