Unemployment Threatens World Cities; Jobs are Needed to Check Growth in Urban Poverty, Says ILO

ILO/96/15

Press release | 29 May 1996

ILO/96/15

GENEVA (ILO News) - Already acute urban problems risk spiralling out of control if the trend toward higher unemployment and underemployment among city dwellers is not reversed, the International Labour Organization warns in a new report. Endnote1

At the beginning of the decade, one-third of the world's urban population, approximately 400 million people, were living in poverty, with lack of productive employment as one of the most direct causes, says ILO. By the year 2000, the ranks of the urban poor are expected to have swelled to as many as one billion people. In absolute terms, Asia represents the largest concentrations of urban poverty in the world. In the developing world, African cities have the highest percentage of poverty, with 41 per cent of the urban population living below the poverty line.

The report, prepared for the Second United Nations Conference on Human Settlements (Habitat II, Istanbul June 3-14, 1996), says that in both developed and developing countries, the rise in urban joblessness has been paralleled by the urbanization of poverty. It notes that poverty-related problems, such as overcrowding, hunger, disease, crime and malnutrition, are increasingly prevalent even in the inner-cities of the wealthiest, most advanced industrialized countries. In countries at all levels of development, the urban poor face limited access to shelter, education, health and social services, and they often pay higher prices for such essentials as food, water and clothing than those who are better off.

The ILO estimates that there will be 1.2 billion new entrants to the world labour market by the year 2025. Most of the new jobs will have to be created in cities. The share of non-agricultural employment grew by 93 per cent in the last four decades, and now accounts for 40 per cent of all employment in developing countries.

ILO's Deputy Director-General, Katherine Hagen said: "By the year 2000, one-half of humanity will be living and working in cities, with developing countries accounting for the major share of the world's new urban population. These people will need jobs if the new cities are to develop as centres of economic opportunity and civilization rather than zones of inequality and misery. Only the generation of productive employment can break the vicious circle of urban poverty that is taking root in cities worldwide."

In spite of the problems caused by rapid urbanization, cities are rightly regarded as centres of productivity and engines of economic growth. For the location of large-scale industry there are few alternatives that can provide the same economic benefits as cities. Urban environments also provide more scope and opportunity for introducing new skills, ambitions, values and standards. Urban centres make a disproportionate contribution to Gross Domestic Product. This is also true for many developing countries. For example, although Kenya is 23% urban, Nigeria 35% and India 27%, the urban areas in all three countries account for 70 per cent of GDP. In ILO's view cities are a resource that needs to be developed sustainably and with a view to increasing human well-being and social justice.

The urban 21st century

At mid-century, only two cities had populations over 10 million (London and New York). Today there are 14 cities with populations over 10 million, 10 of which are in developing countries. By the year 2015, there will be 27 mega-cities, with all the new entrants in developing countries. While urban populations are stabilizing or even shrinking in industrialized countries, they are growing rapidly in developing countries. In the 1970s, about one-half of all the world's city dwellers lived in developing countries. By 1994 that figure had risen to 65 per cent, and by the year 2015, nearly 80 per cent of all city dwellers will be living in developing-countries.

Contrary to popular perceptions, rural-urban migration is not the sole cause of the expansion of the larger cities in the developing world. A study of 26 large cities found that as much as two-thirds of the population increase could be attributed to natural growth, with migration from rural areas (and international migration) accounting for the rest. Smaller cities, however, have greater room for expansion and are more at risk of rural-urban migration.

In much of Latin America, which experienced rapid industrialization and urbanization in past decades, roughly 70-80 per cent of the population already lives in cities, about the same percentage as in industrialized countries.

Rural-urban migration is still a determining factor, and a potentially menacing one, in large areas of the developing world. In Africa and Asia, industry has grown, but not to a sufficient extent to absorb the ever increasing urban labour force; only around 30 per cent of the population in these regions lives and works in cities.

The report notes that "Migration, as opposed to natural population growth, skews urban population growth towards the young, as it is a selective process which tends to include those who are in the prime age group." Therefore migration in one generation builds a propensity for greater natural population growth in the next. The pressure that large numbers of young families can have on access to land is illustrated by Manila, in which one-third of the city's population of nearly 9 million people are squatters in slum areas that occupy less than five per cent of the metropolitan area. The built-up areas of cities in the developing world will have more than doubled between 1980 and 2000, a rate of expansion almost four times that of industrialized countries.

The persistence of widespread urban and rural poverty makes Asian and African cities particularly vulnerable to massive migration if living conditions worsen in rural areas. Paradoxically, improvements in manufacturing or agricultural productivity risk fuelling migration to cities, because mechanization and large-scale farming tend to reduce demand for rural labour. While capital-intensive manufacturing development increases demand for urban labour, this is rarely if ever on a scale to match the supply of labour.

Most urban unemployment in developing countries takes the form of underemployment, in which people are obliged to undertake any available economic activity, however poorly paid and unproductive, because there are no social-safety nets and no alternatives in the form of unemployment insurance or job training for formal sector work. In Ghana, for example, one survey put the unemployment rate at 1.6 per cent of the workforce, but the rate of underemployment was nearly 25 per cent.

In sub-Saharan Africa, the urban informal sector (which can include such activities as small-scale peddling, petty services or work in unregistered factories) is estimated to employ more than 60 per cent of the urban labour force at extremely low incomes. In Latin America, and the Caribbean, 83 per cent of all new jobs created between 1990-1993 were in the informal sector; the bulk of these jobs are poorly remunerated, unsafe and of low productivity. The large majority of Latin America's urban poor work in the informal sector. In India and Pakistan, the unorganized segment of the manufacturing sector is estimated to comprise 75 and 70 per cent respectively of total manufacturing.

Unemployment is not confined to developing-country cities. Cities in developed countries have been hit disproportionally hard by de-industrialisation, since most manufacturing was located in cities. Over the last two decades the average drop in manufacturing employment in G7 countries was 15 per cent. Among the larger EU countries, the UK's share of manufacturing employment declined by 43%, France's by 23% and Germany's by 14%. Most EU countries are struggling with double-digit unemployment with the result that social exclusion, once relatively rare in western Europe, is now prevalent in large cities and towns. The US has low unemployment, but average real wages have stagnated in the last 20 years, and high pockets of unemployment do exist in some large U.S. cities.

The ILO report notes that the only exception to the unemployment trend is in Asia-Pacific, where manufacturing demand grew steadily, with manufacturing employment growing by over 6 per cent per year throughout the past decade, and wages by over 5 per cent per year. Estimates show that during the past decade, 40% of the total labour force growth in Asia-Pacific countries has taken place in urban areas, but forecasts show that urban labour force growth will represent 96% of all growth for the period 2000-2010. In contrast to recent decades, most new job growth will be in service rather than manufacturing sectors.

Conclusions

Mr. Samir Radwan, a senior economist of the ILO, said "given the scale and irreversibility of urbanization, urban employment is the key to solving other problems faced by municipalities". The problems are daunting, but ILO argues that actors at the municipal and local levels have more resources at their disposal than is often realized. The formation of local alliances, involving mayors, trade unionists, entrepreneurs, community groups and others, is the necessary first step in mobilizing the job-creation potential of cities. National authorities have the responsibility of devising macro-economic policies that are capable of stimulating and supporting local initiatives for employment creation.

At the same time, ILO urges municipal authorities to develop policies at the international, national and city levels. The goals are to better understand and influence global economic policies, to improve macro-economic and other national policies toward cities and to influence employment prospects through a range of local economic and social development measures.

Among the major local initiatives, ILO cites employment-intensive investment policies as "perhaps the most powerful tool at the disposal of municipal authorities." Developing countries invest $200 billion annually in infrastructure, about one-fifth of total investment. But much of that investment rarely touches the lives of the poorest urban dwellers - housing, roads, sewage and water systems are inadequate for the needs of many millions of urban poor. A labour-intensive (as opposed to capital-intensive) approach to building municipal infrastructure and providing services "can be a cost-effective and high-quality alternative to equipment-based situations, particularly in situations where wage rates for unskilled labour are relatively low."

Most infrastructure investments which are of greatest benefit to the poor (e.g. drainage, erosion control, waste management and sanitation) lend themselves to labour-intensive methods, which would spur employment, generate earnings and contribute to small enterprise formation. Construction of low-cost housing is another sector of activity that can be carried out efficiently using informal and/or labour-intensive methods, while yielding substantial collateral benefits for urban dwellers. For example in Zambia, which has one of the highest rates of urbanization in Africa, informal sector housing generates six times as many dwellings for the same investment as formal sector housing. Though the housing may be of a lower standard, it is more easily afforded by the poor. Housing investment also gives rise to other sectors, notably building materials and consumer goods and services.

The informal sector, ILO says, can provide a largely untapped productive resource for both urban and rural development. In most countries, informal sector workers lack access to even the most basic services and infrastructure and legislation and licensing procedures often make their activity illegal. The long-term policy objective of municipal planners should be to move the vast and disorganized urban informal sector into mainstream economic development, via training, assistance in organising trade organizations, providing access to credit and other key inputs.

Changes to the regulatory environment, including deregulation of costly and restrictive registration requirements, can be an important step and cost effective way of bringing much clandestine or informal activity back into the mainstream. Other regulatory reforms could include revision of restrictive zoning laws, reduction of bureaucracy, simplification of procedures and improved information.

The ILO will present to the Istanbul Conference an Urban Employment Charter (prepared by worker, employer and government delegations from 20 countries) which calls upon the international community to take full account of the urban-employment challenge and develop a new paradigm of international cooperation on employment generation. The Charter calls for the mobilization of additional financial resources at the local, national and international levels. It also urges a stronger move toward decentralization of finances and calls upon municipal authorities to evaluate public and private investment policies with a view to maximizing their impact on employment while responding to social needs and improving the urban environment.

Endnote1

The future of urban employment. Second United Nations Conference on Human Settlements (HABITAT II). International Labour Office, Geneva, May 1996.