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Global crisis

ILO calls for urgent global jobs pact to forestall "prolonged and severe" employment crisis

The Director-General of the International Labour Organization called for a “Global Jobs Pact” to forestall a “prolonged and severe” jobs crisis that would lead to a massive increase in unemployment and working poverty.

Press release | 24 March 2009

GENEVA (ILO News) – The Director-General of the International Labour Organization (ILO) called for a “Global Jobs Pact” to forestall a “prolonged and severe” jobs crisis that would lead to a massive increase in unemployment and working poverty.

The appeal followed a high-level, tripartite discussion at the ILO Governing Body Monday, during which International Monetary Fund Managing Director Dominique Strauss-Kahn said increased cooperation between the IMF and the ILO was crucial in addressing the global economic crisis. The high-level meeting also heard remarks by Mr. Guy Ryder, General Secretary of the International Trade Union Confederation (ITUC); Mr. Alexander Shokhin, President of the Russian Union of Industrialists and Entrepreneurs; Jonathan Shaw, Minister for Disabled People and for the South East of the UK Department for Work and Pensions.

ILO Director-General Juan Somavia described international coordination to tackle the crisis as weak, and said “the financial, trade, economic, employment and social roots of the global crisis are interlinked and so must be the policy responses”. This is a most important message ahead of the G20 Summit to be held in London next week.

The discussion was based on a study by the ILO’s International Institute for Labour Studies entitled The Financial and Economic Crisis: A Decent Work Response, that said that demographic projections suggest that nearly 90 million net new jobs would be needed over 2009-10 to absorb new entrants in the labour market and avoid a prolonged jobs gap. In earlier financial crises, the labour market recovered only 4 to 5 years after the economic recovery, the study said.

“We need to implement a coherent and coordinated job-oriented recovery strategy, based on sustainable enterprises, as soon as possible”, Mr. Somavia said. “If stimulus efforts are delayed the jobs crisis will be prolonged and severe and employment may only start to recover as from 2011.”

The study by the ILO Institute examined current rescue efforts in 32 countries, including all members of the G20. It said that while the IMF had called for stimulus plans in the order of 2 per cent of GDP in response to the crisis, stimulus plans stand on average at 1.7 per cent. The study also illustrates that stimulus as a percentage of GDP for advanced economies – at 1.3 per cent – is less than half that allocated by developing and emerging economies.

The ILO survey also found that the stimulus packages lean heavily toward financial bailouts and tax cuts instead of job creation and social protection and noted that on average, fiscal stimulus packages for the real economy are five times smaller than financial bailout packages.

“Only half of the countries examined have announced labour market initiatives and among those, the resources allocated to these measures are relatively limited”, said Raymond Torres, Director of the ILO Institute, adding that social policy measures represent, on average, 9.2 per cent of the total fiscal packages. In the case of labour market measures, the figure is 1.8 per cent.

The report also says that infrastructure programmes do not adequately take into account the need to reinforce the existing capacity of businesses and skills supply – so that part of the infrastructure spending may result in higher prices, rather than higher production and jobs; some tax cuts will end in higher savings rather than higher demand, output and jobs; and little is done to help youth and other vulnerable groups.

The measures moreover involve only limited social dialogue with employers and unions and lack coordination across countries. Involving social partners would help improve the design of the measures and help restore confidence.

“The global crisis requires global solutions”, emphasized the ILO Director-General. Lack of coordination diminishes the overall effect of the stimulus measures, making each individual country reluctant to move faster than its trading partners and aggravating the recession. The study also says trade protectionism would further depress world demand and wage deflation or weaker workers’ rights would not only aggravate the global crisis, but be perceived as unfair and aggravate the social crisis.

“The measures have also often failed to tackle the structural imbalances that lie behind the crisis”, Mr. Somavia said. “Responses to the crisis must not be piecemeal in nature and rolled out temporarily, only to revert back to 'business as usual' as soon as possible. Moving ahead with the Decent Work Agenda is crucial to supporting the economic recovery, averting labour market and social crises and promoting social cohesion.”

By coming together around a Global Jobs Pact, ILO constituents could make an important contribution to global policy coherence on these issues. Such a Pact could ensure that stimulus measures more effectively tackle the transmission mechanisms of the crisis, namely the credit crunch, the rapid deterioration in domestic demand conditions and the recession in external markets, addressing key factors that nurtured the crisis while building the foundation for a more sustainable economy.

The forthcoming International Labour Conference in June this year will focus on tackling the Global Jobs Pact.