GENEVA (ILO News) - A new study by the International Labour Office (ILO) highlights that people's economic security promotes personal well being, happiness and tolerance, while benefiting growth and development.
The report, "Economic Security for a Better World," ( Note 1) includes estimates for countries representing more than 85 per cent of the world's population, and says such economic security -coupled with democracy and government spending on social security - not only benefits growth but can also promote social stability.
The report cautions, however, that economic security remains out of reach for the vast majority of the world's workers, about three-quarters of whom live in circumstances of economic insecurity that fosters what the report calls "a world full of anxiety and anger".
Only 8 per cent of people - fewer than one in ten - live in countries providing favourable economic security, said the survey produced by the ILO's Socio-Economic Security Programme.
"Coming shortly after the report of the World Commission on the Social Dimension of Globalization, this book should enrich the debate on how we can build a fair globalization," says ILO Director-General Juan Somavia. "Unless we can make our societies more equal and the global economy more inclusive, very few will achieve economic security or decent work."
The report marks the first attempt to measure global economic security as perceived by ordinary people and was based on detailed household and workplace surveys covering over 48,000 workers and more than 10,000 workplaces worldwide. Economic security is measured on the basis of seven forms of work-related security including income, labour markets, employment, skills, work, jobs and representation.
People in countries that provide their citizens with a high level of economic security have a higher level of happiness on average, as measured by surveys on national levels of life-satisfaction and happiness, the report finds. The most important determinant of national happiness is not income level - there is a positive association, but rising income seems to have little effect as wealthy countries grow wealthier. Rather, the key factor is the extent of income security, measured in terms of income protection and a low degree of income inequality.
In addition, the report finds that a high level of skills security, measured by an index incorporating indicators of schooling and training, is actually inversely related to well being when jobs are poorly attuned to the needs and aspirations of people, especially as they become more educated and acquire more competencies. At present, too many people are finding that their skills and qualifications do not correspond to the jobs that they have to perform, resulting in what the report calls a "status frustration" effect.
The report shows that political democracy and a trend towards civil liberties significantly increases economic security and that government spending on social security policies also has a positive effect. But there is only a weak impact of economic growth on security, measured over the longer-term. In other words, rapid growth does not necessarily create better economic security, although it sometimes can do it if accompanied by appropriate social policies.
In looking at national levels of economic security, countries are divided into four clusters - Pacesetters (with good policies, good institutions and good outcomes), Pragmatists (good outcomes in spite of less impressive policies or institutions), Conventionals (seemingly good policies and institutions but with less impressive outcomes) and Much-to-be-Done countries (weak or non-existent policies and institutions, and poor outcomes).
Many wealthy countries could easily achieve more economic security for their citizens, since the report shows that some lower-income countries achieve higher levels than some of the rich countries. Indeed, the ILO analysis finds that the global distribution of economic security does not correspond to the global distribution of income, and that the countries in South and South-East Asia have a greater share of global economic security than their share of the world's income. Whereas South Asia has about 7 per cent of the world's income, it has about 14 per cent of the world's economic security. By contrast, Latin American countries provide their citizens with less economic security than could be expected from their relative income levels, the report says.
Indeed being insecure has resonance in people's attitudes, which at times can be detrimental to their ideas of a decent society. In a recent survey undertaken by the Latino barometro in Latin American countries, 76% of the people surveyed were concerned about not having a job the following year, and a majority said that they would not mind a non-democratic government if it could solve their unemployment problems.
A feature of the findings is that only countries that provide a coherent set of policies that strengthen all seven forms of labour security have a high score on overall economic security. Countries with very strong attainment in some spheres but with weak attainment in one or more others do not do well overall.
The report also finds that "income security is a major determinant of other forms of labour-related security" (p.296), and that income inequality worsens economic security in several ways. "The message is," the report concludes, "that highly unequal societies are unlikely to achieve much by way of economic security or decent work."
The analysis shows that there has been an upward trend in the frequency and severity of economic shocks during the recent period of globalization (since 1980), as well as a coincidental growth in the number of natural disasters affecting very large numbers of people. It also shows that, excepting the two most populous nations (China and India), globally, and particularly among developing countries, economic growth rates in per capita terms have declined while the variability of annual economic growth rates has increased (see chapter 2), implying more national economic insecurity, contrary to predictions often made by those pushing for rapid economic liberalization.
The ILO report notes that these trends are important because they show that more people are being exposed to systemic risk, rather than contingency risks. The latter are due to individual life-cycle events, such as individual unemployment or illness, which are covered by standard social security systems. People are far less able to prepare for shocks that affect whole communities and regions.
The ILO report also shows that for developing countries, the national level of economic security is inversely related to capital account openness (Chapter 11), implying that it would be sensible for developing countries to delay opening their capital accounts until institutional developments and social policies were in place to enable their societies to withstand external shocks. In other words, countries should postpone opening their financial markets until they have the institutional capacities to handle fluctuations in confidence and the impact of external economic developments.
Besides drawing on a global databank of national policies, the report uses statistics from a series of People's Security Surveys carried out in 15 countries, in which over 48,000 working people were interviewed about their work, the insecurities they experience, and their attitudes to inequality and related aspects of social and economic policy.
Respondents were asked about their attitudes to various aspects of economic insecurity and inequality. A majority everywhere favoured more support for the economically vulnerable and a desire to reduce inequality (see Chapter 12). The report says survey data show that economic insecurity fosters intolerance and stress, which contribute to social illness and ultimately may lead to social violence.
Among other findings are the following:
- most workers in developing countries are unaware of trade unions, which in most countries represent under 10 per cent of workers;
- women usually experience more insecurity on average than men and face more types of insecurity;
- employment security is diminishing almost everywhere, due to the informalization of economic activities, outsourcing, and regulatory reforms (Chapter 6);
- a large number of people possess skills that they do not use in their work;
- job security (the possession of a position giving good prospects of satisfying work and a career) is weak in most countries, and data from the People's Security Surveys highlights wide-spread job dissatisfaction (chapter 9).
The ILO analysis concludes that conventional social security systems are inappropriate for responding to the new forms of systemic risk and uncertainty that characterize the emerging global economic system (Chapter 14). Accordingly, governments and international agencies should promote universalistic, rights-based schemes that provide people with basic economic security, rather than resort to selective, means-tested schemes.
For further information, please contact the Socio-Economic Security Programme secretariat by email: firstname.lastname@example.org or by phone: +4122/799-7913. Members of the team can give interviews in English, French, Portuguese or Spanish. For those interested in the issues in Africa, there is a companion book due for publication in September 2004, namely Confronting Economic Security in Africa. Copies of this will be available at that time.