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    Employment Meltdown


    International Trade Forum - Issue 1/2009

    © International Labour Organization Juan Somavia

    The jobs crisis is severe and escalating, threatening increased poverty and prolonged social unrest around the world. But, with a coordinated response from policy-makers, it's within our means to avert it.

    We are facing a global jobs crisis. Already, a huge gap is opening up between people with work and without. Unemployment is rising rapidly, and is expected to reach 230 million people worldwide this year. More people are being pushed into the informal sector. Meanwhile, labour forces grow and new people seek to enter the labour market. An estimated 90 million new jobs will be required over the next two years just to keep unemployment at its current level.

    The crisis has reversed the trends that recently saw poverty in decline. The number of working poor - people unable to earn enough to lift themselves and their families above the US$2 per person, per day poverty line - may rise by more than 100 million, reaching up to 1.4 billion, or 45% of the world's workers.

    The downturn is global and synchronized. As it spreads, no country is immune. World trade is expected to contract significantly in 2009; commodity prices, oil and gas, metals, and even beverages have fallen precipitously. This has dire consequences for economies around the world, especially major exporting economies of Africa, Asia and Latin America. However, food prices have stayed above past trends, affecting the purchasing power of millions of families. And for the first time in decades, it is likely that migrant remittances will fall, impacting the economic security of many dependent households.

    We may be headed for a vast, prolonged and severe jobs crisis. Just as policy-makers have taken bold and swift action to respond to the financial and economic downturn, similar bold action is required to address the jobs crisis. Failure to do so will affect hundreds of millions of people. The human cost of widespread employment loss is very high and can carry great uncertainty, frustration and social instability.

    The risk of a social crisis is further aggravated by the weakening of social protection. We can no longer rely on 'market-solves-it-all' approaches. Private pensions have devalued by around 20%. Millions with no pensions or unemployment benefits have no social protection. Many developing countries lack even a minimal social safety net.
    Financial stimulus packages aimed at banks have been five times larger than fiscal stimulus packages aimed at people, according to a recent International Labour Organization (ILO) survey of 40 countries. Such imbalance shows a lack of support for the real economy. Less-developed countries lack the fiscal space to support the working poor.

    We can avert a social crisis of considerable proportions and unpredictable risks

    First, jobs and social protection must become the bedrock of crisis responses. Bold measures are needed: to safeguard jobs that can be saved, through partial subsidies, lower working hours and training schemes; to compensate for income losses where possible with unemployment benefits and other cash transfers; to place job creation at the centre of public investment through close scrutiny of estimated job effects; and to strengthen employment services to guide job seekers, especially younger ones, towards new growth areas, such as green technologies. What the ILO calls 'social dialogue' is needed to enable employers and workers to join in designing measures, while also enhancing political support for the crisis strategy.

    There is a risk of wage deflation and an erosion of workers' rights, as countries may be tempted to weaken values and take any or all measures to improve competitiveness. This would only aggravate the crisis.

    Second, the response must be coordinated and global. All countries must join in making employment and social protection a centrepiece of their crisis responses. The ILO is proposing a Global Jobs Pact as a shared platform for national, regional and global responses to the jobs crisis. This will be further refined at the International Labour Conference in June 2009, which will centrally address the jobs crisis.

    Third, there was a crisis before this crisis and we cannot just aim to go back to business as usual. The root causes of the crisis comprised inappropriate financial regulations, growing income inequalities and inadequate employment opportunities. We overvalued the market, undervalued the state, and devalued the dignity of work, the protection of the environment and social solidarity.

    The crisis is teaching us harsh lessons. The ILO pointed out in 2004 that globalization was unsustainable without a strong social dimension. Rethinking global governance institutions is overdue. Any recovery from the current slump should build on the foundations of social, economic and environmental sustainability that are lacking. Crisis responses should be geared towards a stronger, fairer and greener world economy.

    In restoring confidence, we must focus on building people's trust in progress towards a new vision of a fairer, cleaner, more stable world. We must forge a response that puts people first as we seek to build out of the crisis and achieve a fair globalization.