Continued slowdown in the global economy
has seriously affected the employment scenario in both developed and developing
countries in the last two years. The 2003 edition of International Labour
Organization's annual publication 'Global Employment Trends' (GET) has
estimated that the number of unemployed grew by 20 million since the beginning
of 2001 and is expected to reach about 180 million by the end of 2002.
Along with the increase in unemployment, quality of employment has also
suffered. ILO estimates suggest that by the end of 2002, the number of
workers living on 1 US dollar or less have returned to the level of 1998
and reached the 550 million mark. Youth unemployment, which was declining
during the 1990s, is also on the rise in the recent years. Other associated
problems like increase in informal employment, poor working conditions,
child labour and increased gender inequity are also the rise in most parts
of the world.
According to this report, the main reasons for this increase in the unemployment
rates are the slower growth rate in the industrialized countries, low
export growth in developing countries and the severe downturn observed
in the Information and Telecommunications (ICT) and tourism sectors in
2001. It is feared that in the aftermath of the September 11th attack
on USA, more than 10.5 millions jobs were lost in the tourism sector alone.
The report shows that the countries in Latin America and the Caribbean
(LAC) were the worst hit from the economic slowdown and the September
11 attacks. Data presented in the report shows that the percentage point
differences between 2001 GDP growth rate forecast in September 2000 and
the 2001 GDP growth rate estimated in 2002 are the highest for LAC countries
(data are shown in Figure 1). As a result, unemployment rate rose to about
10 percent for the region.
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The downturn in the ICT sector severely affected some of the East and
South East Asian economies as their exports of ICT products to developed
countries shrank significantly during this period. Singapore was the worst
affected as its GDP contracted by 2 percent in 2001. The four crisis countries,
Indonesia, Malaysia, Thailand and Philippines were also severely affected
by this downturn. Among the East Asian countries, Hong Kong, South Korea
and Taiwan Province of China suffered from declining external demand for ICT products. Poor
export outlook of ICT products has led to decreased investment and lower
employment generation for this region as a whole. Other countries of this
region, which are less dependent upon ICT exports like Cambodia, Lao and
Vietnam were less affected by the events of 2001 and posted steady growth
rates. However, in spite of good economic results of these countries,
the unemployment rate of South East Asia went up to 6.6 percent in 2001.
The other big factor which resulted in severe job loss in East and South
East Asian countries is the massive downturn in tourism activities in
this region. As mentioned before, the global uncertainty following the
September 11 attacks led to a huge reduction in tourism activities across
the world. Tourism activities in this region suffered a further setback
following the Bali bombings in October 2002. Estimates suggest that in
only in China, about 1.8 million tourism related jobs were lost in 2001-02.
This decline in tourism has affected countries in other regions as well.
Estimates suggest that tourism recession in the Caribbean countries can
contract their GDP by 1.5 to 5 percent. As more than 900,000 people are
directly or indirectly linked with tourism in these countries, the impact
of this slump in tourism on employment is likely to be very high.
General sluggishness and slow growth in developed countries had profound
negative effect on the GDP and employment scenario in most of the developing
countries. Stagnation of developing country exports to developed countries
resulted in sharp employment declines in export oriented industries in
developing countries. Labour intensive industries like garments were the
worst hit and the employment decline is likely to have a disproportionately
greater impact on women who are most likely to lose jobs in these situations.
During 2001, declining global demand led to a drop in commodity prices,
particularly for oil, coffee and sugar. Coffee prices reached their lowest
level in 30 years and this has severely affected commodity exporters in
Latin America and the Sub-Saharan Africa. According to the GET report,
this had a disastrous impact on the employment situation in Sub Saharan
Africa. It is also estimated that the decline in commodity prices are
likely to reduce the global exports of LAC countries by about 5 percent
by the end of 2002.
As far as South Asian countries are concerned, this report shows that
in spite of decent GDP growth rate (5.48 percent for the period 1995-2000)
and increased integration with the global economy, unemployment rate in
South Asia rose from 2.9 percent in 1995 to 3.4 percent in 2001. Security
concerns, poor weather conditions, low export growth rate and a declining
tourism are said to be responsible for this increase. Also, according
to this report, employment prospects for the countries in South Asia in
medium term are quite bleak.
The ILO report suggests that the deterioration of the employment scenario
is unlikely to change in 2003. Though GDP growth projections suggest that
world output is slated to grow faster in 2003 than in 2001 and 2002, the
estimated export growth rate for 2003 is quite bleak. According to the
GET report, WTO has projected a very modest increase in global trade in
2003. Given this situation, it seems unlikely that employment situation
in those developing countries, which are more trade dependent and where
a large number of workforce is in the exports sector, will improve significantly
in the next one or two years.
Overall, this report indicates that the developing countries which are
more integrated with the global economy are facing increased employment
problems in the last few years. This conclusion again highlights the anomaly
that while the benefits accruing to the developing countries from higher
integration with the world economy are few, the shocks are very easily
transmitted across the countries. Also the pressure of multilateral agencies
like the World Bank, IMF and the WTO to make developing country economies
more market oriented has reduced the policy options available to counter
such shocks. In such an integrated world, developing countries will have
to depend upon a global recovery to pull the employment rates up in these
countries. The report estimates that to absorb new entrants into the labour
market and reduce working poverty and unemployment, at least one billion
new jobs are needed during the coming decade to achieve the UN Millennium
Development Goal (MDG) of halving extreme poverty by 2015. However, given
the pessimistic projections cited in this report, it does not seem likely
that employment situation in developing countries is likely to improve
in the immediate future.
The full report can be accessed at:
http://www.ilo.org/public/english/employment/strat/download/trends.pdf