TWN Info Service on Finance and Development (Nov10/08)
11 November 2010
Third World Network

ILO urges G20 to focus on job-intensive growth policies
Published in SUNS #7037 dated 10 November 2010

Geneva, 9 Nov (Kanaga Raja) -- The International Labour Office (ILO) has urged the G20 leading economies to intensify their focus on productive employment and job-intensive growth policies at their summit, which is to take place in Seoul, South Korea on 11-12 November.

This comes amidst a fragile labour market marked by persistent high unemployment, slack jobs growth and declining wages, said the ILO, as it released a new statistical update on employment and labour market trends in the G20 countries.

"The highly differentiated but overall weak economic growth, volatile capital flows and tensions on currencies observed today, can be traced to the employment and labour market trends prevailing in G20 countries," says the ILO report, which was prepared for the G20 summit.

"These trends include rising income inequality and low or no wage growth for a large majority of wage employed, ultimately reflected in macroeconomic imbalances of deficient aggregate demand and current account surpluses and deficits," it adds.

"The crisis has set back countries' ability to address labour market imbalances that pre-date the crisis, including high shares of informal and casual employment, rising inequality, low or flat real wage growth and low social protection coverage. The continued growth in the working age population during the crisis years in most of the countries has amplified the challenge and urgency of addressing these imbalances in the future."

According to the report, data available up to the second and third quarter of 2010 point to an overall fragile labour market situation across G20 countries with signs of a weak recovery, stronger in emerging countries than in high-income countries.

The number of persons available for work, whether actively engaged in job search or not, remains far in excess of available vacancies in most countries. Hours of work and labour force participation rates have declined, whereas time-related underemployment and discouraged workers have increased, pointing to considerable slack in the labour market beyond that reflected in the unemployment rate.

The report finds that in mid-2010, unemployment rates across G20 countries ranged between 25 and 5 per cent with a median of 7.8 per cent. In 2010, compared to the same period in 2009, unemployment has continued to increase in ten of the G20 countries, and declined in another eight.

All emerging economies, except South Africa, have experienced an increase in employment and a reduction in unemployment during 2010. However, unemployment in mid-2010 is 70 per cent above its pre-crisis level in high-income countries (excluding Europe), and 30 per cent higher in Europe.

Globally, the ILO estimates that unemployment reached 210 million mid-2010, or 30 million above the 2007 level.

Analysing the recent labour market trends in the G20 countries, the report says that despite clear signs of output recovery, half of G20 countries still experience an increase in unemployment rates in 2010.

In its analysis, the ILO has aggregated the data into three groups: Europe includes France, Germany, Italy, Netherlands, Spain, and the United Kingdom; High-income Economies (except Europe) include Australia, Canada, Japan, Korea, and the United States; and Emerging economies include Argentina, Brazil, Indonesia, Mexico, Russia, South Africa, and Turkey.

In the second quarter of 2010, aggregate unemployment rates across these three G20 country groupings lie between 8 and 10 per cent.

The employment prospects of young women and men are dramatic, says the report, pointing out that unemployment rates for persons less than 25 years average 16-20 per cent across G20 countries. These rates practically duplicate those for the total population. However, as for the aggregate, the rate of increase in youth unemployment is decreasing.

When disaggregating data by sex, it is observed that unemployment rates have risen more for the male than the female population. In high-income economies during 2010, unemployment has been lower for women than for men. In emerging economies, female unemployment has declined whereas male unemployment has risen.

Employment has decreased in all high-income economies since the third quarter of 2008 and is now close to the 2006 level. In emerging economies, employment growth recovered in the second quarter of 2009 and has been growing since.

According to the report, a slight upturn in the employment situation can be observed since the second quarter of 2010. In the second quarter of 2010, a majority of countries (ten against eight) experienced employment growth. In last quarter of 2009, the number of countries with employment growth was only six.

Growth in the economically active population has been modest, especially in high-income economies.

"Consequently, labour force participation has declined, more significantly in high income countries other than Europe. This decline is a consequence of the depressed labour market leading persons to withdraw from active employment search."

In Europe, with low population growth, labour force participation rates are almost unaltered on average (although there could exist higher variations by country and by age group). In emerging economies, the economically active population has grown, but population growth has been strong as well, leading to only small increases in labour force participation rates.

The ILO notes that the crisis has led to a reduction in male labour force participation in all the regions, whereas female labour force participation has increased in Europe and in emerging economies.

The report also finds that employment has declined significantly (by over 4 per cent) in high-income economies in agriculture and industry (including construction). Employment in services has risen in emerging economies, possibly including lower quality informal employment.

Noteworthy, says the ILO, the share of employment in manufacturing in total employment has fallen significantly across the three country groups.

In a sample of eight countries with available data, time-related underemployment has increased significantly between 2008 and 2009, but has stabilized in 2010. Three countries with available data show a strong increase in the number of discouraged workers (Spain, South Africa and the United States) in a context of high unemployment.

"This suggests again that the unemployment rate does not reflect the full downturn in the labour market."

The report also finds that real wages have decreased on average by 4 per cent mid-2010 relative to the pre-crisis situation. As of the second quarter of 2010, no recovery in real wages is observed. Hours worked declined sharply from mid-2008 to mid-2009, then rebounded and declined again in the second quarter of 2010.

In assessing the medium-term prospects for employment growth, the report says that for higher-income (non-European) economies, based on past trends and current economic outlook, a return to the pre-crisis employment level is projected to occur around 2015. The situation is more critical in Europe, where recovery in employment is not projected to be reached within the medium-term period.

On the other hand, the report adds, the projection for emerging economies shows a continuous increase in employment over the period.

When taking into account the growth in working age population, the outlook is even more dramatic for high- income countries. Increases in the population imply that recovery in the employment rate is not projected to be reached in the next five years in both groups of high-income economies.

In emerging economies, growth in population equalizes growth in total employment (including informal employment), thus the ratio remains relatively constant during the period of analysis.

The report observes that between 2010 and 2020, the working age population (15-64 years) among G20 countries will increase by 212 million. Over 64 per cent of the increase will occur in only one country, India. China and Indonesia will see an increase of 23 and 20 million respectively, followed by Brazil and the United States with increases of 15 and 11 million respectively. Six countries, notably Japan and the Russian Federation, will see absolute declines in their population.

These trends have a number of implications, says the ILO, underlining that the G20 countries will collectively need to generate some 21 million jobs per year, every year to 2020, just to absorb new entrants into the labour market.

"Balanced growth will increasingly have to rely on domestic demand linked to wages rising along productivity increases and higher employment levels. In most countries, future output growth will depend on an appropriate combination across economic sectors of productivity growth and greater job intensity," says the report.

"Unemployment is not the only issue," said Rafael Diez de Medina, Director of the ILO's Department of Statistics, adding that the ILO had found declining hours of work and labour force participation rates in high-income economies and a significant increase in the number of discouraged workers.

"This is quite worrying," he stressed, "since they are not part of the unemployment figures and have a clear impact on social cohesion. Time-related underemployment has stabilized in 2010, but remains high in several countries of the G20." +