Global Trends by Martin Khor

Monday 24 June 2013

Tackling the global jobs crisis

With social unrest and unemployment being coupled worldwide, there is urgent need to restore full employment as a global and national priority goal.


Unemployment has reared its ugly head to become arguably the world’s biggest economic and social problem once again.  The situation today is not unlike the Great Depression period in the late 1930s and early 1940s, when millions were thrown out of work.  

Lack of jobs was associated with unrest then, and some historians think it contributed to World War Two.   It is now also a major factor in street protests in Europe and unseated political leaders in Egypt and elsewhere.

Now, as then, there is confusion in intellectual and policy discussions on what has caused and how to tackle unemployment.

Global unemployment is now slightly above 200 million.  It grew by 4.2 million last year and will do so by another 5 million in 2013, according to the International Labour Organisation.

There are 28 million more unemployed people today than in 2007, when the global financial crisis started.  But the figure climbs to 67 million as a “global jobs gap”, if we include those who chose to stop looking for jobs.

Globally, 73 young people are unemployed, a 12.6% rate.  But in some countries, 30 to 40% of the young are jobless and thus susceptible to frustration and rebellion.

At the United Nations last week, employment was one of the main issues discussed at a working group tasked with formulating sustainable development goals (SDGs).

In fact, the UN should adopt employment as a top priority issue, for obvious reasons.  It is the most important indicator whether an economy is healthy.  It is the gateway to social development, as people with jobs are more likely to escape poverty and fulfil their basic needs. 

Thus “the attainment of full employment” should be accepted as a major SDG.  And “employment” should include formal jobs as well as livelihoods in the farm and urban informal sectors.

Full employment was widely recognised as the major goal of economic policy in the post-Second World War period.  The leaders swore not to have a long period of high unemployment again, as in the Great Depression. 

After the war, international organisations like the UN, the IMF, the ILO, the GATT and   UNCTAD were set up, and employment was one of their top priorities.  One of the first UN conferences in 1947 was titled the UN Conference on Trade and Employment; it led to the creation of the multilateral trading system.  

“Ensuring full employment” is a main objective of the WTO.  The IMF has “promotion and maintenance of high levels of employment and real income” as a main purpose.

In Economics taught in school and universities, and in government policy circles, the attainment of full employment was accepted as the main priority in economic policy, together with adequate economic growth.

However, full employment was downgraded as a policy goal starting in the 1980s, to be sidelined by other goals, including controlling inflation, reducing the budget deficit, eliminating tariffs, and cutting the size and role of government.

These other goals became central in the Washington Consensus and the “structural adjustment policies” that the IMF and World Bank imposed as conditions for receiving loans.

Many developing countries that faced debt problems took on these policies to avoid default.  Today this story is repeated in many European countries as “austerity” is adopted as the priority policy set. As a result, employment and growth were set aside.  

The resulting rise in unemployment, accompanied by recession and inequality, has catapulted job creation into the centre stage as a public demand, in conflict with the austerity programme.

A policy war is raging between those who stress the need to tackle unemployment now while addressing the budget deficit in the medium term, and those insisting on wide and deep austerity measures now.

The anti-austerity camp is gradually winning, as the facts on the ground show a rise in unemployment and a fall in growth rates.

The developing countries are increasingly affected by the austerity policies, especially as the Western slowdown is now affecting their exports, currencies, capital flows and growth rates.

To avoid a worsening employment situation, the developing countries need favourable international policies, including:

  • Avoidance by developed countries of national policies that adversely affect the employment situation of developing countries. 
  • International financial institutions and aid agencies should avoid policy advice and conditions that have negative impact on employment in developing countries. 
  • Attaining full employment in developing countries should be adopted as a top priority objective in international agencies.
  • Criteria for debt sustainability for developing countries should fully take account of the requirements for generating sufficient employment.
  • Trade rules and negotiations should give the highest priority to the maintenance and promotion of employment in developing countries the highest priority.      

Globally, full employment should be restored as a top economic policy goal.  This should be translated at the national level into full employment as a top priority in national goals and targets, including in fiscal and development policies.

Developing countries that face shortfalls in government budgets required to fund programmes that generate employment-intensive growth to a level sufficient to attain full employment, should be by able to draw on international financing and other supports.