Countries must make a dramatic shift in the current policy approach to address the global economic crisis: they should step away from stringent austerity measures, and recognize the importance of placing jobs at the top of the policy agenda. This is the main message of the recently released “World of Work Report 2012: Better jobs for a better economy.”
The report explains that the global jobs crisis has become more structural in nature and thus more difficult to eradicate. It is expected that in 2012, around 202 million people will be unemployed and the unemployment rate will increase to 6.1%. The report cautions that the world economy is unlikely to grow sufficiently in the comings years to solve current levels of job scarcity, while simultaneously providing employment for the over 80 million people expected to enter the labour market during this period. It also finds that employment has become more unstable or precarious, leading to a waste of productive capacity. Moreover, there is a risk that certain groups will be excluded from the labour market; and society is becoming increasingly anxious about the lack of decent jobs, leading to increased social unrest in countries in Europe, the Middle East, North Africa and sub-Saharan Africa. The report further notes that the crisis has led to an increase in poverty rates in half of advanced economies and one-third of developing economies; and in inequality in less than one-half of advanced economies and one-quarter of emerging and developing economies.
According to ILO, many countries, especially in Europe, are taking the wrong measures to address the economic crisis and the job crisis. It notes that countries faced with the twin challenges of low employment growth and limited fiscal space have turned increasingly towards labour market reform (e.g. lighter employment protection regulations and decentralized collective bargaining) as a tool for reassuring financial markets and in the hope of boosting economic growth. However, in some cases, these measures can "reduce job stability and exacerbate inequalities while failing to boost employment levels," the ILO cautions.
Countries are also focussing on austerity measures to cut fiscal deficits, risking falling in the austerity trap. As the ILO explains, austerity measures slow down economic growth, increase volatile capital flows, and worsen banks’ balance sheets. As a consequence, this results in vicious circle with a further contraction of credit, less investment, more job losses, smaller government budgets, and new austerity measures.
Instead, the ILO calls for “boosting domestic demand, complementing it with better enforcement of core labour standards and measures to avoid destabilizing capital flows.” The ILO proposes a three-pronged approach to move away from the austerity trap, based on (1) the strengthening of labour market institutions so that wages grow in line with productivity; (2) restoring credit conditions and creating a more favourable business environment for small enterprises; (3) promoting employment while meeting fiscal goals.
The report is divided in four chapters. The first chapter analyzes employment levels, job quality and the social implications of the global crisis, while the second chapter considers recent trends and labour market impacts as a result of employment protection and industrial relations. Chapter three examines the relation between fiscal consolidation and employment growth, and chapter four studies global investment and employment trends for a sustainable recovery.
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To download the summary of the report, click here.
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