Asia Pacific job recovery lagging economic growth

ILO Global Employment Trends 2011 cites concerns including inflation, youth unemployment, working poverty.

Press release | 25 January 2011

ILO Global Employment Trends 2011 cites concerns including inflation, youth unemployment, working poverty

BANGKOK (ILO News) – With global unemployment, as officially measured, at record highs for the third straight year since the start of the economic crisis, the International Labour Office (ILO) warned that weak recovery in jobs is likely to continue in 2011, especially in developed economies.

Despite a sharp rebound in economic growth in many countries, official global unemployment stood at 205 million in 2010, essentially unchanged from 2009, and 27.6 million more than in 2007 - the eve of the global economic crisis. In 2011 the ILO projects a global unemployment rate of 6.1 per cent, equivalent to 203.3 million unemployed.

Global Employment Trends 2011: The challenge of a jobs recovery, the ILO’s annual employment trends survey, points to a highly differentiated recovery in labour markets; with persistently high levels of unemployment and growing discouragement in developed countries, and employment growth coupled with continuing high levels of vulnerable employment and working poverty in developing regions. These trends make a stark contrast with the recovery seen in several key macroeconomic indicators: global GDP, private consumption, investment, and international trade and equity markets all recovered in 2010, surpassing pre-crisis levels.

In Asia and the Pacific, while rapid economic growth has resumed in many economies, regional unemployment is expected to see little change in 2011 and overall the employment outlook is uncertain, with youth unemployment, vulnerable employment, working poverty and a lack of social protection among concerns facing policy-makers.

In East Asia economic growth rebounded strongly, at an estimated 9.8 per cent in 2010 it was the highest of any region in the world. Overall, regional unemployment declined to 4.1 per cent in 2010 (although it is still higher than in 2007), with the services’ sector as the main driver. But youth unemployment remains a major challenge; regionally young people are 2.5 times as likely as adults to be unemployed, in Hong Kong they are 4.4 times as likely. “As some countries…phase out crisis response measures, there is a need to refocus on inequity and on labour market policies that can support structural change and increased consumption,” the report says.

In South-East Asia and the Pacific2 the crisis affected the quality of employment more than the quantity in some economies. Although unemployment is now below or at pre-crisis levels in some countries, regional unemployment has only edged down slightly, from 5.2 per cent in 2009 to 5.1 per cent in 2010, and is expected to show little change in 2011. Vulnerable employment has increased and youth unemployment is an issue. The region faces two key challenges, the report says. Firstly employment growth has not matched economic growth and full and productive employment needs to become a core macroeconomic policy goal; secondly, more attention needs to be paid to job quality, in particular creating a stronger link between productivity growth and wage growth. The report also cautions that the huge inflow of foreign capital to the region is a key challenge to growth and jobs, bringing dangers such as asset bubbles and inflation.

In South Asia3, rapid economic growth has resumed and the region’s unemployment rate has been fairly stable, running between 4.3 and 4.5 percent between 2007 and 2010. But the report cautions that “unemployment is not the main labour market challenge in the region….employment growth does not automatically equate to positive labour market trends”, highlighting the issue of youth unemployment – young people are 3.5 times as likely to be unemployed as adults – and gender-based inequalities, such as the disproportionate number of women in low productivity or vulnerable employment.

“In spite of a highly differentiated recovery in labour markets across the world the tremendous human costs of the recession are still with us” said ILO Director-General Juan Somavia. Speaking on the eve of the World Economic Forum in Davos, Mr. Somavia added, “There is one common challenge; we need to rethink our standard macroeconomic policy mixes and make quality job creation and decent work a central target of macroeconomic policies, alongside high growth, low inflation and balanced public budgets. We must not forget that for people the quality of work defines the quality of a society”.

Worldwide, 78 million young people (aged 15-24) were unemployed in 2010, well above the 2007 pre-crisis level of 73.5 million but down from 80 million in 2009. The global youth unemployment rate was 12.6 per cent in 2010, 2.6 times the adult unemployment rate. In South-East Asia and the Pacific it was 1.42 per cent, in South Asia 9.5 percent and East Asia 8.3 per cent. However, the ILO also warned that, among the 56 countries for which there was available data, there were 1.7 million fewer youth in the labour market than were expected from pre-crisis trends, and that such discouraged workers are not counted as unemployed because they are not actively seeking work.

“Policy makers should remember that the future competitiveness and sustainable development of their societies depends on creating opportunities for young people today,” said Sachiko Yamamoto, ILO Regional Director for Asia and the Pacific. “Young people bring energy, new skills and innovation, but without decent opportunities for work they cannot apply these talents. If discouragement leads to young people not fulfilling their potential then we all loose – individuals, families and societies as a whole”.

The report notes that globally, an estimated 1.53 billion workers were in vulnerable employment4 in 2009, equivalent to 50.1 per cent of the global workforce. However all three Asia Pacific regions recorded percentages higher than this average; 50.8 per cent (413 million people) for East Asia, 61.8 (or 173 million) in South-East Asia and the Pacific and 78.5 percent (508 million) in South Asia, giving this region the highest rate of vulnerable employment in the world

The report also finds that there were 630 million workers (20.7 per cent of all workers globally) living with their families in what is defined as extreme poverty (US$ 1.25 a day) in 2009. Globally, this corresponds to an additional 40 million working poor, 1.6 percentage points higher than the pre-crisis trend projected. Of these, 282 million people were in South Asia, 73 million in East Asia, and 63 million in South-East Asia and the Pacific.

The study points out that this delayed labour market recovery is indicated not only in the lag between output growth and employment growth, but also by the way that productivity gains are poorly reflected in real wage growth in many countries. “This can threaten future recovery prospects, as there are strong linkages between growth in real wages, consumption and future investments” the report says.

Increasing food prices around the world also represent a growing threat. For non-agricultural sectors, continued sharp increases in food prices could lead to employment losses if inflation is transmitted into other areas of the economy and an increase the number of working poor in developing economies.

“Rebalancing the global economy so that growth is both strong and sustainable requires more than adjustments to currencies and financial regimes,” Mr. Somavia said. “Promoting entrepreneurship, investments in the real economy, inclusive labour markets and income-led growth are the means to get growth moving while measures to expand social protection and improve the quality of jobs will ensure more sustainable outcomes.” “This is a win-win situation for both enterprises and workers while enhancing the credibility of public policies” he added

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