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KILM 2001
Aftershocks: ILO says despite being shaken, labour productivity growth can recover
Steady rates of growth in labour market productivity1, one of the hallmarks of the 1990s economic expansion, were badly shaken by the events of September 11 and the resulting economic downturn. The 2001-2002 edition of the ILO's Key Indicators of the Labour Market (KILM2), a 900-page compilation of labour market information for over 200 economies, says the global economy can absorb the shocks.
GENEVA - In the United States, labour productivity rates increased from less than one per cent in the early part of the decade to more than 2.5 per cent by the year 2000. In most European countries, labour productivity also rose throughout the 1990s although growth rates slowed in later years. In Germany the annual growth rate between 1995 and 2000 was 1.6 per cent compared to a rate of 2.4 per cent for the first half of the decade. Japan also showed lower growth in the later 1990s, less than one per cent annually between 1995 and 2000.
The question now is whether those rates can be sustained in the aftermath of September 11. According to the KILM, though it is still too early to predict the extent of any decline in productivity growth rates, a dip is probably inevitable because of transportation delays and increased costs, reluctance to travel and disruptions in workplace practices due to heightened security concerns.
Likewise, it is impossible to predict where these declines will be most pronounced. Many of the industries that powered the productivity surge in the 1990s are among those most affected by the current downturn, including finance, travel and tourism and aviation. What's more, these industries are global and the impact of a downturn in any major market is likely to be felt worldwide.
While shocks will be felt in the short term, the ILO sees no reason why the global economy cannot absorb them and sustain productivity growth rates consistent with the trend prior to September 11.
Another factor that risks scrambling the current productivity outlook, though unrelated to the events of September 11, is the decline of the so-called "new economy" based on information and communications technology (ICT). This trend is thought to be temporary. A new generation of ICT-related economic growth is expected to follow the current downturn. Likewise, in spite of the current negative impact of economic and political events on productivity growth, the long-term outlook for growth for many countries remains optimistic.
Wages and employment
Although female labour force participation rates continue to rise in most parts of the world, women's wages are almost invariably lower than men's, with women predominating in part-time and often low-paid jobs.
Manufacturing wage indices show that nominal wages rose faster for women than for men in many economies, and that where real wages have been falling the declines have been smaller for women than for men. While this indicates that women's purchasing power is catching up with men's, it does not tell the whole story.
To have a better sense of whether women and men are receiving equal pay for equal work or work of equal value, it is necessary to have information for specific occupations or occupational groups. According to an analysis of the real wage rates and earning indices of six selected occupations (labourer, welder, teacher, professional nurse, computer programmer and accountant) provided in the report, male wages generally exceed female wages. The occupation with consistently lower female wages rates was computer-programmer, while for welders and accountants the disparity by sex is less pronounced.
Work remains highly segregated by sex. In Major Europe the main source of employment for women is health and social work, whereas the most important sector for men remains manufacturing. In Latin America and the Caribbean, women in services are most likely to be domestic workers in private households whereas men in services are most likely to be in wholesale and retail trades.
In the 1990s, the share of part-time to total employment rose in most of the developed (industrialized) economies. As much as one-half to two-thirds of all part-time workers were women and part-time work is especially common for women in the industrialized economies, especially Major Europe.
Youth unemployment rates for both sexes are more than twice the corresponding rates for the economically active adult population in all regions of the world. But the unemployment rate is usually higher for young women than for young men.
Young women appear to have greater difficulty than men in gaining access to the labour market and retaining their jobs in periods of economic downturn, particularly in Latin America and the Caribbean and South Asia. In most Asian countries, the mid-90s financial crisis and economic downturns, especially in Indonesia, Mongolia, the Philippines, the Republic of Korea and Thailand, appear to have hit women harder and their labour force participation rates have fallen.
Service Sector Growth
Another major trend outlined in the KILM 2001-2002 is that employment opportunities in the service sector of industrialized economies continue to outpace those in the manufacturing sector and the agricultural sector accounts for only a tiny fraction (less than 5 per cent) of overall employment.
Among the largest industrialized economies, the percentage of employment in the service sector exceeds 70 per cent in Canada, France, the US and UK. In Germany, Italy and Japan, services account for nearly 65 per cent of total employment.
In contrast, manufacturing employment declined in the last two decades, from approximately 34 per cent of German employment in 1980 to 24 per cent in 2000; for the US, the drop was from 22 to 15 per cent, in the UK from 28 to 17 per cent. In Japan, the decline was less pronounced, from 25 to 21 per cent.
Other European countries showing similarly high concentrations (more than 70 per cent) of their employment engaged in the service sector include Netherlands, Norway, Sweden and Switzerland, all of which experienced net job losses in agriculture and manufacturing during recent years.
The KILM shows that the decline of employment in agriculture, and to a lesser extent the manufacturing industry, and the shift to service sector employment in industrialized economies correspond with the importance of such key inputs as finance, technology and a highly skilled labour force which have served as key factors of productivity growth in recent years.
Trends in manufacturing and agricultural employment
Although the manufacturing industry stagnated as a source of job creation in industrialized economies, real manufacturing wages moved up gradually and steadily throughout the last decade for most Major European economies.
In Japan, real wages for the manufacturing industry rose by 34 per cent from 1980 to 2000. In Finland, Iceland and Spain real manufacturing wages increased by 30 per cent or more from 1980 to the late 1990s. Other countries registering increases of between 20-30 per cent include Denmark, Ireland, the Netherlands, Norway and the UK. France and Italy saw increases of approximately 15 per cent.
In Australia, Canada and the US real manufacturing wages have picked up in recent years after a period of decline.
Nearly all of the transition economies of Central and Eastern Europe experienced declines in wages and employment during the past decade. The level of real manufacturing wages remains below the early-90s in Belarus, Bulgaria, Estonia, Kazakhstan, Kyrgyzstan, Republic of Moldova, Romania, the Russian Federation, Tajikistan and the Ukraine. However, in Armenia, the Czech Republic, Croatia, Hungary, Latvia, Lithuania, Poland, Slovakia and Slovenia the trend has been reversed. In Poland real manufacturing wages rose by 36 per cent since 1990; likewise, real manufacturing wages in Armenia rose by an impressive 112 per cent since 1994.
This transition to service-sector employment from manufacturing and agricultural employment has largely bypassed the former communist countries. In spite of large job losses in the industrial sector, manufacturing represents the single most important sector of employment for both women and men in this region.
Transition economies where the service sector is becoming significant in terms of employment include Croatia (53 per cent), the Czech Republic (55 per cent), Hungary (59 per cent) and the Russian Federation (59 per cent).
For the Least Developed Economies, agriculture continues to predominate as a source of employment. In the world's poorest countries, agriculture accounts for as much as 80-90 per cent of the total employment, all-too-often at very low earnings on large commodity-producing plantations or in subsistence farming.
Asian economies experienced significant decreases in agricultural employment and large increases in employment in the services sector between 1980 and 1999. Employment in services, relative to total employment, increased by 75 per cent in Thailand, 65 per cent in the Republic of Korea, 62 per cent in Hong Kong, China, 38 per cent in the Philippines and approximately 30 per cent in Malaysia and Taiwan, China. The shift in sectoral employment in these countries appears to be largely due to services from agriculture. Thailand, for example, saw a decline of 31 per cent in agricultural employment during the last two decades.
In Latin America the trend is much the same, although in Brazil and Ecuador employment in agriculture appears to be increasing and industrial employment decreasing in the 1990s. The increase in employment in services is particularly notable in Honduras and Mexico where the numbers increased by more than 75 per cent in the 1980 to 1999 period. Bermuda and Nicaragua have actually seen decreases in services employment over the same period.
Economies in Latin America had substantially lower growth rates of labour productivity than the more developed economies and have shown very little improvement over the past two decades. On average, these economies even experienced a significant decline in productivity levels between 1980 and 1990 and a slow recovery during recent years.
During the last two decades, agricultural employment dwindled in all industrialized countries, accounting for just 5 per cent of the total workforce today in Canada, Italy and Japan; 3 per cent in Germany and less than 2 per cent for France, the UK and US.
The decline in agricultural jobs is so pronounced that even in EU countries with traditionally large agricultural sectors, total agricultural employment dropped sharply, falling, for example, from 30 to 18 per cent of total employment in Greece, 18 to 8 per cent in Ireland, 27 to 13 per cent in Portugal and from 19 to 7 per cent in Spain.
In Australia and New Zealand, both large agricultural exporters, employment in this sector dropped from, respectively 7 and 11 per cent in 1980 to 5 and 9 per cent for the latest available year (1999 for Australia and 2000 New Zealand).
1
Labour productivity provides a key measure of economic performance. The driving forces behind it - in particular
the accumulation of machinery and equipment, improvements in organization and transportation as well as physical and
institutional infrastructures, improved health and skills of workers (human capital) and the generation of new technology -
are important for formulating policies to support economic growth.
2 For additional
information relating to the Key Indicators of the Labour Market, please visit the KILM Web sit at: www.ilo.org/kilm,
or contact Lawrence Jeff Johnson, Chief of the Key Indicators of the Labour Market Team, e-mail: johnsonl@ilo.org, tel:+4122/7997012.