Thursday 26 January 2012

World faces a 600 million jobs challenge, warns ILO

The world faces the “urgent challenge” of creating 600 million productive jobs over the next decade in order to generate sustainable growth and maintain social cohesion, according to the annual report on global employment by the International Labour Organization (ILO).
24 Jan 2012

GENEVA (ILO News) – The world faces the “urgent challenge” of creating 600 million productive jobs over the next decade in order to generate sustainable growth and maintain social cohesion, according to the annual report on global employment by the International Labour Organization (ILO).

“After three years of continuous crisis conditions in global labour markets and against the prospect of a further deterioration of economic activity, there is a backlog of global unemployment of 200 million,” says the ILO in its annual report titled “Global Employment Trends 2012: Preventing a deeper jobs crisis”. Moreover, the report says more than 400 million new jobs will be needed over the next decade to absorb the estimated 40 million growth of the labour force each year.

The Global Employment Trends Report also said the world faces the additional challenge of creating decent jobs for the estimated 900 million workers living with their families below the US$ 2 a day poverty line, mostly in developing countries.

“Despite strenuous government efforts, the jobs crisis continues unabated, with one in three workers worldwide – or an estimated 1.1 billion people – either unemployed or living in poverty”, said ILO Director-General Juan Somavia. “What is needed is that job creation in the real economy must become our number one priority”.

The report says the recovery that started in 2009 has been short-lived and that there are still 27 million more unemployed workers than at the start of the crisis. The fact that economies are not generating enough employment is reflected in the employment-to-population ratio (the proportion of the working-age population in employment), which suffered the largest decline on record between 2007 (61.2 per cent) and 2010 (60.2 per cent).

At the same time, there are nearly 29 million fewer people in the labour force now than would be expected based on pre-crisis trends. If these discouraged workers1 were counted as unemployed, then global unemployment would swell from the current 197 million to 225 million, and the unemployment rate would rise from 6 per cent to 6.9 per cent.

The report paints three scenarios for the employment situation in the future. The baseline projection shows an additional 3 million unemployed for 2012, rising to 206 million by 2016. If global growth rates fall below 2 per cent, then unemployment would rise to 204 million in 2012. In a more benign scenario, assuming a quick resolution of the euro debt crisis, global unemployment would be around 1 million lower in 2012.

Young people continue to be among the hardest hit by the jobs crisis. Judging by the present course, the report says, there is little hope for a substantial improvement in their near-term employment prospects.

Global Employment Trends 2012 says 74.8 million youth aged 15-24 were unemployed in 2011, an increase of more than 4 million since 2007. It adds that globally, young people are nearly three times as likely as adults to be unemployed. The global youth unemployment rate, at 12.7 per cent, remains a full percentage point above the pre-crisis level.

The report’s main findings also include:
There has been a marked slowdown in the rate of progress in reducing the number of working poor. Nearly 30 per cent of all workers in the world – more than 900 million – were living with their families below the US$2 poverty line in 2011, or about 55 million more than expected on the basis of pre-crisis trends. Of these 900 million working poor, about half were living below the US$1.25 extreme poverty line.
The number of workers in vulnerable employment2 globally in 2011 is estimated at 1.52 billion, an increase of 136 million since 2000 and of nearly 23 million since 2009.
Among women, 50.5 per cent are in vulnerable employment, a rate that exceeds the corresponding share for men (48.2).
Favourable economic conditions pushed job creation rates above labour force growth, thereby supporting domestic demand, in particular in larger emerging economies in Latin America and East Asia.
The labour productivity gap between the developed and the developing world – an important indicator measuring the convergence of income levels across countries – has narrowed over the past two decades, but remains substantial: Output per worker in the Developed Economies and European Union region was US$ 72,900 in 2011 versus an average of US$ 13,600 in developing regions.

“These latest figures reflect the increasing inequality and continuous exclusion that millions of workers and their families are facing”, said Mr. Somavia. “Whether we recover or not from this crisis will depend on how effective government policies ultimately are. And policies will only be effective as long as they have a positive impact on peoples’ lives”.

The report calls for targeted measures to support job growth in the real economy, and warns that additional public support measures alone will not be enough to foster a sustainable recovery.

“Policy-makers must act decisively and in a coordinated fashion to reduce the fear and uncertainty that is hindering private investment so that the private sector can restart the main engine of global job creation”, says the report.

It also warns that in times of faltering demand further stimulus is important and this can be done in a way that does not put the sustainability of public finances at risk. The report calls for fiscal consolidation efforts to be carried out in a socially responsible manner, with growth and employment prospects as guiding principles.

1 A person who has decided to stop looking for work because they feel they have no chance at finding a job is considered economically inactive (i.e. outside the labour force) and is therefore not counted among the unemployed. This also applies to young people who choose to remain in schooling longer than they had hoped and wait to seek employment because of the perceived lack of job opportunities.

2 Vulnerable employment is defined as the sum of own-account workers and unpaid family workers.

Restoring hope and public trust
By Juan Somavia, Published The Straits Times, 27 Jan 2012

CAPITALISM has gone through crises of legitimacy before but this one is unprecedented. The underlying causes are complex, yet the net effect is plain - inequality is great and rising. Sixty-one million individuals have the same wealth as 3.5 billion people.

And the macroeconomic outlook is worsening. According to the International Labour Organisation's (ILO) annual Global Employment Trends report out this week, one out of every three workers - some 1.1 billion people - is unemployed or living in poverty. At the present rate, it will take us 88 years to eradicate extreme poverty. Over the next decade, we need to create 600 million jobs - 200 million for today's unemployed and 400 million for those entering the labour market.

Given this, it is not surprising that this year's Global Risks reports of the World Economic Forum (WEF) rate severe income inequality and high unemployment, especially among young people, as the most likely global risks over the coming 10 years.

Last year's Gallup polling data showed that globally, people are perceiving their living standards to be falling and expressing diminishing confidence in their government's ability to reverse this. In the United States, a recent survey by the Pew Research Centre showed conflict between rich and poor as the biggest source of societal tension. In far too many places, there is a sense of receding hope for the future.

Clearly, this cannot go on. We need to be bold and not just tinker at the margins (the recovery after the 2008-2009 crisis was short-lived because the 'quick fix' option prevailed). Nothing short of a new paradigm will do - the bonding of people, the economy and society.

This is why this year's WEF theme, 'The great transformation: shaping new models', is spot on. I will be arguing that we must urgently put in place a much more effective model for strong, sustainable and balanced growth that is people-oriented.
First, we must rethink how we measure growth beyond percentage changes in gross domestic product or average income per capita. The measure of success must be tangible improvements in people's lives.
Second, full employment, with low inflation and financial stability, must be a top macroeconomic goal as well as a central bank policy goal, as in the US and Argentina. We know this works. Countries that invested in job creation (and social protection) as a way out of the 2008 crisis fared better than those that prioritised bailing out their banks. China invested in labour-intensive infrastructure projects. Germany's work-sharing programme kept 1.5 million workers employed at the height of the crisis. 
Third, we must put the financial system back at the service of the productive economy, not the other way around. The distortion of this fundamental notion is at the heart of the current crisis, yet the markets are once again calling the shots. Risky and unproductive operations must become less profitable for financial institutions and taxpayers should not pick up the losses.
Fourth, we need to strengthen the framework for productive investment, including through an income-led growth strategy. This ignites demand through consumption and leads to savings to fuel future growth, rather than debt.
Fifth, we need social protection for the most vulnerable. In Brazil, income inequality, as measured by the Gini coefficient, is largely declining due to a national conditional cash transfer scheme that supports poor families. Boosting jobs reduces poverty. 
Sixth, we need to build strong institutions to assist in the creation of new businesses, including through long-term partnerships between banks and enterprises, as in Germany and South Korea. Promoting decent work and labour rights is part of the process.
Finally, we need more coherence between economic and social policies to connect people's aspirations for social justice with the management of a sustainable global economy.
This is an achievable agenda. But governments cannot deliver it alone. We need what WEF founder and executive chairman Klaus Schwab calls 'collaborative power' - and what the ILO calls social dialogue.

Businesses have a vital role to play to make this global shift possible, from leading in debates like those in Davos, Switzerland, to their job-creating capacity. An ILO/University of Maryland study projects that US companies could create 2.4 million new jobs in 2014 by investing the US$500 billion (S$630 billion) extra corporate reserves accumulated over 2010 to last year. The highest priority should go to small and medium-sized enterprises as they are engines of growth.

Above all, we need creativity and innovative thinking to seriously address the social dimension of globalisation. It is a political responsibility and a sound business decision as an investment in a peaceful and prosperous future.

In Davos this week, leaders must focus on restoring not only hope and confidence but also public trust. Never again must people feel that, while some banks are too big to fail, they are too small to matter.

The writer is the director-general of the International Labour Organisation.

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