A global economic deterioration threatens employment growth

In presenting the findings of the “World Employment and Social Outlook” report to Member States at the UN, the ILO recommended urgent action to boost decent work opportunities or face the risk of intensified social tensions.

News | 09 February 2016





For the full discussion, please watch the video above. The text below provides an paraphrased overview of the presentation and discussion.

Introductory remarks
Mr. Lenni Montiel, Assistant Secretary-General for Economic Development, UN Department of Economic and Social Affairs


In 2015, important universal commitments were made in development such as the 2030 Agenda and Financing for Development. This year, as we begin the implementation of these machineries, we should keep in mind that world economy continues to face challenges. Global economy growth has been weak for few years and it is expected to grow modestly at best next year.

Sharp decline in commodity prices has been problematic for many countries as well as increased financial volatility. Employment deteriorated particularly in those countries with sharp commodity price decline.

Job quality globally remains poor. In South East Asia and Sub-Saharan Africa, more than 2/3 of workers are in vulnerable employment with no access to social protection.

Gender gap remains large. Women are more likely to be working poor than men.

These challenges should be confronted with collected resources and actions. The SDGs goals and targets such as target 8.7 will help us to work in a cooperative manner.

Presentation of the WESO Report
Raymond Torres, Director, ILO Research Department


1) Deterioration in the global economy:
Global economic growth this year and the next will be much lower than the growth at the beginning of the global financial crisis. Global unemployment also continues to grow this year and in the next, in both developing and developed countries. In advanced economies, underemployment has become a problem. In developing regions, due to the decline in commodity prices, commodity-producing countries’ job markets were negatively affected. Unemployment rate increased and labour force participation rate decreased.

Majority of inactive population (those who are not participating in the labour market) are women. Global youth unemployment rate is expected to increase until 2017. Currently 71 million young people are unemployed. Number of young people categorized as NEET or working poor also increased.
Extreme working poverty rate (those who work for $1.90 a day, according to the ILO and the World Bank definitions) was falling but since 2014, the decline has stopped. This poses a huge challenge to the achievement of the SDGs.

2) Consequences:
-Economic consequences: The above deterioration of global economy poses a risk of perpetuation of weak global economic growth. Weak growth decreases private consumption and investment and this have negative impacts on labour market. Less jobs mean less income which then leads back to decrease in consumption and investment.

-Social consequences: The share of middle class in total population is expected to increase only by less than two percentage point. It is a huge concern that educated youth are not employed and that youth unemployment creates risks of emerging social unrest in countries.

-Political consequences: Weakening of the political system and governance. Difficulties in reaching people.

3) Policy choices:

- To make right policy choices, we need to consider the following mechanical factors;

-Chronic shortage in global demand, rising income inequality and low investment. Lagging labour income is fundamental not only for developing countries but for the whole world economy to grow and generate enough decent jobs.

-Private investment is not enough to nurture stable economic growth and enough job creation. Instability of financial flows also negatively affects investment. Banks are not yet renewed after the global financial crisis. Institutional reform of the global financial sector is also not enough.

-Policy choices to these problems have not been responsive enough. Macroeconomic policies are not balanced with social concerns and in some countries, fiscal space is not fully utilized. Structural reforms tend not to focus on labour market. Also, available resources for these programmes are not enough due to fiscal constraints and austerity measures of many countries. Less formal jobs mean less taxation which leads to less funds for labour market assistant programmes.

-Institutions are weak. Social dialogue between employers and workers are fundamental for well-developed labour market policies but often this is non-existent in developing countries.

-International cooperation and coordination is key to solving these problems. Adoption of the SDGs will be the path to policy coordination among countries.

Comments
Mr. Shantanu Mukherjee - Team Leader, Human Development Report, UNDP


Global technologies and skills market has expanded but at the same time some parts of it disappeared, leading to job losses of skilled workers. Premature industrialization of some countries, which means the lack of manufacturing-focused phase in economic development, also leads to less jobs for workers with relevant skills. Do we need different social contract in such changing economy?

Demographic changes should be considered too. Ageing population is a challenge in many countries. It poses increased burden of care and expans job market for care work, which is mostly consisted of women workers. Is this unfairly skewing job options for women? How does such demographic change affect gender equality?

Environmental changes are also important. Are jobs environmentally sustainable? Many jobs in informal sector are environmentally unsustainable.

Questions and comments:


At what point stimulus packages hinder job growth?
  • Torres: Fiscal policies should promote decent work in the first place. Investment should be made with consideration on job creation. Tax policies could be pursued in a way that grow SMEs which then will lead to job creation. Well-used policy is an investment for the future.
  • Mukherjee: Collective bargaining power worldwide has been weakened. This hinders securing labour income growth.
Low labour force participation rate – what are the causes? Is this the new normal, for example, because more young people are in education?
  • Torres: Labour force participation rate decline was mostly due to the decline in participation of prime-aged men. Contributing factors to this decline are long-term sickness and disability. These factors disconnect people from labour market for a long-term and lower their future income prospects
Technological transition has potential in generating jobs. In this sense, unemployment could be more of a qualification mismatch problem.
  • Torres: Yes, the question is the quality of jobs, not the volume. Also, employment relations in new technology industries should be looked at to see if employment in such industries are secure enough.
  • Mukherjee: Investing in human resources takes a long-term. Is children in developing countries receiving the same treatment, support and education as those in developed countries? How is the quality of education? Countries, when they implement the SDGs, should consider this long-term effect and makes investments for the future
We see improvements in technologies but not much increase in productivity.
  • Torres: New technology causes big displacement between sectors but does not increase productivity. One of the reasons is investment shortage. Often in developing countries, there is an investment mismatch. Savings and investment-needs are not matched properly and do not create lasting impact
Global Action: What is being done for the reform of global financial industry? Without the reform, it is likely that we face similar crisis again which had a huge negative impact on jobs.
  • Torres: Financial reform is very relevant. G20 made a commitment on the reform of the global financial industry, including the separation of commercial and investment banking. This commitment should be delivered.