Moving towards full employment: An interview with Aurelio Parisotto

This year’s Employment Policy Research Symposium, to be held on 12-13 December, will focus on the fundamental question of full employment - its definition and relevance, its implications for inclusive and greener economic growth, the conditions leading to it and the role it plays in helping those who are at risk of being left behind. In this interview Aurelio Parisotto, Head/Policy Coordination and Development Unit at the ILO Employment Policy Department, talks about what is meant by full employment, why it matters and how to achieve it given the central role that SDG8 on Decent Work and Economic Growth plays in the 2030 Agenda for Sustainable Development.

Article | 22 November 2019

Q1. What exactly is full employment and why is it important?

Full employment is the situation where all people who are available and searching for work can find a job at the prevailing remuneration rates and conditions. It does not mean zero unemployment - there are always some who may be temporarily unemployed, as they move from one job to the other or for other reasons. What it means exactly is that those who do not work do so voluntarily. For economists, this is the situation where all labour resources are fully utilized and where an increase in the demand for workers brings about an increase in inflation, not in output. For the major advanced economies today, it corresponds in practice to unemployment rates between 3 and 6 per cent of the labour force.

Why is this important? Unemployment is a devastating experience for individuals and society. High levels of unemployment and underemployment – where jobs are inadequate, rationed, lower-paid or under-qualified - are commonly associated with instability and demand for economic and political change.

In less develop countries and surprisingly in some major advanced economy in recent years, low unemployment rates can be associated with a disappointing labour market. People are officially registered as being employed, but they may be actually working a few hours a week or in substandard conditions, with incomes barely beyond subsistence and poor prospects for improvement. A topic we will discuss at the symposium relates to the set of indicators, beyond the unemployment rate, which can give a true sense of how tight the labour market is.

Q2. What role can national employment policies play – and have to play - to achieve full employment? How would they specifically contribute to the inclusion of workers on the lower end of the skills and income spectrum?

The ILO takes a broad view of employment policy. Since 1964, the Convention on Employment Policy No. 122 calls upon ILO member States to declare and pursue an “active” policy designed to promote full, productive and freely chosen employment as a major goal. The Convention does not prescribe what the content of such “active” policy should be, but from our tripartite experience, we know it has to include an array of measures adapted to a country’s needs and circumstances - from its macroeconomic stance to investment, trade and enterprise policies as well as labour market interventions directly targeting the unemployed. No single measure per se is likely to be sufficient to set the economy on a stable and sustainable path to full employment– not a decrease in the interest rate, not tax cuts for enterprises, not the opening of new training centres.

The critical issue is to have a clear commitment, sustained by tripartite consensus, to implement a coherent, country-specific strategic policy mix. One objective of the symposium it to learn lessons from country experience on key ingredients for the success of those comprehensive employment policy packages.

The closer an economy is to full employment, the better the chances for vulnerable and discriminated groups to have access to opportunities in the labour market. There is evidence to show that at very low levels of unemployment, the rate of recruitment of less qualified workers, female workers, minority and other discriminated groups is higher. Full employment enhances the chance of success “in the aggregate” of measures targeting skills and other obstacles that “less employable” groups face as they look for a job.

Q3. With megatrends such as globalization and technology rendering some jobs obsolete or redundant, is achieving full employment even possible, especially in less developed countries?

There is growing concern for the job displacements that might occur as a result of new technological advances and other megatrends such as demographic and environmental dislocations. Yet, there are also opportunities for job creation once the appropriate policy mix is in place. At the symposium, we want to look at some of the relevant policies in areas such as the care economy and greener growth.

Why shouldn’t full employment be possible? One lesson from the global financial crisis is that macroeconomic policies are powerful tools to reduce joblessness. We may wish to use those instruments to a fuller extent, in particular fiscal policies, and combine them with complementary industrial policies to trigger productivity and innovation and labour market measures to support people in their labour market transitions.

Labour standards and policies to improve the quality of jobs are also important. Minimizing the numbers of those who are openly unemployed and struggle as a result of their situation is a clear priority. At the same time, in most countries the majority of people are at work. The most difficult challenge, in my view, is to improve the quality of their jobs. What workers want, what they need – is decent work. For the less developed economies, in particular, the challenge of full employment takes the form of creating higher-productivity jobs in modern sectors for the large numbers of those who are underemployed or precariously employed in the informal economy.

Q4. Evidence for the indicators on full employment and the other targets in SDG8 on Decent Work and Economic Growth suggest that progress has been uneven and that at its current pace, the goal is unlikely to be achieved. What can the ILO and its constituents do to change this, particularly in developing countries?

We call for more robust “active” policies, a new generation of national employment policies that integrate measures targeting the aggregate demand-side with measures focusing on the supply side, with genuine involvement of tripartite constituents and other stakeholders to ensure buy-in and effective implementation. An integrated employment agenda can create enabling conditions for a cumulative and circular process towards SDG8, stimulating the economy through wage and income growth, thereby boosting sustainable consumption, investment and innovation, which will lead to more productive and decent jobs. It is not a one-country-fits-all approach. The appropriate mix of economic and social policies may differ from country to country. What some tend to forget is that attention to the quality of jobs is part of a successful transformation. It contributes to more productive economies and more stable societies. This is the spirit of SDG8.

Q5. The agenda clearly shows a renewed interest in sectoral policies for structural transformation. Why are they so important?

As mentioned earlier, prompting structural transformation – the progressive shift to more modern and more productive economic activities - is the foundation to sustain progress toward full employment in the less developed economies. I think, however, that the interest in sectoral policies is broader. There is much less enthusiasm for simple across-the-board deregulation and incentives to capital accumulation as the optimal vehicle to raise the level of productive investment, productivity and innovation. The trend is toward the rediscovery of the role of the public sector as a facilitator, a partner of the private sector but also as a direct actor in fostering research and technological innovations and in responding to the unmet demand of citizens across all countries for housing, transportation, education and health and other services. Of foremost importance, sectoral polices comprising fiscal and financial incentives are necessary to encourage the shift to a low-carbon economy and the creation of decent green jobs. This is imperative.

Q6. Can you tell us something about the participants of this event?

An ambitious response to the challenge of full employment and SDG8 requires the cooperation of many partners and agencies. We made an effort to gather at the symposium representatives of our tripartite constituents from all regions, together with other policy-makers, experts from international agencies, development partners, and prominent scholars from academic and research institutions. Each one of the participants has cutting-edge knowledge and experience on the issue of employment policy. We believe we need the contributions from such a wide global knowledge network in order to advance in identifying research questions, policy issues, methodologies and tools to inform and enhance our programme of work for the future.

Biography

Aurelio Parisotto is Head of the Policy Coordination and Development Unit at the ILO Employment Policy Department. Before joining the ILO, Mr. Parisotto worked at UNCTAD and the International Institute for Labour Studies in Geneva. He was a member of the technical secretariat of the World Commission on the Social Dimension of Globalization in 2002-2004 and has contributed to major reports by the ILO, UNCTAD and the United Nations.