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TWN Info Service on Finance and Development (Jan08/03) 28 January 2008
Economic turbulence, mainly stemming from the credit crisis in industrialized countries and rising oil prices, could spur an increase in global unemployment by an estimated 5 million persons in 2008, the International Labour Office (ILO) has warned. In its annual Global Employment Trends report, the ILO said that the new projection for 2008 is in contrast to 2007, a watershed year in which sound global GDP growth - of more than 5% - led to a “stabilization” of global labour markets with more people in work - a net increase of 45 million new jobs and only a slight increase in the number of people unemployed, to a total of 189.9 million persons worldwide. Below is a report on the ILO’s projections. It was published in SUNS # 6400, Friday 25 January 2008. This article is reproduced here with the permission of the SUNS. Reproduction or recirculation requires permission of SUNS (sunstwn@bluewin.ch). With
best wishes
Economic turbulence, mainly stemming from the credit crisis in industrialized countries and rising oil prices, could spur an increase in global unemployment by an estimated 5 million persons in 2008, the International Labour Office (ILO) has warned on Thursday. In its annual Global Employment Trends report, the ILO said that the new projection for 2008 is in contrast to 2007, a watershed year in which sound global GDP growth - of more than 5% - led to a “stabilization” of global labour markets with more people in work - a net increase of 45 million new jobs and only a slight increase in the number of people unemployed, to a total of 189.9 million persons worldwide. “This year’s global jobs picture is one of contrasts and uncertainty,” said ILO Director-General Juan Somavia. “While global growth is annually producing millions of new jobs, unemployment remains unacceptably high and may go to levels not seen before this year. What’s more, though more people are in work than ever before, this doesn’t mean that these jobs are decent jobs. Too many people, if not unemployed, remain among the ranks of the working poor, the vulnerable or the discouraged,” he added. The ILO report noted that the reduction in the growth in developed economies attributed to credit market turmoil and higher oil prices so far had been “compensated for in the rest of the world,” especially in Asia, where economic and job growth remained strong. But an expected slowdown in growth during 2008 could increase the global unemployment rate to 6.1%, resulting in an absolute increase of at least 5 million unemployed worldwide. At a media briefing Tuesday, Jose Salazar-Xirinachs, Executive Director of the ILO Employment Sector, said that after several years of sustained global growth, the world is facing turbulence and the prospect of slower growth. Significantly, turbulence in the US and Europe has so far not impacted labour markets in other regions, but this is a very important issue and a very strong possibility, he added. Risks for the global economy in 2008 should be watched carefully, Salazar-Xirinachs said, adding that the important question for the ILO is how labour markets worldwide will react to slower growth or growing uncertainty. On
the outlook for 2008, he said that the basic question is whether the
turbulence stemming from the crisis in the In response to a question, Salazar-Xirinachs said that the estimates in the ILO report are based on the review done by the IMF in September. It looks like what happened from September to today is obviously not good news. It is very likely that there will be revisions of rates of growth downward for developed economies. If this happens, then the ILO’s estimates of impact in labour markets will have to be revised, he added. Dorothea
Schmidt, author of the report, said that “we have already seen many
signs of problems in the “We
don’t know what is going to happen in 2008,” she said, adding however
that the signs are not all negative. It could be that “That of course doesn’t help any of the people who lose their jobs in the developed economies and that is really the people that we have to worry about,” she added. The ILO report noted that the IMF reduced the GDP growth estimate for 2008 from 4.9% (April estimate) to 4.8% for the world. This global downward revision is the result of a downward adjustment for the developed economies and the European Union region where the earlier expected growth rate of 2.6% was reduced to 2.2%. However, with increasing globalization and the participation of more and more countries, probably for the first time, a slowdown in this important region has so far not had a negative impact on the economic and labour market performance of the rest of the world. According to the IMF, even in 2008, the risk of a slowdown in the world economy exists, but there is also a chance that other regions are strong and independent enough to offset this slowdown in the industrialized economies. As a result, other regions’ GDP saw an upward adjustment in comparison with the April estimates. If it turns out that worldwide growth no longer only depends on the performance of the industrialized world, the fact that, in the Developed Economies and European Union, 240,000 fewer jobs will be created as a result of slower growth - which motivated the IMF’s downward revision - will be more than compensated for by job creation in the rest of the world, said the ILO. According to the ILO report, global economy growth of 5.2% created an estimated 45 million new jobs in 2007, but failed to have any significant impact on the growth of unemployment. Overall, 61.7% of the global population of working age - or an estimated 3 billion people - were employed in 2007. Although the global unemployment rate remained virtually constant at 6%, that meant an estimated 189.9 million people, compared to 187 million in 2006, were unemployed worldwide in 2007. The ILO said that not only is there a rather low impact of growth on job creation, but there is also another concern: the ongoing (but, already slightly decreasing) growth does not have as substantial an impact as necessary to reduce the levels of working poverty, especially in the poor regions of the world. There are still 486.7 million workers in the world who do not earn enough to lift themselves and their families above the US$1 a day poverty line and 1.3 billion workers who do not earn enough to lift themselves and their family above the US$2 a day line. In other words, despite working, more than four out of ten workers are poor. To make a long-term inroad into unemployment and working poverty, it is essential that periods of high growth are better used to generate more decent and productive jobs. Reducing unemployment and working poverty through creation of such jobs should be viewed as a precondition for sustained economic growth, said the ILO. Looking at the share of employed people in the world’s working-age population (aged 15 years and older), known as the employment-to-population ratio, a decline was observed between 1997 and 2007. It stood at 61.7% in 2007, almost a percentage point lower than ten years earlier. The report also noted that the gap between men and women continued, with 49.1% of women of working age employed in 2007 and 74.3% of men. The gender gap in labour force participation is another indication of women’s more limited chances to take part in the world of work. In 2007, 52.5% of all women of working age was either looking for work or working. The report also underlined that the service sector continued to grow during 2007, further surpassing agriculture as the world’s most prevalent source of employment. The service sector now provides 42.7% of the world’s jobs, compared to agriculture which provides 34.9%. The industrial sector, which had seen a slight downward trend between 1997 and 2003, has continued a rather slow upward trend in recent years, representing 22.4% of global jobs. With respect to regional trends, the ILO observed that the Middle East and North Africa still had the highest unemployment rates at 11.8% and 10.9% respectively in 2007, followed by Latin America and the Caribbean, Central and South Eastern Europe (non EU) and the Commonwealth of Independent States (CIS) at 8.5%. Sub-Saharan
The inability to reduce working poverty, as a result of slow productivity growth and slow changes in vulnerable employment (the sum of own-account workers and contributing family workers as a share of total employment) combined with the growing number of unemployed, has resulted in sub-Saharan Africa being considered as unable to reach the MDG of halving the share of extreme poor by 2015, said the report. In North Africa, where productivity levels increased by more than 16% in the last 10 years, extreme working poverty is now almost eradicated at 1.6% of the employed population. Latin
America and the Working poverty shares at the US$1 a day level further decreased to a low level of 8% and also, at the US$2 a day level decreased by a considerable 8.2 percentage points to 25.4%. The
ILO said that At the same time, the region has the highest share of vulnerable employment, much of it reflecting the poor quality of jobs created. More than seven out of 10 people are either own-account workers or contributing family workers, carrying a higher risk of being unprotected, without social security and without a voice at work. In
terms of vulnerable employment as a share of total employment, South
Asia, with a rate of 77.2%, was followed by sub-Saharan Africa at 72.9%,
South-East Asia and the Pacific at 59.4%, East Asia at 55.7%, Latin
America and the Caribbean at 33.2%, the Middle East at 32.2% and The
report noted that East Asia appeared to be on its way to becoming a
middle income region, as sustained productivity growth had increased
incomes and helped lift millions of people out of poverty. In 2007,
Total employment in 2007 increased by 7.5 million, 0.9% more compared to the previous year. This increase accounts for 16% of all jobs created in the world in 2007. The unemployment rate continues to remain at low levels. It decreased between 2006 and 2007 and was 3.3% in 2007, the lowest rate observed in any region and any year between 1997 and 2007. The estimated share of East Asian workers living with their families below the US$2 per day poverty line dropped to 35.6% today from 59.1% 10 years ago, while the percent living below US$1 per day had decreased to 8.7% from 18.8% over the same period. The
Developed Economies and European Union (EU) region grew by 2.5%, less
than the year before. The smooth performance of the region in recent
years (the ten year annual growth rate was 2.6%) was slightly disturbed
as a result of turbulence stemming from a crisis in the Labour market indicators for the region did not confirm the positive trends of more recent years, but showed signs of some stagnation between 2006 and 2007. The number of unemployed increased by 600,000 and was 32.1 million in 2007. The
outlook for the coming years is not as positive, said the ILO. The IMF
apparently saw the slowing down effect caused by oil prices and the
turbulence in the But, now that growth for GDP in the region is forecast to be only 2.2% instead of the original 2.6%, it is expected that 240,000 fewer jobs will be created in 2008 than would have been created with a GDP growth of 2.6%. However,
the ILO analysis also indicated that from a global perspective this
downward tendency in the developed economies would be “offset by the
rest of the world”, largely due to strong economic and jobs growth in
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