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World of Work Report 2009

ILO warns “early exit” from stimulus measures could prolong jobs crisis

An “early exit” from support measures adopted in response to the global economic crisis could postpone a jobs recovery for years and render the fledgling economic upturn “fragile and incomplete”, a new report by the research arm of the International Labour Organization (ILO) says.

Press release | 07 December 2009

GENEVA (ILO News) – An “early exit” from support measures adopted in response to the global economic crisis could postpone a jobs recovery for years and render the fledgling economic upturn “fragile and incomplete”, a new report by the research arm of the International Labour Organization (ILO) says.

In a stark analysis of the impact of the global recession, the ILO’s World of Work Report 2009: The Global Jobs Crisis and Beyond, also projected that unless adequate measures are adopted and in some cases continued, more than 40 million people could drop out of the labour market (Note 1).

“Despite some initial signs of economic upturn and because of the significant rise in unemployment and in part time work, support measures should not be withdrawn too early” said Raymond Torres, Director of the ILO’s International Institute for Labour Studies and lead author of the report.

“The global jobs crisis is not over,” he added. “It is therefore crucial to avoid premature exit strategies. In short, the economic upturn will remain both fragile and incomplete as long as the jobs crisis continues. A real recovery will be achieved only when employment recovers.”

The report also indicates most of the failures of the financial system that lie at the root of the present crisis have not been tackled so far – another reason why early exit would be premature.

This report complements earlier ILO analysis and policy messages. ILO Director-General Mr. Juan Somavia stated: “This report confirms that unless decisive measures to support employment are taken and sustained, genuine recovery with employment will be unnecessarily delayed. This crisis and the crisis before both illustrate the need to shift the policy paradigm to one centred on people’s needs for decent work.”

The report also observes that bringing persons back into productive employment sooner would be less costly for the public purse than taking action later.

The ILO report says the length and scope of the jobs crisis could be reduced if stimulus measures and overall policies were focused on the approach of the ILO “Global Jobs Pact” adopted earlier this year. The Pact presents an integrated portfolio of tried and tested policies that puts employment and social protection at the centre of crisis responses. It has received worldwide support at the highest political level, including by the United Nations and the G20, in the space of only a few months.

The report shows that a continuation of fiscal stimulus measures, if well focused on jobs, would raise employment by 7 per cent compared to an early exit situation.

The World of Work Report is an annual study by the ILO Institute, which provides an assessment of the current state of labour markets. Among its findings:

• Based on the latest IMF growth estimates, the report calculates that employment in high GDP per-capita countries may not return to pre-crisis levels before 2013, unless more decisive measures are taken to stimulate job creation. In emerging and developing countries, employment levels could start recovering from 2010, but may not reach pre-crisis levels before 2011.

• Two-thirds of the countries for which data are available do not have regular unemployment benefits. Only one third of developing countries have provisions pertaining to informal workers or the self-employed.

• In addition to unemployment, millions of workers have been "retained" by enterprises with support from governments despite falling activity. These workers are now on shorter hours, partial unemployment or involuntary part time.

• An estimated 5 million workers are at risk of losing their jobs in the 51 countries analysed if governments withdraw their support, or the economic rebound isn't strong enough.

• Experience from earlier crises suggests that this risk is especially acute for the low-skilled and older workers. New entrants, including youth and women, face major difficulties obtaining employment, and they face the prospect of dropping out of the labour market or losing skills.

• In developing countries, high-quality jobs have been lost and affected workers are likely to move into the informal economy.

“Clearly, what we have on our hands is a situation that could become critical in the long–term unless we concentrate on promoting jobs and helping those who have lost theirs,” Mr. Torres said. “This crisis is not just about people who have lost their jobs but also about people who have no options but to keep on looking for one”.

The report says there are already signs that the proportion of people of working age who do not participate in the labour market has started to increase in developed countries, while in developing nations high-quality jobs have been lost and affected workers are moving into the informal sector or falling into working poverty.

The report also analyzes the challenges and opportunities of moving to a greener economy, as well as the risks associated with the increasingly important role of financial markets in the operation of the non-financial sector. And it finds that:

• Imposing a price on CO2 emissions (to be discussed at the climate conference in Copenhagen) and using resulting revenues to cut labour taxes would increase employment by 0.5 per cent by 2014, equivalent to more than 14.3 million net new jobs for the world economy.

• Ever growing pressures for more and better financial returns have adversely affected wages and job stability, exacerbating income inequalities and destabilising enterprises.

Note 1 This would include long-term unemployed workers who simply stop looking for a job and new entrants who shift directly to social assistance and other forms of inactivity because they do not find work. Such a scenario would aggravate social hardship, reducing future growth potential and compromising budget deficits over the long term. The figure of over 40 million is a projection for 51 countries based on the outcomes of earlier crises.

For more information on World of Work Report 2009, please contact the ILO Department of Communication and Public Information at +4122/799-7912 or