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Generating jobs, sustaining growth
By Juan Somavia, director general, International Labour Organization
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The world may be seeing signs of economic recovery, but unemployment is still high. The G20 leaders need to find and act on the right policy frameworks to boost employment and ensure sustained global growth
Global unemployment is still at record levels – and that is just the tip of the iceberg of discouraged job seekers, involuntary, temporary and part-time workers, informal employment, pay cuts and benefit reductions. However, the signs of economic recovery are becoming clearer and some countries are growing at a brisk pace. Yet for working women and men, and for many enterprises in the real economy, the recovery has not yet begun.
One year ago, as the global financial and economic crisis was in full force, the International Labour Conference agreed on a global jobs pact to guide the response of the International Labour Organization (ILO) to the worst worldwide jobs crisis in more than 60 years. It has helped shape a period of policy activism that has eased the worst effects of the crisis. In 2010, the test is to accelerate a jobs-rich recovery and get onto a path of strong, sustainable and balanced growth that leads to the goal of decent work for all.
The G20 leaders in Toronto will review progress on the commitment they made in Pittsburgh in September 2009 “not to rest until the global economy is restored to full health and hard-working families the world over can find decent jobs”. They asked G20 ministers of labour and employment to assess the evolving employment situation, review ILO reports on the impact of policies implemented, report on any necessary further measures and consider employment and skills development policies, social protection programmes, and best practices so workers can take advantage of advances in science and technology.
In April 2010, the G20 labour and employment ministers met in Washington. Their statement offers broad policy consensus on what has to be done in the field of employment and social protection policy: “We want to ensure that productivity gains are shared with workers as rising living standards; that work is a reliable path out of poverty for all of our people; that the fundamental rights of workers are respected; and that social dialogue is fostered.”
The ministers offered five sets of policy recommendations to be considered by G20 leaders:
The G20 ministers recommended coordinated efforts to make employment growth a priority because strong growth of jobs and incomes in many countries will reinforce global demand, which in turn will create more jobs. Moreover, growth in employment and incomes, particularly in countries with many low-income households, is indispensable to strong, sustained and balanced global growth.
The approach advocated by the G20 ministers also reflects a global policy consensus expressed in the ILO Global Jobs Pact and Decent Work Agenda, which the ministers described as “valuable resources” for designing further measures to address employment and social protection systems.
Accelerating a Job-Rich Recovery in G20 Countries: Building on Experience, the report submitted to the G20 labour ministers by the ILO, showed that overall, policy responses will have created or saved 21 million jobs in G20 countries by the end of 2010 – the equivalent of 1 per cent of total employment for the whole G20 – as a result of both discretionary fiscal stimulus and the working of automatic stabilisers. Stimulus measures have created or saved millions of jobs, even though they have been resisting a strong tide of job destruction.
As global growth revives, governments might be pushed into pulling out of stimulus packages before the still fragile recovery takes firm root. But a premature exit would lead not only to lower employment by 2015, but also to worse deficits than would be the case with a more measured return to fiscal balance.
For the critical years ahead when globalisation could be improved, a central challenge is finding policy frameworks that generate patterns of growth and development to yield full, productive and freely chosen employment and decent work. Even before the financial crisis, many countries experienced frequent periods in which growth did not produce enough decent work to match the growth of the labour force and support improved living standards and reduced poverty. Now the world needs to accelerate a jobs-rich recovery and implement policies that support stronger job creation and poverty reduction for the long term.
Such a new growth strategy will require a finance sector that meets the needs for investment, innovation, trade and consumption. It is thus vital to adopt financial policies and regulations that encourage resource flows and allocations – including development cooperation – toward long-term productive investment by sustainable enterprises and the creation of decent work opportunities.
Stimulating labour demand – through fiscal stimulus, public spending, reduced working hours and hiring subsidies – has proven efficient. Australia, China, the Republic of Korea, the Russian Federation, Saudi Arabia and South Africa adopted average fiscal stimulus in the range of 3 per cent to 4 per cent of gross domestic product in 2009. Hence, the rebound since mid 2009 was particularly strong in these countries. A reduction in working hours, commensurate with wages, helped retain workers in Germany and, to a lesser extent, in Canada, France, Italy, Japan, Mexico, the Netherlands, South Africa, Spain, Turkey and the United States.
Extending social protection – by providing a basic social protection floor and by targeting public employment programmes in low-income countries – has shown strong results during the downturn. China has announced plans to achieve universal coverage of basic healthcare by 2020. India is expanding its health protection for low-income households and is developing a national old-age pension scheme. Temporary benefits for families have been introduced in Germany and on a permanent basis in Argentina. Brazil continued to expand the coverage of its conditional cash transfer programmes, as have Mexico and Turkey. India’s National Rural Employment Guarantee Scheme – possibly the largest such programme – is providing 100 days of employment at the minimum wage to 43 million low-income households in 2009-10. A similar programme in Mexico created more than half a million jobs in 2009.
In 2010 and 2011, private and public policies must converge to strengthen credit flows, investment, sustainable enterprises and decent work creation and to reinforce what is still a fragile recovery.
The employment and social protection policies deployed by many countries interact with each other and contribute to improved macroeconomic performance and a stronger employment intensity of growth. A continued focus, in all countries, on productive investment, sustainable enterprises, inclusive labour markets, wide coverage of social protection and basic labour rights, and the elements of the decent work agenda, will usher in a more stable, stronger world economy with a robust social dimension.
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