Uneven job recovery poses challenges to most countries, UN labour agency reports

International Labour Organization (ILO) Director-General, Guy Ryder. Photo: ILO

3 June 2013 – Five years after the global financial crisis, the world employment situation remains uneven with emerging and developing economies recovering much faster than most advanced countries, the United Nations labour agency today reported, warning of potential social unrest, particularly in Europe.

“These figures present a positive development in many parts of the developing world, but paint a disturbing picture in many high income countries, despite the economic recovery,” said UN International Labour Organization’s (ILO) Director-General, Guy Ryder.

“We need a global recovery focused on jobs and productive investment, combined with better social protection for the poorest and most vulnerable groups. And we need to pay serious attention to closing the inequality gap that is widening in so many parts of the world,” Mr. Ryder stressed.

According to ILO’s World of Work report 2013, ‘Repairing the economic and social fabric,’ income inequalities have increased in advanced economies over the past two years, against the backdrop of increasing global unemployment – predicted to rise from the current 200 million to nearly 208 million by 2015.

Over 30 million jobs are still needed to return employment to the pre-crisis levels, according to the report, while an additional 16.7 million positions are needed for the young people who will reach working age this year.

This is a particular challenge for the numerous college graduates this year, as the authors note the need to advances in educational attainment with decent work opportunities as “a major global challenge for the years to come.” Young people and women almost globally find it difficult to find jobs that match their skills and aspirations.

The authors praise some advanced economies for managing to recover some of the jobs lost, in particular Australia, Canada, New Zealand and the Republic of Korea, with positive signs of recovery also in Japan and the United States. Europe, in contrast, still faces significant challenges to its labour marked and its social outlook continues to deteriorate.

“More and better jobs are needed so there can be a more balanced distribution of income in both advanced and developing economies,” said Raymond Torres, Director of the International Institute for Labour Studies, the research arm of the ILO.

The report also shows a reduction in the middle class in many advanced economies, “fuelled in part by long-term unemployment, weakening job quality and workers dropping out of the labour market altogether.”

“The shrinking size of middle-income groups in advanced economies is a matter of concern, not only for the inclusiveness of those societies but also for economic reasons,” Mr. Torres said. “Long-term investment decisions by enterprises also depend on the proximity of large and stable middle-income groups which are in a position to consume.”

In developing and emerging economies, however, the size of the middle-income group has grown from 263 million in 1999 to 694 million in 2010.

The growth is especially significant in the majority of Latin America, which underwent stagnation in the 1990s. The middle class grew by 16 percentage points in Brazil, an upper-middle-income group, and 46 per cent in Honduras, a middle-income group economy.

In the Middle East and North Africa (MENA), of the growth among lower-middle-income countries, the middle class grew especially in Morocco, doubling from 4 million in 1999 to 9 million in 2010. However, the report authors point out that the poor and vulnerable still represented 70 per cent of the population in 2010.

Authors also noted a vulnerable “floating group” comprised of people just above the poverty line, whose numbers grew from 1.1 million in 1999 to 1.9 million in 2010, mostly in low and low-middle income economies.

“This emerging middle class is actually quite fragile and most or the large majority of people within this group are living just above the poverty level of $2 a day, so the middle class is not middle at all in terms of the standards that we think and we understand,” ILO economist Marva Corley-Coulibaly, who worked on the report, told UN Radio.

“There aren’t additional programmes, qualities of employment, there isn’t there that additional impetus to help them to move up the economic ladder,” she said.

These trends have fuelled social tensions among some developing and advanced economies. The authors conducted a social risk analysis of the data focusing on economic growth and the unemployment rate as the key factors.

“Out of 71 economies for which information is available, the risk of social unrest increased in 46 of them between 2011 and 2012. The risk of social unrest is the highest among the EU-27 countries,” according to the report.

Between 2010 and 2012, the countries that experienced the sharpest increases in the risk of social unrest are Cyprus, Czech Republic, Greece, Italy, Portugal, Slovenia and Spain; while the risk of social unrest declined in Belgium, Germany, Finland, Slovakia and Sweden.

In addition, inequalities rose between 2010 and 2011 in 14 of the 26 advanced economies surveyed, including France, Denmark, Spain and the United States, while inequality levels in the majority of the remaining 12 countries were still higher than before the start of the crisis.

Risk of unrest also increased among Central and South-Eastern European (non-EU) and Commonwealth of Independent States (CIS) countries, as well as those in South Asia.

In the Middle East and North Africa the risk of social unrest peaked in 2008 and has remained elevated compares with the pres-crisis period.

Meanwhile, the risk of social unrest declined in Sub-Saharan Africa, East Asia, South East Asia and the Pacific. Countries in Latin America and the Caribbean in particular experienced a relatively swift recovery from the global crisis, in large part due to the combination of expansionary fiscal policies and the increase in commodity prices, according to the report.

The authors also praised countries like Brazil, mentioned earlier, Costa Rica, India, among others, were able to utilize productive investment, minimum wages and social protection to consolidate economic progress and reduce poverty and inequality.

Among its recommendations, the ILO urges countries to adopt a more sustainable approach to fiscal consolidation, to pay more attention to the employment and social impact of different macroeconomic policies.


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