Decent Work and Financing for Sustainable Development

An ILO Background Note for the UN Conference on Financing for Development Addis Ababa 13 -16 July 2015

A fully integrated approach to means and ends is essential if development is to be truly sustainable. Implementation of the post 2015 sustainable development agenda, and in particular financing, should therefore form part of global, regional and national strategies in which progress towards goals such as poverty reduction, inclusive growth and decent work for all augments the flow of funds into the investments that enable further transformation.

The preparations for the Addis Ababa Conference on Financing for Development and the UN Summit on the post-2015 development agenda have revealed widespread concern that, despite notable progress towards the Millennium Development Goals, major challenges remain and new threats to economic, social and environmental sustainability have emerged. Significantly increasing the pace at which opportunities for decent work are created is central to shifting on to an inclusive, sustained and transformative development trajectory.

Escaping the slow growth trap

The great recession caused by the 2008 global financial crisis slowed the pace of employment growth, the reduction in the numbers of working poor and the transformation of low productivity vulnerable jobs into decent work.

Investment in the productive economy is anaemic in many countries despite historically very low interest rates and substantial corporate cash reserves in large multinational businesses. The international financial system is not yet fully repaired and in many countries micro, small and medium-sized enterprises face difficulty in raising loans on reasonable terms.

The hard reality is that there is a risk of the global economy slipping into a slow growth trap in 2016 in which weak growth in employment and labour earnings leads to restrained household consumption and in consequence low investment. That feeds back into slack productivity and employment growth and further strain on public finances through depressed tax revenues. The trap tightens further because many countries are also pursuing policies of fiscal consolidation at the same time.

The UN Financing for Development Conference is taking a long term view of the investment needs of the emerging post 2015 sustainable development agenda but cannot afford to neglect the immediate need to get the global economy on to a virtuous upward spiral in which improving job prospects stimulate investment and thus rising productivity which feeds back into faster creation of decent work opportunities and rising flow of savings. Action to break out of the slow growth trap and make a vigorous start on the post 2015 development agenda is urgently needed.

The 2030 jobs challenge

The scale of the global jobs challenge in the period up to 2030 is captured by the need to reduce the incidence of vulnerable employment (own-account and unpaid family workers). Women and men in vulnerable employment make up the bulk of working poor in the informal economies of developing countries. A long run trend in emerging and developing countries of a falling share of vulnerable and a rising share of wage employment has stalled since the crisis. Unless economic growth picks up more than currently forecast, the ILO expects the rate of vulnerable employment to remain almost constant at around 45 per cent of total employment over the next two years.

The number of workers in vulnerable employment has increased by 27 million since 2012, and currently stands at 1.44 billion worldwide. Sub-Saharan Africa and South Asia account for more than half of this total, with three out of four workers in these regions in vulnerable employment. These are key numbers because if the new development agenda is to be truly transformative it has to enable women and men to move out of low productivity, low paid, insecure jobs into decent work. This is central to the sustainable development process.

Just to keep pace with the growth of the global labour force and reduce unemployment to pre-crisis levels requires over 600 million new jobs by 2030 – that’s around 40 million year. Narrowing the participation gap between women and men by say 25 per cent by 2030 requires another 200 million new jobs. And 780 million women and men are working, often long and hard, and still not able to lift themselves and their families out of $2 a-day poverty.

These are daunting numbers. But the repercussions of not rising to the challenge of generating every year for fifteen years 40-50 million decent new jobs and improving another 40-50 million poverty jobs are even more, economically, socially and environmentally damaging and politically disastrous.

Worldwide almost 74 million young people (aged 15–24) were looking for work in 2014 and not finding any. The youth unemployment rate is almost three times higher than the adult unemployment rate. Only 39 per cent of young women participate in the labour market. This is 16 percentage points lower than the participation rate of their male counterparts. In six of ten emerging and developing countries recently surveyed by the ILO, over 60 per cent of young people are either unemployed, working but in low quality, irregular, low wage jobs, often in the informal economy, or neither in the labour force nor in education or training.

Reversing current trends in global labour markets and setting course for achieving the SDGs by 2030 is an essential foundation for the political momentum and cooperation needed to fulfil the promise of the whole agenda.

Financing investment and implementing inclusive growth and decent work

Full and productive employment and decent work for all constitutes a primary source of resources for development by generating a virtuous cycle of income in which more and better jobs lead to rising consumption, increased savings, higher private and public investment and increased productivity. Accelerating the generation of decent work opportunities is thus both a means and also an end of sustainable development.

Generating full and productive employment and decent work for all and promoting Micro/Small/Medium Enterprises (MSMEs) supports domestic resource mobilization as well as spurring investment demand, generating productive capacity and decent work while building social cohesion. As a key cross-cutting area of the emerging development agenda, it connects directly to delivering social protection and essential public services for all. Fiscally sustainable and nationally appropriate social protection systems and measures for all, including floors, are a key element of a new social compact founded on the eradication of extreme poverty.

The ILO is able to contribute to an integrated system-wide implementation of the sustainable development agenda in a number of practical ways that build on its unique structure as a tripartite partnership between governments, employers’ and workers’ organizations. The idea of a broad consensus about developmental priorities that is inherent in the concept of a social compact has at its heart a constructive relationship between employers and workers facilitated by public policies and laws that translate internationally recognized labour rights into practice. Such relationships are built through social dialogue from the workplace upwards.

The ILO has a range of policy tools that can both help increase the impact of different forms of investment on goals such as poverty reduction, decent job creation and environmental protection. The value of the decent work agenda for global recovery and sustainable development is well encapsulated in the ILO’s Global Jobs Pact. For example, these policy tools include:
  • Design of employment intensive infrastructure investment which can increase impact and sustainability on local economies not least through investment in skills and small enterprise development.
  • MSME programmes aim to improve the environment for sustainable enterprise to start up, grow and survive.
  • ILO’s Multinationals Declaration is the only set of employment and social principles globally agreed between employers, unions and governments and thus is a sound guide to responsible foreign direct investment.
  • ILO’s Green Jobs Initiative works with governments, employers and unions on solutions that from the ground up enable both decent jobs to be created and poverty reduced while reducing damaging carbon emissions and other forms of environmental damage.
  • The ILO in collaboration with partner agencies in the UN initiative on youth employment supports multidimensional approaches to increased decent work opportunities for young women and men with a strong emphasis on skills development.
  • In collaboration with the Social Protection Inter-Agency Coordination Board, the ILO promotes its Recommendation 202 on Social Protection Floors and enables countries to assess social protection systems, identify potential social protection policies and reform options and analyse trends over time.
  • The ILO’s rights-based approach to remittances proposes financial education training tools and programmes for migrant households that help migrant workers make responsible decisions about budgeting, spending, saving, borrowing, and investing.
Looking ahead, the ILO is preparing to offer full support to countries in collaboration with the UN system and other partners to realize the sustainable development goals. OWG proposed Goal 8, “Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all” will be a particular focus of ILO work. Many areas of ILO expertise are covered under other OWG Goals including social protection systems, universal health coverage, technical and vocational skills, for employment, decent jobs and entrepreneurship, gender discrimination, inclusive and sustainable industrialization, fiscal, wage and social protection policies for greater equality and statistical capacity-building.

Realizing the ambitious, comprehensive and integrated sustainable development agenda requires new approaches to multi-stakeholder partnerships. The ILO’s long experience as a tripartite partnership is an enormously valuable asset in this regard. The Addis Ababa Conference provides an important opportunity to explore with potential partners how in practice the full range of technical and financial resources can best be focussed on the SDGs. The ILO fully recognizes its responsibilities as part of the UN system to play an active role in mobilizing resources and ensuring their effective deployment.