ILO expert Steven Kapsos, describes how the vicious circle of weak employment growth, slow consumer spending and business investment, has led to sluggish overall economic growth.
Transcript$1.2 trillion dollars. That’s equal to two per cent of annual global consumption. All of the goods and services consumed around the world. $1.2 trillion at purchasing power parity is bigger than the total annual output of Australia. So how does $1.2 trillion figure into the ILO’s World Employment and Social Outlook report?
$1.2 trillion dollars is our estimate of the annual wages lost around the world due to the global jobs gap that has opened up since the economic crisis of 2008 and 2009. We have 30 million more unemployed people around the world today than we had before the crisis. If we add to this the discouraged workers that have dropped out of the labour market altogether, we estimate a global jobs gap of 61 million.
That’s 61 million people not working today and not earning wages. $1.2 trillion in wages. This report argues that this global wage gap is a key indication of a vicious circle of slow economic growth and weak employment growth. Indeed, nearly 40 per cent of this global wage gap is found in the European Union, which has been struggling with low growth and high unemployment more than any other region.
Importantly, we estimate that closing this global jobs gap would add $3.7 trillion dollars to the global economy – a 3.6 per cent boost to global output – as increased wages would lead to more global consumption, and increased profits and investment levels.
These figures are an important reminder that, especially in the advanced economies that are struggling with slow growth and high unemployment rates, pro-employment policies must also be viewed as pro-growth policies. So to break the vicious circle of weak economic growth and weak labour markets, policies should focus on spurring a recovery in employment.
At the same time, this report on “the changing nature of jobs” also provides evidence of increasing part-time work, less permanent employment around the world and only limited growth in wage employment in some developing regions. So policies have to take this into account, they have to recognize that expanding employment just by itself, without considering the quality of employment, without considering workers’ income security and their social protection, is unlikely to provide meaningful and sustainable support to global aggregate demand.