Tackling thejobs crisis
By Juan Somavia, director general, International Labour Organization
Global unemployment is at its highest ever level. The International Labour Organization is working with leading experts on the issue to promote a job-rich recovery and growth
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The global financial crisis has imposed many costs on the world economy none more painful than the impact on the tens of millions of working people who have lost their jobs. Some 210 million people are out of work, an increase of more than 30 million since 2007. This is the highest level of official unemployment in history. The scars of this distress in labour markets will be with the world for a long time.
Three-quarters of the increase in the number of unemployed people has occurred in the advanced economies, with the remainder among emerging and developing countries. In the developing countries, informal economies have grown, leaving about 1.2 billion people still unable to earn enough to keep themselves and their families above the poverty level. Young people have been especially hard hit by the jobs crisis. Past recessions reveal that the cost to all those who become unemployed can be a persistent loss of earnings, reduced life expectancy and lower educational achievement for their children.
There is one other fundamental impact: unemployment is likely to affect attitudes in a manner that increases tensions and reduces social cohesion a cost that everyone bears.
What is to be done to address the jobs crisis? The government of Norway, the International Monetary Fund (IMF) and the International Labour Organization (ILO) held a major conference in Oslo on 13 September 2010, along with national leaders, senior business and labour representatives, and top experts on this issue.
The purpose of the conference the first ever between the ILO and IMF was to help advance thinking on policies that can better cushion the human costs of unemployment and produce strong, sustainable and balanced growth. A joint discussion document titled The Challenges of Growth, Employment and Social Cohesion launched the debate.
One key outcome of the conference was the need to have better coordination between employment and social policies and macroeconomic strategies something that was clearly missing before the crisis. In particular, both institutions agreed to explore the idea of a basic social protection floor for the most vulnerable, to work together on policies to promote a job-rich recovery and growth, and to deepen their cooperation within the G20.
There are no easy solutions to the employment challenge facing the world. The financial crisis has exacerbated the decent work deficits that were all too apparent during the so-called boom years before 2008. But there are lessons that can be drawn from the past and best practices to be drawn from the present, as is done in the ILO Global Jobs Pact. It has been widely endorsed, including by the G20.
Experience shows that the policy response revolves around three pivotal elements:
First, a recovery in aggregate demand is the single best cure for unemployment. Many countries moved quickly during the crisis to lower interest rates and provide fiscal stimulus. These policy actions were notable for their consistency and coherence across countries. Cumulatively, they helped to avoid recession becoming depression and even more jobs being lost. Now, even as many advanced economies face the need to stabilise or reduce very high levels of public indebtedness, it is vital that policies be implemented in a way that is fair, tailored to individual country circumstances and that does not impair growth and employment.
Second, there are targeted programmes that can be undertaken to help job seekers and ease the pain in labour markets. Some governments have stepped up placement services and expanded labour market programmes aimed at improving skills and encouraging the job search. Others have implemented policies allowing firms to retain workers, while reducing their hours and wages. Such programmes were extensively used by Germany one of the countries least affected by unemployment and often implemented through social dialogue. Another step is to extend unemployment insurance benefits and link them to continued job training and job search.
Third, there are ways to accelerate jobs recovery. In particular, subsidies can be targeted at specific groups that are most vulnerable to joblessness the long-term unemployed or youth. Emerging economies such as China, India, Brazil and South Africa are building social protection floors to reduce poverty and boost purchasing power, and thus to stimulate job creation.
These elements constitute a policy mix that has already been used and will continue to be used with different emphases in different countries. But again, there are no silver bullets. The integration of employment and social policies with macroeconomic policies must be improved, nationally and internationally. A better understanding of the forces at play in the present state of the global economy is required. And there needs to be more creativity in developing a wider array of policies and programmes that can provide decent work for all who desire it. That is why the ILO and IMF met in Oslo.
The economic rationale is clear. But the history of what happened the last time the world faced an unemployment crisis of this magnitude the 1930s holds a stark reminder of the potentially broader implications. Lost jobs mean lost faith in private and public institutions, and even a threat to democracy and peace.
The Oslo Conference served as an important first exercise of the kind of cooperation that is needed to get the world economy back on its feet and workers back in their jobs.
Dialogue especially between governments, unions and business will be an essential component of the tough decisions that lie ahead.
The last months of 2010 could be decisive in making sure that recovery is secured and the national and international imbalances that caused the crisis rectified so that the world moves on to a path of strong, sustainable and balanced growth. The Oslo Conference should help to push the jobs challenge to the top of the agenda of international gatherings such as the United Nations Summit on the Millennium Development Goals, the annual meetings of the IMF and the World Bank, and the Seoul G20 Summit.
An economic recovery that does not provide employment opportunities will mean nothing to most people. The world must act together now to tackle the jobs crisis.
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