Global Employment Trends 2004: No Solutions on Offer Sabyasachi Mitra

The Global Employment Trends (GET) 2004, published by the International Labour Organization (ILO), does not hold much promise for the workers and job seekers in the world in the current year. GET 2004 starts on a dismal note saying that despite a recovery in economic growth in 2003 following a slowdown during the previous two years, there was no improvement in the global employment situation in 2003. Total unemployment grew from 2.5 per cent in 2002 to 3.0 per cent in 2003. Youth unemployment rates have been growing much faster than the growth in the overall unemployment rates. In other words, the young and those fresh in the job market are finding it more difficult to get jobs compared to those who are already experienced.

Another worrying aspect outlined in the GET 2004 is the increasing size of the informal economy in developing countries, particularly those having low rates of GDP growth. Informalization of the economy tends to increase the number of working poor, those who do not earn enough to raise their families above poverty levels. The ILO report points out to a slow recovery of the industrialized nations and the outbreak of the Severe Acute Respiratory Syndrome (SARS) in several countries as the prime factors behind the rise in the numbers of unemployed and underemployed people worldwide. Travel and tourism, a sector the growth of which leads to a rise in employment, was also hit hard as a consequence of the SARS scare and because of the war in Iraq.

Even in industrialized countries like the United States, which has witnessed a recovery in the second half of 2003 in terms of growth, job creation was sluggish and unemployment rates remained at high levels of around 6 per cent. The European Union and Japan however witnessed some decline in the unemployment rates.

The phenomenon of a recovery in economic growth not accompanied by any significant recovery in employment growth during the last year has been almost universal. Only South-East Asia show some decline in unemployment in 2003. Despite having growth rates of over 7 per cent, East Asia witnessed an increase in unemployment. In South Asia there was hardly any change in the unemployment rate despite the region having a 5.1 per cent growth in GDP. Unemployment increased in the Middle East as well as in North Africa. The region has the highest incidence of unemployment in the world, experiencing an unemployment rate of 12.2 per cent. While the GDP in Latin America grew at 1.6 per cent, employment rose by only 1 per cent. Youth unemployment remains a major challenge for the region with the unemployment rate for young people (16.6 per cent) in 2003 being twice as high as that of the total labour force. Also even as the region has made some progress in universalization of primary education, a decline in public social expenditure has resulted in growing gaps in educational status of people from different income groups at the secondary level and higher. Sub-Saharan Africa has failed to reduce the unemployment rates and has also failed to improve its high incidence of poverty. In addition the HIV-AIDS pandemic has further hindered human resource development in the region. The transition economies however witnessed some improvement in the employment scenario.

This said the GET 2004 does not proceed beyond mentioning what can be seen and what is pretty obvious. Everybody with a basic knowledge of economics knows that if an economy grows faster both in terms of GDP and employment creation poverty and unemployment would be reduced. What one would have expected from an ILO report is a suggestion as to what poor economies need to do in order to reach the desired levels of growth. But nowhere in the GET 2004 can one find such policy prescriptions. In one section of the report the GET 2004 states:

South-East Asia has the potential not only to reduce unemployment further but also to reduce working poverty – if those economies with the highest poverty incidence manage to reach GDP and employment paths similar to those achieved in the past few years by wealthier economies in the region.[1]

This sentence is akin to saying that if you have more and more money you will be getting richer and richer. Also the report fails to overcome the neoclassical fetish for looking at foreign investment as a panacea for economies which want to develop.

The GET 2004 does not offer any analysis of the situation, nor does in offer any solution to the problem of low employment generation. All that the report does is to state that a jobless growth will not help in reaching the Millennium Development Goals (MDG) target of halving world poverty by 2015. The GET 2004 merely says that jobless growth today will threaten future growth and that pro-poor policies should be designed to provide those under the poverty line with decent jobs. But the report is completely evasive on how this might be attainable. It talks about the need for allowing products from developing countries into developed markets but also harps on the need for international assistance to help developing countries in fighting its woes. The report seems to be ignorant of the scores of historical evidences where such assistance to developing countries has actually caused greater pains than benefits and for every dollar worth assistance recipient countries have found several more going out of these countries, often directly as a consequence of the acceptance of assistance from abroad.

Another aspect that one can observe from the GET 2004 is the shift that is taking place in the Caribbean countries and in some countries in Central America from being exporters of primary products to being providers of financial services as well as becoming tourist destinations. While this is one transition many would warmly welcome what is worrying is the fact that the manufacturing sector has remained almost undeveloped in these economies. The kind of fluctuations the financial and the tourism sectors undergo, economies banking on these sectors are bound to experience turmoil whenever there is some disturbance in these sectors. On the other hand all developed countries of today had experienced an industrial revolution of sorts during which those economies made the transition from being primarily agricultural to becoming more dependent on the manufacturing sector for growth. However the GET 2004 conveniently overlooks this difference and hails the diversification in the developing economies which are moving into trading in financial services and tourism products. For the countries experiencing such transformation it might be just a case of going from the frying pan to the fire.

Looking at the situation in East Asia the GET 2004 comments that unemployment is a relatively new phenomenon in the region and the unemployment rate has gone up to only 3.3 per cent in 2003 from 2.4 per cent a decade ago. While the report acknowledges that among those who are working over 18 per cent are working poor, it tends to ignore the rising unemployment as a matter of no great concern as the rate in 2003 is still very low. However, if one calculates the change in the rate of unemployment in the region, it is found that there has been a 37.5 per cent rise in the unemployment rate during the decade under consideration.

In the section discussing employment trends in South Asia the report mentions the dismal situation in the region with the labour force growing strongly, female labourers continuing to get much less and have higher unemployment rates than their male counterparts, a growing number of working poor who now constitute 40 per cent of all employed people, a virtually stagnant unemployment rate, youth unemployment rates, though lower than they were in 1995, still almost thrice the total unemployment rate sin the region. Again here the GET 2004 wants more labour absorption in the so-called high-productivity sectors, which is an impossibility since the way sectors become ‘highly productive’ today is by retrenching labour.

The kind of investment the developing world is witnessing today is mostly using contractual labour and has resulted in an almost complete informalization of these economies. Despite this being an easily observable fact, the GET 2004 says that the policy challenge ahead of developing economies is ‘to move from job creation in the informal economy to creating productive jobs in the formal economy’.[2] But as has already been mentioned, the report also highlights the need for developing countries to attract foreign assistance. How the two can be simultaneously attainable is anybody’s guess.

In the section on the Middle East and North Africa the report wishes that the region realizes its significant export potential for non-oil exports. Another thing on the GET 2004 wishlist for the region is that economic and social barriers towards women should be dismantled to allow women to participate more widely in economic life and thus boost economic growth and productivity in the region. Again the report is totally silent on how this can be achieved. While most of the foreign assistance that come into developing countries are full of conditionalities on withdrawal of the state, weakened labor norms, and so on there are nothing written in the loans to ensure that progressive trends are enforced.

The remedies for the ills of countries in Sub-Saharan Africa according to the GET 2004, besides peace among the warring factions in several countries in the region, are debt relief and aid from the developed world. But as has earlier been mentioned aid to developing countries has never been given for the uplift of nations in trouble but have been fraught with imperialist designs, aimed at gaining control over the resources of such nations.

The employment outlook for Sub-Saharan Africa is no different from that for several other regions. It says that there would be no improvement in the employment scenario in the region ‘unless progress is made in terms of creating productive employment opportunities for the unemployed, the underemployed and for new entrants to the labour markets’.[3] Now, who did not know that?

The adjustment to the market economy process has strongly affected the transition economies. A large number of workers are being excluded from the formal economy and many are withdrawing from the labour market after getting frustrated by the failure to get jobs after a long search. While the average unemployment rate in the region has fallen marginally from 9.4 per cent in 2002 to 9.2 per cent in the next year, high rates of youth unemployment continues to plague transition economies. Countries in Central and Eastern Europe have the highest youth unemployment rates in Europe. The major impediments to boosting employment in the region are lack of aggregate demand and infrastructural bottlenecks. To remove these the only solution is public investment. Private sector investment has never catered to these areas. However with the waning of the state, something which the GET 2004 has nowhere been critical of, such bottlenecks might never get removed.

Even industrialized countries that have diverse labour market characteristics witnessed growing youth-unemployment-to-population ratio. Total unemployment in major European nations in 2003 was 7.9 per cent, almost the same as it was a year before. In other major OECD economies the unemployment rate rose from 5.8 per cent in 2002 to 5.9 per cent in 2003.

The section on industrialized economies, which is the last section of the report, ends with the following lines:

In the major non-European economies, where the average age of the population is lower and fertility rates are higher than in Europe, the challenge is to create employment opportunities for the growing population and to match the strong growth in output with job creation. In the United States, where on average 2 million people have entered the labour force each year since 1999, job growth must be stronger than recent figures indicate. The aim is therefore not only to fill positions made redundant in the downturn, but also to innovate and expand into new markets in order
to create additional employment opportunities.
Thus in a way the report shows a consistency throughout its entire length in merely offering an advice that employment rates need to be jacked up for the poor to be brought over the poverty line but consistently fighting shy off suggesting policy prescriptions as that would require vouching for the role of demand-side economics, something that is anathema to orthodox mainstream economic theory that has control over the resources in today’s world.

[1] Global Employment Trends, January 2004, Page 3
[2] Global Employment Trends, January 2004, Page 17
[3] Global Employment Trends, January 2004, Page 23
[4] Global Employment Trends, January 2004, Page 29