World of Work 2014

ILO: Investing in high quality jobs can make economic leaps

The ILO’s global report shows, for the first time, that quality jobs can drive sustained growth in emerging and developing countries. Viet Nam made an enormous leap over the past two decades but progress has slowed down recently.

Press release | 27 May 2014
HANOI (ILO News) – Countries that invested the most in quality jobs from the early 2000s grew nearly one percentage point faster every year since 2007 than other developing and emerging economies, says a new ILO report. This helped cushion the impact of the global crisis which erupted in 2008.

The World of Work 2014: Developing with Jobs report, which provides an in-depth analysis for 140 developing and emerging nations, shows for the first time that investing in quality jobs, reducing vulnerable employment and tackling working poverty leads to higher economic growth.

It also finds investment in high quality jobs tends be associated with lower income inequalities.

“Development doesn’t happen through such things as exports, open trade and foreign direct investment on their own,” said Guy Ryder, Director-General of the ILO. “Social protection, respect for core labour standards and policies that promote formal employment are also crucial for creating quality jobs that raise living standards, increase domestic consumption and drive overall growth. Decent work opportunities for women and men help trigger development and reduce poverty.”

Viet Nam as a case in point

In Viet Nam, the share of wage and salaried workers rose 22 percentage points, accompanied by a dramatic decrease in the working poor to one-third of the 1991 level by 2013, and productivity grew rapidly in the period.

According to Viet Nam Labour Force Survey of the first quarter this year, share of wage workers continued to increase 0.2 per cent to 34.9 per cent in the first three months of 2014 against the same period of 2013.

Nominal wages also increased significantly by 64 percentage points between 2010 and 2013.

The establishment of the National Wage Council and the adoption of the Employment Law last year and the on-going law-making process ... are expected to help Viet Nam overcome those challenges."
However, progress has slowed down recently, especially since the country achieved its lower middle income status in 2010 which has brought new challenges in addition to opportunities.

Low labour productivity and competitiveness is one of the main challenges for Viet Nam’s labour market. The Global Competitiveness Index 2013 ranked Viet Nam 70th out of 148 countries globally. Viet Nam’s labour productivity is also among the lowest in the Asia-Pacific region.

According to the latest Labour Force Survey, the rate of vulnerable employment – self-employment or work by contributing family workers – also remains persistently high. While only 2 out of 100 workers in the labour market are unemployed, 63 are in vulnerable employment, which is likely to have low productivity, inadequate income and poor working conditions and lack social security.
One-fifth of Vietnamese workers are working without a labour contract and the rate is as high as 45 per cent for young people under 25 of age.

“But the Government is committed to improving the situation,” said ILO Viet Nam Director Gyorgy Sziraczki. “The establishment of the National Wage Council and the adoption of the Employment Law last year and the on-going law-making process, including the Law on Vocational Training and Law of Occupational Safety and Health, are expected to help Viet Nam overcome those challenges.”

The global report also stresses the importance of combining well designed social protection with a strategy to increase the productivity of agriculture and invest income from oil and other natural resources into the rest of the economy. It means governance measures to provide an enabling environment that can facilitate the creation and expansion of businesses. This includes simplifying administrative procedures, as Uruguay has done with a “single tax” social protection scheme for the self-employed, leading the way to formal entrepreneurship.

Global employment trends update

The 2014 edition of the World of Work discusses the importance of job quality amid somewhat positive global employment developments. Reflecting a smaller increase than previous projections, global unemployment stood at just under 200 million in 2013 and is expected to rise by 3.2 million in 2014. By 2019, given current trends and policies, unemployment will reach 213 million. Global joblessness is projected to remain broadly at the current level of 6 per cent until 2017.

The highest unemployment rates, in North Africa and the Middle East, are expected to remain at 12.3 and 11.1 per cent in 2014. The largest increase in 2014 is estimated for Central and South-Eastern Europe and former Soviet bloc countries, where unemployment will reach 8.3 per cent in 2014.

Over the next five years, 90 per cent of jobs will be created in emerging and developing countries. This is expected to have a significant impact on migration flows. Already, South-South migration is on the rise while workers are also leaving advanced economies, particularly some hard-hit European countries, for work opportunities in developing countries.