103rd International Labour Conference

'Why employment matters: Reviving growth and reducing inequality' - Statement by Pr. Deepak Nayyar

Statement by Dr.Deepak Nayyar, Professor of Economics at Jawaharlal Nehru University, New Delhi, India, at the World of Work Summit held by the ILO during the 103rd International labour Conference.

Declaración | 9 de junio de 2014
Prof. Deepak Nayyar
The object of my keynote address is to analyze the critical importance of employment in the wider context of the world economy. It might be somewhat different from the conventional discourse and the usual debate on the subject. For one, it seeks to focus on the macroeconomic aspects of employment, rather than the microeconomic concerns about the world of work. For another, it considers employment not only in industrialized countries but also in developing countries.

In the second decade of the twenty-first century, the world economy is confronted with two serious problems. First, the financial crisis that surfaced in late 2008 led to a sharp contraction in trade, output and employment. It is more than five years since then. But the Great Recession that followed in its aftermath persists. Recovery is slow, uneven and fragile. In a few countries, where output has recovered, employment has not. In many countries, the crisis runs deep. And the prospects are uncertain. The manifestations and the consequences are visible and tangible. Second, beginning around 1980, there has been a rapid increase in economic inequality among people almost everywhere in the world. The distribution of income between people within countries and people in the world a whole has worsened. The share of the poorest 50 percent of the population in national income has contracted almost everywhere, while the share of the richest 1 percent or even 0.1 percent, the super-rich or the ultra-rich, has risen rapidly almost everywhere. This change is less visible and almost silent. Yet, it is politically unsustainable and ethically unacceptable.

I shall argue that employment can provide a sustainable solution to both problems. It is the way forward for reviving growth and reducing inequality. The essential argument, developed in the macroeconomic sphere, is simple. The slowdown in economic growth and employment creation are both associated with a worsening income distribution. At the same time, a deterioration in the quality of employment has accentuated economic inequalities. But there are no trade-offs between output growth and job creation. Growth can create jobs, and jobs can drive growth, reinforcing each other. More employment and better jobs would also mitigate problems arising from rising inequality. In this process, every dimension of employment matters, not only its quantum but also its quality and terms.

The structure of my presentation is as follows. First, I will sketch a global picture to suggest that employment expansion is the path to growth with stability in the world economy. Second, I will consider the national context, to explain the phenomenon of jobless growth, in terms of underlying changes in income distribution which have not only squeezed employment but also dampened growth. Third, I will discuss how to resolve this problem, which must begin with a rethinking of macroeconomic policies, to revive wage-led growth and stimulate profit-led growth, which shows that there are complementarities rather than trade-offs between employment creation and economic growth. Last but not least, I will draw together some simple yet striking conclusions that emerge.

Global Perspective

The world economy is confronted with a serious dilemma. Restoration of growth based on debt-driven consumption and asset-price inflation in the United States and the EU deficit countries will only postpone adjustment, or the day of reckoning, and accentuate financial fragility. Fiscal consolidation and retrenchment by deficit countries and indebted consumers, even if it reduces financial fragility, will lead to global deflation and stagnation. But this supposed trade-off between financial stability and economic growth is a false dilemma, because neither growth nor stability would be sustainable for long. What we need is both. Stability and growth, together, can provide a sustainable solution.

Recovery would be sustainable if, and only if, there is a progressive reduction in global macroeconomic imbalances. In this context, there is a natural focus on the United States, which is the largest importer and the reserve currency country, and China, which is the largest exporter and biggest lender to the United States. But such a characterisation of the imbalances is incomplete and insufficient. For one, the current account deficits and surpluses of economies reflect gaps between income and expenditure at a macro level. For another, apart from the United States, some EU countries, and some emerging economies, run large current account deficits, just as,
apart from China, Germany and Japan run large current account surpluses. The United States, the EU deficit countries and a few emerging economies have lived beyond their means for quite some time, while China, Germany and Japan have lived below their means for quite some time. This provides a more complete picture of imbalances in the world economy. The rebalancing that is needed, however, is easier said than done.

In the current account surplus countries, there is serious problem of under-consumption. In China, for example, since the late 1990s, there has been a continuous decline in private consumption as a proportion of GDP which is attributable to the steady decline in the share of wages in GDP. Similarly, in Germany and Japan, during the 2000s, there has been a discernible decline in the share of wages in GDP which has led to a decline in private consumption as a proportion of GDP, since 2005, that was significant in Germany and modest in Japan. In the United States and the EU deficit countries, the share of wages in GDP witnessed a similar decline, but private consumption was sustained by debt-financing and asset-inflation both of which have now come to an end. The story is similar but not quite the same in the emerging economies which have large current account deficits. The share of wages in GDP declined. This led to a decline in private consumption, as a proportion of GDP, which was not supported by debt financing. Yet, current account deficits persisted or surfaced because governments or private sectors (with increasingly unequal income distributions), or both, lived beyond their means.

The global imbalances, then, are a matter of economics rather than geography. It is income distribution that lies at the heart of the problem. In Germany and Japan, but even more so in China, real wages lagged behind productivity growth, so that the share of wages in GDP fell while the share of profits in GDP rose. The story about changes in the share of wages and profits in GDP was roughly the same in industrialized countries and emerging economies that ran current account deficits. It is no surprise that markets and globalization strengthened capital and weakened labour. The mobility of capital and the immobility of labour, combined with flexible labour markets, reinforced the process.

The rebalancing in the world economy, therefore, needs some redistribution of incomes within these countries. China needs to shift from export-led growth to consumption-led growth. Germany and Japan need to shift from external markets to domestic markets as a source of growth. This is possible only if there is an increase in the share of wages in GDP and real wages keep pace with productivity growth. It requires the pursuit of full employment and an acceptance of higher wages. The United States, as also the EU deficit countries, need to shift from consumption-led growth to export-led growth. It might be difficult for exports to lead growth in the short-run as competitiveness is not simply a matter of exchange rates. And it might be difficult to squeeze consumption levels for people who have seen almost no increase in their real wages over a long period of time. Consumption based on household debt is obviously not sustainable. But consumption that is based on more employment and higher wages would be sustainable and could provide domestic demand to drive growth. For emerging economies with current account deficits, export-led growth is a limited option for a few. However, if all of them adopt that strategy it would only exacerbate global imbalances. But the domestic market could provide a more sustainable source of demand to drive economic growth. Therefore, even in the deficit countries, an increase in the share of wages in GDP should be conducive to growth.

The logic of the argument is simple. It is time to place full employment centre stage once again as the primary objective of macroeconomic policies, in both industrialized countries and emerging economies. For what is good for employment is good for economic growth. The connection is causal. It is only increased employment that can provides a sustainable solution to the crisis and in the process deliver growth with equity. Such a rebalancing would also provide stability with growth.

National Context

There is obviously some need for international collective action in the quest for better global macroeconomic management at least through a coordination of national policies. The logic of this proposition is impeccable. Yet, it would seem that the willingness and the ability of governments to coordinate, in terms of implementing such collective action, is not quite there. Both have to be created. Until then, the problem has to be resolved essentially within countries. But there are constraints implicit in the phenomenon of 'jobless growth'. In this respect, the age of markets and globalization, beginning circa 1980, provides a sharp contrast with the golden age of capitalism, from the late 1940s to the early 1970s. For one, rates of growth have been slower and more volatile. For another, levels of unemployment have been far higher while employment creation has been much slower.

It is plausible to suggest that economic growth over the past three decades has been sustained by increases in labour productivity rather than increases in employment. Technological progress has made it possible to use a small number of highly skilled workers at much higher levels of productivity, the benefits of which accrue in the form of higher profits and, to a limited extent, higher wages for a few so that much of the work force is not part of these increments in output. The experience since 1980 suggests that this chain of causation describes the reality in most industrialized economies. It is just as true in many developing countries, in particular the emerging economies, where rapid economic growth has not been associated with commensurate employment creation, as the employment elasticity of output growth has declined almost everywhere in the age of markets and globalization.

This jobless growth is neither accident nor coincidence. It is the outcome of changes in policies that have stressed more openness in terms of trade, investment and finance. Such a worldview, of which orthodox macroeconomics and financial liberalization are an integral part, has meant an increase in the relative importance of foreign markets as compared to the domestic market, so that countries have sought to stimulate demand through an export surplus rather than demand management at home by governments through fiscal and monetary policies. There is, of course, a fallacy of composition here. It is not possible for all countries to achieve an export surplus at the same time. The export surplus of some must be matched by the import surplus of others. Even for some of the countries that run an export surplus, such policies may turn out to be counter-productive if the contraction in the domestic market turns out to be more than the expansion in external markets.

Yet, industrialized countries and emerging economies alike have attempted to be more price competitive than their rivals by reducing unit costs of production. This has been achieved by wage restraint and labour market flexibility on the one hand and raising labour productivity on the other. It is no surprise that integration into world markets has created a strong pressure to reduce costs through the labour market not simply to attain price competitiveness but also to attract foreign investment. Such policies have carried the danger of a contraction in domestic demand, since wage restraint depresses consumption by workers at a macro level. At the same time, increases in labour productivity, brought about by a downsizing of the workforce through restructuring of firms at a micro level, reinforce this depressive effect.

The rate of employment growth in an economy reflects the difference between output growth and labour productivity growth. It is worth noting that there is a frequently observed positive association between output growth and productivity growth which reflects linkages between the supply side and the demand side. The essential idea is that more rapid output expansion may lead to the introduction of more productive technologies and the realization of dynamic scale economies, which are a function of cumulative past output or cumulative production experience, and an increase in labour productivity. The cost reduction, insofar as it is passed on to consumers in the form of lower prices, would stimulate demand expansion in domestic and foreign markets. This increase in market size could once again facilitate the realization of scale economies, thus bringing about a cost reduction, just as a reduction in costs, if it lowers prices, could induce a demand expansion. However, for any technical change, if the rate of growth of labour productivity is faster than the rate of growth of output, the rate of employment growth declines and could after a point approximate to jobless growth. The cumulative causation then ceases to be virtuous, largely because there is little or no feedback on the demand side which turns out to be the weak link in the chain. In industrialized countries, this has been the case for the past three decades.

In the enthusiasm for supply side economics, it is often forgotten that demand also matters. On the demand side, expansion can be wage-led when driven by consumption demand, or profit-led when driven by investment demand, or a mix of both. During the golden age of capitalism, associated with rapid growth and full employment in the industrialized world, it was both wage-led and profit-led. In the age of markets and globalization, characterized by slower growth and much higher unemployment, it has clearly not been wage-led and has been only weakly profit-led. If aggregate demand is weakly profit-led, where a big change in productivity growth does not stimulate much growth in demand, the outcome would be little employment expansion. It is only if aggregate demand is strongly profit-led, where a big change in productivity growth does stimulate a significant demand expansion, the outcome would be more employment expansion which can at least maintain the rate of growth of employment.

The story does not end with a recognition or explanation of the unfolding reality of jobless growth. It is also necessary to understand how and why this phenomenon might be responsible for lower rates of growth not only of employment but also of output. The causation runs through income distribution. In industrialized countries, there is a redistribution of incomes from wages to profits and a redistribution of profits from the real sector, whether manufacturing or services, to the financial sector. The possibilities of wage-led growth are obviously constrained. But even profit-led growth is not quite feasible. The financial sector creates a demand for financial assets rather than goods and services, so that there is little or no employment creation. In fact, the shift in income and wealth to the super-rich creates a large demand drag. In developing countries, particularly emerging economies but also elsewhere, there is a similar redistribution of income from wages to profits that curbs the possibilities of wage-led growth. There is, at the same time, a redistribution of profits, partly to the financial sector in emerging economies that are integrated into international financial markets but in larger part to profits in the form of quasi-rents derived from property rights in land or in natural resources, acquired through patronage of governments, which also weakens profit-led growth.

The problem has been compounded by orthodox macroeconomic thinking which is now deeply embedded in finance ministries and central banks across the world. Over the past three decades, the focus of macroeconomic policies, everywhere, has become narrower with the passage of time. In industrialized countries, with the decline of Keynesianism and the rise of monetarism, the objective shifted from full employment to price stability, premised on the belief that if the government achieves price stability, then the market will automatically achieve full employment. In the developing world, after many countries ran into debt crises or other forms of macroeconomic disequilibrium, macroeconomic policies sought to focus on stability defined largely in terms of prices rather output or employment, so that controlling inflation and eliminating macroeconomic imbalances became the essential objectives.

Again, the reason put forward was that if the government succeeded in achieving price stability in the short run, all else including growth would follow. The presumption that full employment and economic growth would materialize as corollaries was belied by experience in both industrialized and developing countries.

Resolving the problem

It would be exceedingly difficult to resolve these problems confronting the world economy without rethinking the macroeconomic policies that have accentuated the problems. The dominant ideology of our times has been dented, if not discredited, by the global economic crisis. And it is beginning to lose its stranglehold on thinking, at least in political processes, if not in the ivory towers of academia. There is a growing recognition that markets are no magic wand, that the invisible hand of the market is not visible because it is not there, and that markets are good servants but bad masters. It is clear that the financial crisis and the persistent recession provide an opportunity to rethink macroeconomic policies.

Such a rethinking must begin by redefining policy objectives. In the short-term, or in crisis situations, the prime concern should not be the stability of prices alone. The stability of output and employment is just as important. In the medium-term, or in normal times, the essential objective of macroeconomic policies cannot simply be the management of inflation and the elimination of macroeconomic imbalances. It should be just as much, if not more, about fostering employment creation and supporting economic growth. The rethinking must also extend to reconsidering policy instruments. Fiscal policy cannot be reduced to a means of reducing government deficits or restoring macroeconomic balances. It is a powerful instrument in the quest for full employment and economic growth. Monetary policy cannot be reduced to a means of controlling inflation through interest rates. It is a versatile instrument where both the price and volume of credit can be most effective in the pursuit of development objectives.

In sum, it is essential to return a developmental approach to macroeconomic policies, which is based on an integration of short-term counter-cyclical fiscal and monetary policies with long term development objectives. This should shift the focus from the financial sector to the real economy, from the short-term to the long-term and from equilibrium to development. Economic growth with full employment should be the fundamental objective of macroeconomic policies. Given the differences in the quality and maturity of institutions, the framework for macroeconomic policies in developing countries, in terms of objectives, instruments or stance, would have to be different from that in industrialized economies.

Such rethinking is easier said than done, because it requires doing away with some beliefs that have acquired sanctity in orthodoxy which exercises enormous influence. Orthodox macroeconomic policies are often shaped by a simple analogy between governments and households, which propagates the belief that, just as it is not possible for households to live beyond their means, for it can only end in financial ruin, it is not possible for governments to live beyond their means, for deficits and debt can both become unsustainable. The prescription is downsizing of government to balance income and expenditure. Of course, this reasoning is based on a false analogy. There is a fundamental distinction between good management of household finances by an individual and sensible management of the economy as a whole by the government. This distinction cannot and should not be blurred. The obsessive concern about deficits in government finances that borders on fetishism is misplaced. There is nothing in macroeconomics which stipulates an optimum level to which the fiscal deficit must be reduced as a proportion of GDP. The real issue is the end-use, in relation to the cost, of borrowing. Thus, government borrowing is always sustainable if it is used to finance investment and if the rate of return on such investment is higher than the interest rate payable. And it may sometimes be necessary for a government to borrow to finance non-investment expenditure although that must be within limits. The essential point is that what is efficient for a household at a micro-level is not necessarily efficient for the government at a macro-level because the whole is different from the sum total of the parts. Yet, orthodoxy about balanced budgets holds sway. However, this orthodoxy has somewhat different manifestations in industrialized economies and in developing countries.

In the industrialized world, the message of orthodox macroeconomics is clear. First, governments should focus on price stability and not on employment levels. Second, beyond balanced budgets, there is a need to downsize the government. The quest for price stability in a situation where rates of inflation are already so low, leads to a slowdown in growth and an increase in unemployment combined with a downward pressure on real wages. It is no surprise that the stress on the supply side turns a blind eye to the demand side. Wages are costs on the supply side but wages also determine market size on the demand side. And aggregate demand, which remains a determinant of growth, reinforces the slowdown. The belief in the necessity and virtue of downsizing governments leads, in way or another, to a dilution and erosion of social protection. Unemployment benefits are streamlined. Pension plans are moved from defined-benefit to defined-contribution systems. Public provision of healthcare is reduced or significant user-charges are introduced. Government support for education is lowered and fees paid by students are raised. In other words, there is a privatization of risk as forms of social insurance are progressively undermined. The increase in unemployment and the decrease in social protection, taken together, have the greatest impact on the living conditions of people who are most vulnerable. The economic downturn in industrialized countries, which followed the recent global financial crisis, did evoke a counter-cyclical policy response from governments but, given the bail-outs for the financial sector, it was inevitably associated with an increase in debts and deficits of governments. Orthodox macroeconomics seized the opportunity to argue that such deficits are unsustainable and cuts in government spending are essential. Fiscal retrenchment has begun, even if this solution turns out to be worse than he problem.

In the developing world, orthodox macroeconomics prescribes two essentials. First, in is situations of disequilibrium or crisis, governments should not attempt to attain full employment. Instead, governments are urged to accept the pain of adjustment, in the form of lower output today, for a higher output tomorrow. This recommendation conforms to the strong spring analogy: the harder you push the spring down, the greater the force with which it bounces back. But a weak spring is a more appropriate analogy for the economy, for when it is pushed too hard, it may simply remain there if its restorative forces are destroyed. Second, as a rule, governments should just focus on price stability. This is simply not appropriate. In countries where inflation is already moderate or low, concerted policy efforts to reduce it further, at the margin, may yield only small benefits but impose large costs, for it squeezes employment in the short-term and dampens growth in the medium-term. The problem is that, in developing countries, even under normal circumstances, there is a pro-cyclical pattern to macroeconomic policies. This problem is accentuated by orthodoxy in macroeconomics which advocates a restrictive fiscal policy and a tight monetary policy. Fiscal contraction is associated with cuts in public expenditure on social sectors which hurt the poor, and cuts in public investment on infrastructure which constrain growth. Similarly, a tight monetary policy constrains growth as higher interest rates dampen private investment and lead to more failures in firms.

The time has come to dispense with these shibboleths, not only to resolve the problem of jobless growth but also to revive economic growth.

In industrialized countries, it is necessary to revive wage-led growth and strengthen profit-led growth. For the former, there are two essentials: the restoration of full employment as an objective and an increase in real wages. This would ensure that a part of the benefits from growth in output and productivity accrue to workers, which would mean some redistribution of income from profits to wages. That would stimulate consumption demand. For the latter, there has to be some redistribution of profits from the financial sector to the real sector, to stimulate investment demand. That would require closer regulation of innovative instruments, such as over-the-counter derivative swaps, in financial markets, which allow profits of the super rich to be invested in financial assets rather than real products.

In developing countries, wage-led growth is possible only through employment creation, even if full employment is not an attainable objective, as it would drive growth through expanding consumption demand in the domestic market. It is just as important to stimulate investment demand not simply for profit-led growth on the demand side but also for creating production capacities on the supply side. There are complementarities between public investment in infrastructure and private investment in manufacturing that could be exploited. At the same time, it would be wise to hasten slowly in financial deregulation and liberalization, which could redistribute profits from the real sector to the financial sector that could, in turn, dampen investment in manufacturing or services and curb the potential for employment expansion.

The moral of the story is clear enough. There are no trade-offs between job creation and output growth, so that it is misleading to present it as an either-or choice. In fact, there are strong complementarities between employment creation and economic growth. Growth can create jobs, and jobs can drive growth. Indeed, the two can reinforce each other, through an interaction between the supply side and the demand side, to create a virtuous circle of cumulative causation. It is just as important to recognize that more employment generation or faster job creation in the process of economic growth would simultaneously address the problem of increasing economic inequality between people, by reducing inequality or preventing it from rising as much as it otherwise would. Similarly, an improvement in the quality of employment, which provides decent work, would also contribute to a reduction in economic inequalities. This is particularly important in developing countries where average income levels are low but it is just as significant in industrialized countries where average income levels are much higher.

Employment as a solution

It is not surprising that my analysis of why employment matters, in the wider macroeconomic context of the world economy, has sought to focus on industrialized countries and emerging economies. But it must be stressed that employment is of utmost importance at every stage of development.

In most countries at low levels of income and in earlier stages of development, which are capital scarce, there is surplus labour that is underemployed irrespective of the endowment of land or natural resources. Hence, their most abundant resource, labour, is underutilized. Macroeconomics in developing countries is, at least in part, about mobilizing and creating resources, not only financial resources but also real resources, for development. Employment creation can both mobilize and create resources. It constitutes resource mobilization beyond financial resources, which are the usual concern of macroeconomics, in as much as it mobilizes the most abundant yet underutilized resource, people, for development. The absorption of surplus labour in employment, then, is an important source of economic growth. It constitutes resource creation in so far as it increases the productivity of labour, for any given level of technological development, introducing another source of economic growth. The same people, who constitute resources on the supply side, provide markets on the demand side in the process of development. This interactive causation, which is a potential source of economic growth, is possible but not automatic or assured. It may not materialize if employment opportunities are not created or are not sufficient.

Thus, employment matters as a driver of economic growth. And if economic growth is to be transformed into meaningful development, which improves the wellbeing of people, employment creation is essential insofar as it provides income opportunities. In countries where absolute poverty is widespread, social safety nets that require transfer payments in perpetuity might mitigate the situation, but employment that provides livelihoods is the only sustainable means of reducing and, ultimately, eradicating poverty. Given this reality, many governments in developing countries have discovered the idea of inclusive growth. Some of it is just populist rhetoric. In a few countries, governments in search of political legitimacy set aside resources for the poor, often in terms of allocations to social sectors or public services. But the bottom line cannot change. Any process of economic growth is pro-poor if, and only if, it creates employment opportunities that provide sufficient incomes to lift people out of poverty.

The conclusion that follows is simple. Employment is the solution, which must not be seen as a problem. For people who do not have the income to meet their basic needs, such as food, clothing and shelter let alone healthcare and education, employment opportunities are the only sustainable means of reducing and eradicating their poverty. But that is not all. In poor countries, employment can drive economic growth both from the supply side and the demand side. The pursuit of full employment in industrialized countries and employment expansion in emerging economies could revive economic growth and drive recovery in the world economy. At the same time, employment, in the form of decent work that yields sufficient incomes, could also do much to address the problems associated with rising economic inequalities between people everywhere in the world.

In this context, it is necessary to recognize that, while the number of jobs created makes an enormous difference, the quality of employment also matters. This is so because the world of work is diverse. Every person works in one way or another. But not everyone in employed. A significant proportion of this work, however, is not sufficiently recognized or adequately rewarded. There are many who work hard for a living. There are a few who hardly work and yet lead a comfortable life. There are some who work very hard but do not earn enough for a living. There are others who work but are not paid for their labour. The reality is complex, and is changing. The developing world is full of over-worked and under-employed or unemployed people. Many of them do not earn enough to meet their basic human needs. Working conditions are poor even in the formal sector and often worse in the informal sector. For a large proportion of the work force, there is little, if any, security of employment. In industrialized countries, unemployment rates are much higher than in the past. Social protection is being diluted. Risk is being privatized. Hence, the unemployed are more vulnerable. There is also a casualization of the workforce, as permanent employees in the workplace are being turned into contract workers at home who are engaged for limited durations or specified purposes, so that work no longer means what it did. For such people, there is no security of employment. Superannuation benefits and healthcare benefits provided by the employer also cease. It would seem that, for a large number of people, the quality of employment is poor in developing countries and worsening in industrialized countries. In this situation, if employment created also provides decent work, it would be more effective in mitigating the rising inequality between people. Higher job quality would lower economic inequalities.

The moral of the story, then, is that a focus on employment, as the primary objective rather than as a residual outcome, is absolutely essential. Conventional thinking seeks to focus on the objectives of GDP growth at a macro-level and productivity growth at the micro-level. There is, perhaps, a more useful way of thinking about GDP growth directly in terms of employment growth. The growth of employment and the growth in labour productivity, measured as output per worker, together add up to the growth in GDP. If the employment growth rate is increased by 1 percent, the GDP growth rate would also increase, provided labour productivity does not fall by 1 percent or more. In other words, if it is possible to raise the employment growth rate, without inducing an equivalent or greater reduction in labour productivity growth, the growth rate of the economy can only be higher. It should thus be possible to focus on employment growth as a the objective.

This should also lead to some rethinking about the meaning of efficiency beyond the usual conceptions of economic efficiency or technical efficiency. Indeed, employment expansion is at least as important as productivity increase. In a sense, both represent the utilization of labour as a resource. Why, then, is thinking about efficiency focus on one and neglect the other? It is time, perhaps, to reflect on the meaning of efficiency, which must extend beyond output per worker or productivity increase to expansion of employment and labour-use. Such an idea could make a real difference.

In conclusion, it is worth reiterating my messages for each of three constituencies in the tripartite ILO world. Governments should rethink macroeconomic policies by redefining policy objectives and reconsidering policy instruments, so that the focus is on fostering employment creation and supporting economic growth rather than on price stability and balanced budgets. Employers should recognize that wages are costs on the supply side but are also incomes on the demand side, which means that profit-led growth and wage-led growth are complements not substitutes, and that what is good for employment is good for economic growth, where the connection is causal. Trade Unions represent their members who are employed but they should also attempt to speak for, even if they do not represent, the unemployed and the underemployed, so that in situations of unemployment they should use their voice in the political process and influence on economic policies to maximize employment levels and, if possible, return to full employment, as the pursuit of this objective would be in the collective interest of workers. It is time, perhaps, for all three constituencies to strive for a social contract. I would also urge the Ministers of Labour present here to stress the critical importance of employment in their own political processes so that it is centre-stage in thinking about the economy in their national contexts and the debate on the Post-2015 Development Agenda in the international context.