Scope of the reportThis is a special edition of our annual Global Employment Trends report, which is warranted because 2012 saw a resurgence of the crisis, in the form of slower growth than expected in all regions, lower than in 2011, and an associated worsening of unemployment and labour markets, which the report calls a second jobs dip.
More specifically the report contains four main contributions :
- discusses the changes in the growth and macroeconomic frameworks during 2012,
- tracks various indicators of labour markets globally and in the nine regions in 2012 and analyses the prospects for 2013;
- contains a useful chapter on developing economies looking specifically at the relationship between structural change and job creation; and
- concludes with a chapter with policy recommendations on how to accelerate recovery from the second jobs dip.
Key global and regional findings regarding employment trends
|ILO's Director-general Guy Ryder|
First, that growth decelerated sharply over the course of 2012 has been well reported by other institutions, in particular the IMF. We know that the slowdown was most notable in Europe, which entered back into recession, and in other advanced economies such as the United States and Japan. And we know that through trade and financial channels the effects quickly spread out geographically, weakening growth in nearly every region over the course of the last twelve months. Our first finding is that, because of these developments, and the policies that led to them,unemployment and labour markets are worsening again.
- The report finds that following two years of declines in the number of unemployed around the world, global unemployment surged again in 2012 by 4.2 million.
- A quarter of this increase (of 4.2 million) in global unemployment in 2012 has been in the advanced economies, while three quarters has been in other regions, with marked effects for developing economies in East Asia, South Asia and Sub Saharan Africa.
- There are over 28 million more unemployed people around the world today than in 2007. But if we account for both jobseekers as well as the estimated 39 million workers who have given up hope and dropped out of the labour market, we estimate that since the beginning of the crisis 5 years ago, the global jobs gap has reached 67 million people.
- The average duration of unemployment has increased. 33.6 per cent of all job-seekers in the Developed Economies were unemployed for 12 months or longer at the end of 2012, up from 28.5 per cent prior to the crisis.
Secondly, as regards the employment outlook for 2013, the report finds that despite a moderate pick up in output growth expected for 2013-14, the unemployment rate is set to increase again and the number of unemployed worldwide is projected to rise by 5.1 million in 2013, and by another 3 million in 2014. Some of this owes to trends in population and labour force growth, while some is due to lags between economic changes and changes in the labour market.
Third, Young people remain particularly badly affected by the crisis. Currently, some 73.8 million young people are unemployed globally and the slowdown in economic activity will likely push another half million into unemployment by 2014. Our projections indicate that the youth unemployment rate – which increased to 12.6 per cent in 2012 – is likely to rise further. Many young people now experience long-term unemployment right from the start of their labour market entry. When this occurs early on in a person’s career, it can do significant damage to their long-term employment prospects.
Fourth, the length and depth of the labour market crisis is worsening labour market mismatch, in several countries contributing to extended spells of unemployment. New jobs that become available often require competencies that the unemployed do not possess. Such skill and occupational mismatches are likely to continue to make the labour market react slowly to any acceleration in activity.
Fifth, prior to the crisis, many developing countries benefited from a rapid reallocation of workers from low- to higher productivity activities across broad economic sectors, which has helped reduce vulnerable employment and working poverty. However, the report identifies a broad slowdown in labour productivity growth, affecting nearly every developing region, in large part due to a slowdown in structural change during the crisis. Jobs are moving out of low productivity agriculture into industry and services at a much slower pace than before the crisis in several regions(Central and South Eastern Europe, Latin America and the Caribbean, South Asia, Sub-Saharan Africa and the Middle East). And none of them is projected to get fully back on its pre-crisis path of structural change. This suggests that the crisis caused more damage than previously thought in the development prospects of developing countries.
Sixth, despite the slowdown in productivity growth, working poverty has continued to decrease, but at a slower pace than before the crisis. There are still around 870 million workers living with their families on less than US$2 per person per day, of which nearly 400 million are living in extreme poverty. In addition to the 870 million working poor, a further 660 million workers are living just above the poverty line and are highly vulnerable to any subsequent economic shocks. We project that the absolute number of working poor will decline only gradually unless faster economic growth returns.
Seventh, a longer term, promising trend, highlighted in the report is that the number of workers in the middle class in developing countries has risen sharply over the past decade, particularly in East Asia. 42 per cent of all workers in the developing world is now estimated to be middle class, living with their families on more than US 4 per person per day, up from 23 per cent in 2001. An increase of around 400 million middle class workers. And our projections indicate that the number of workers in the middle class and above in the developing world could grow by an additional 390 million by 2017, to 52 per cent of the developing word’s workforce. This could bring about a new global growth engine but for this to happen the trend needs to continue into the longer run.
Policy analysis and policy messagesLet me now turn to policy issues. The report contains some analysis of what role policies have had in leading to the trends and outcomes I just highlighted, and also a summary of recommendations to policymakers of steps that can be taken to recover from the second jobs dip reported. In terms of the role of policies in labour market outcomes let me highlight the following:
In examining the impact of macroeconomic developments on labour markets, the report stresses the role of negative feedback loops from low consumption, low investment, credit constrained capital markets and reduced public budgets that have weakened labour markets. Far from the anti-cyclical response to the initial crisis in 2009 and 2010, the policy reaction in 2011 and 2012 has been pro-cyclical, leading to the double dip reported here. So the report finds that the adjustment of macro imbalances have been passed on to the labour market to a significant degree.
With each passing day in which we face high unemployment, growing numbers of long-term unemployed, increased detachment from labour markets, and slowing labour productivity, the world inches closer to allowing the vicious circle of weak economic growth and labour market distress to become more entrenched, more structural. And the more entrenched and structural the problems, the more difficult it is for recovery policies to be effective.
Policy-makers must strive to break these vicious circles.
The report also points out that the piecemeal approach to financial sector and sovereign debt problems, in particular in the euro area, has contributed to uncertainty, weighing on the global outlook.
On the basis of the trends reported and the policy insights I just mentioned, the report concludes with a call to policy makers to take additional steps that can help recover from this second jobs dip:
First, tackling uncertainty to increase investment and job creation.
Particularly in developed countries, this requires: providing more coherent and predictable policy plans; measures to increase disposable incomes to foster stronger consumption; prompt implementation of financial reforms to restore the banking sector to its proper function of supporting investment and providing credit in particular to SMEs. It also requires credible exit strategies for those countries particularly affected by the debt crisis, for instance by rescheduling sovereign debt.
Second, we call for better coordination of macroeconomic policies
to avoid deflationary spirals and to increase global demand and employment creation. We recommend that policy makers and coordination bodies such as the G20 and EU should make stronger efforts to avoid beggar-thy-neighbor policies. Policy actions need to be better coordinated globally in order to re-balance growth and foster multi-polar growth engines. We point out that the growing purchasing power of the emerging middle class in many developing countries is a positive development that could increasingly become an important growth engine for the world economy.
Third, it is essential to address growing mismatch in labour markets.
The bulk of the unemployment crisis is cyclical. However, policy makers also need to tackle structural problems that intensified with the crisis,such as skill and occupational mismatches that some countries are facing.Governments should step up their efforts to support skill and retraining activities and to address long-term unemployment. Re-activation and job counselling measures should also be enhanced. In developing countries it is important to take measures to promote structural change and where employment in agriculture is significant, governments are advised to pursue measures to accelerate productivity growth in that sector and diversify the work and investment opportunities in rural areas.
Fourth, expanded efforts to promote youth employment are urgently needed.
We have been warning about the risks of a “lost generation”. Here, we call on policy makers to promote youth employment following the Call for Action agreed by governments, workers and employers at the June 2012 International Labour Conference.