Data on global unemployment released by the International Labour Organization (ILO) on Tuesday makes for unhappy reading. And the numbers are alarming.
In 2012, there were 197 million persons without a job. In the next five years this number is expected to rise to 210.6 million. Even if one discounts new entrants to the job market globally, the picture is one of stagnation. The global economy will not grow at the pace that is required to absorb this large pool of workers in the coming years.
The situation for those out of work now is dismal from another perspective as well. Prolonged unemployment has deep de-skilling effects, making future employment difficult. Very often, such persons simply stop searching for jobs. This has deleterious social effects. A stable level of unemployment is a normal feature of most developed economies. These countries had created institutions to ensure that those out of work did not turn destitute. But such has been the scale of the global economic upheaval that these mechanisms have broken down. It is not surprising to understand why. Spain, to give one example, suddenly faced double-digit unemployment rates in the past two years after its housing bubble burst. It simply is not possible for economies powered by volatile sectors to re-employ large pools of labour in different sectors. Skills, growth rates and other issues do not permit that.
It is also not clear what can be done. The usual remedy for getting out of recessions—fiscal expansion—is not available to these countries. Their national balance sheets have been whipped out of shape by efforts to salvage their financial institutions.
That, however, is the situation in the “rich” economies. South Asia, too, has been affected with global headwinds. But there is a difference: unlike Europe and North America, where there are few, if any, sources of organic growth, countries such as India have a huge latent investment demand that has been derailed due to poor policy choices. The lesson from the ILO data is to quickly ensure that pro-growth policies are reignited.
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