Mumbai: Five years after the outbreak of the global financial crisis, triggered by the Lehman Brothers collapse, global growth has decelerated and unemployment started to increase again, leaving around 197 million people without a job in 2012, according to a report released on Tuesday by the International Labour Organization (ILO)—a United Nations (UN) agency dealing with labour issues.
Some 39 million people have dropped out of the labour market as job prospects proved unattainable, opening a 67 million global jobs gap since 2007. In the medium term, the global economy is expected by many commentators to recover, but growth will not be strong enough to bring down unemployment quickly. Even with an acceleration of growth, the global unemployment rate is expected to remain at 6% up to 2017, not far from its peak level in 2009. At the same time, the global number of unemployed is expected to rise further to some 210.6 million over the next five years, the report said.
Despite a moderate pick-up in output growth expected for 2013-14, the unemployment rate is set to increase again and the number of unemployed worldwide is projected to rise by 5.1 million in 2013, to more than 202 million in 2013 and by another 3 million in 2014. A quarter of the increase of 4 million in global unemployment in 2012 has been in the advanced economies, while three quarters has been in other regions, with marked effects in East Asia, South Asia and Sub-Saharan Africa. Those regions that have managed to prevent a further increase in unemployment often have experienced a worsening in job quality, as vulnerable employment and the number of workers living below or very near the poverty line increased.
The ILO report noted that following a strong economic performance in 2010, growth in South Asia weakened in 2011 to 6.5%. With the continuing sovereign debt crisis in the European Union (Euro area), sluggishness in the US economy, and slowdown in China and other emerging economies, it is not surprising that economic conditions in South Asia have further deteriorated with growth projected to be just 4.9 per cent in 2012. It pointed out that domestic problems, namely political paralysis in countries like Nepal and the Maldives, uncertainty and falling investor sentiment in India, and fragile conditions in Afghanistan and Pakistan, have also played a large role in dampening growth, adding that the three best performers in the region continue to be India, Sri Lanka and Bangladesh. Gross domestic product (GDP) growth in 2012 in these three countries is estimated to be 6.9% (revised down to 6.1% in July 2012), 7.5% and 5.9%, respectively (IMF, 2012b). South Asia has been the second-fastest growing region in the world in recent years, mostly thanks to India’s contribution, and is likely continue to be so despite the slowdown and domestic constraints, the report said.
As noted in the Global Employment Trends 2012 report, robust economic growth in South Asia in the 2000s was largely associated with an improvement in labour productivity rather than job creation, which has been referred to as “jobless growth”, a phenomenon most notable in India. In India’s case, total employment grew by just 2.7 million from 2004–05 to 2009–10, compared with over 60 million during the previous five-year period (1999–2000 to 2004–05). However, this does not suggest a static labour market; rather there are many transitions taking place, most importantly a withdrawal from the labour force among young people and women, lowering net employment growth, the ILO report said.
A major reason for the slow growth in employment in countries like India is the fall in female labour force participation. In India the participation rate for women fell from 37.3% in 2004–05 to 29.0 per cent in 2009–10. This can be partly explained by increasing education enrolment in secondary schools across the country, the report noted.
In India, unemployment rates increased rapidly for high-skilled workers, in particular women. Indians with a diploma suffer particularly, with unemployment rates reaching 34.5% for women and 18.9% for men during 2009-2010. However, occupational choices bear a strong impact on the risk of joblessness as workers with technical education face lower unemployment rates than other graduates (only for men). At the same time, Indian employers have trouble hiring staff: according to the 2011 Manpower Talent Shortage Survey, 67% of employers stated that they had difficulties filling positions, it noted.
The current global slowdown and domestic challenges in South Asia will mean that the goal of creating more decent work will be even more elusive over 2013, the ILO report concluded. Persisting uncertainty and insecurity in Afghanistan (with the transition approaching) and Pakistan, and political paralysis in Nepal and the Maldives, implies that these economies will continue to lag behind the progress made in the fast- growing South Asian countries. At the same time, India faces its own political hurdles and wavering investor sentiment in light of a high current account and fiscal deficit, the report said.
Effect on youth
Young people remain particularly stricken by the crisis, noted the report. Currently, some 73.8 million young people are unemployed globally and the slowdown in economic activity is likely to push another half-million into unemployment by 2014. The youth unemployment rate--which had already increased to 12.6% in 2012--is expected to increase to 12.9% by 2017. The crisis has dramatically diminished the labour market prospects for young people, as many experience long-term unemployment right from the start of their labour market entry, a situation that was never observed during earlier cyclical downturns, the report noted.
Currently, some 35% of all young unemployed have been out of a job for six months or longer in advanced economies, up from 28.5% in 2007. As a consequence, an increasing number of young people have become discouraged and have left the labour market. Such long spells of unemployment and discouragement early on in a person’s career also damage long-term prospects, as professional and social skills erode and valuable on-the- job experience is not built up, the report added.
The ILO comprehensive guidance on how to do this is contained in the Call for Action on the Youth Employment Crisis agreed by governments, workers and employers at the June, 2012 International Labour Conference. Besides pro-employment macroeconomic policies and active labour market policies, three specific types of interventions are considered particularly relevant: i) enhancing young people’s employability through measures such as better links between the world of education and training and the world of work, including apprenticeships; improving young people’s access to information on career opportunities, support for job search, and youth employment guarantee schemes; ii) encouraging youth entrepreneurship; and iii) promoting labour standards and rights of young people by ensuring that they receive equal treatment and are afforded rights at work, including their right to organise and bargain collectively, and ensuring their adequate social protection.
Economic outlook remains cloudy
The global economy is projected to show a modest rebound beginning in 2013, with output growth edging up to 3.6% versus 3.3% in 2012 (IMF, 2012b). Even if the expected recovery is set to strengthen, global unemployment is likely to remain elevated and even increase further over the short term, the ILO report noted.
The rise in estimated global unemployment by 4.2 million in 2012 is one of the largest increases since the early 2000s, excluding the immediate crisis years, the report said. Reaching 197.3 million jobseekers in 2012, the number of unemployed is expected to rise further by about 5 million in 2013 and by 2.9 million in 2014 in the ILO’s baseline projection, which assumes effective policy action in the US to avoid a sharp reduction in fiscal expenditures and successful resolution of the debt ceiling discussions and no intensification of the Euro area sovereign debt and banking crisis.
At the same time, the global unemployment rate is projected to edge higher and remain stuck at around 6% until at least 2017. The larger increase in global unemployment projected for 2013 as compared with 2012 is due to projected increases in the Developed Economies and European Union region as well as South-East Asia and the Pacific, South Asia and Latin America and the Caribbean. Some of this, in turn, is due to population and labour force growth, while some is due to lags between economic changes and changes in the labour market.
The report pointed out to a great deal of heterogeneity among the regions of the world with regard to trends in unemployment but also a general divide between developed and developing regions. One reason for this divide is that by and large, developing economies have significantly outperformed developed economies during the recovery period in terms of economic growth, it noted. Another reason for the divide in unemployment trends between developed and developing economies is that in developing countries, which often have large shares of workers outside of formal, wage employment, unemployment rates typically have a weaker correlation with macroeconomic changes than in developed economies.
Labour productivity growth slowed sharply in 2012, the ILO report said. At the global level, output per worker grew by only 1.9% in 2012, down from an average of 2.9% in the two previous years and below the pre-crisis average growth rate of 2.3%. All regions excluding North Africa and Sub-Saharan Africa experienced a decline in productivity growth, and growth remains well below the pre-crisis trend in the developed economies and European Union, Central and South- Eastern Europe (non-EU) and CIS, East Asia and South Asian regions.
Trends in employment
Meanwhile, new ILO research has for the first time also produced a further breakdown of the developing world’s workforce, providing a first glimpse of trends in employment across five economic classes:
(1) the extreme working poor (less than US$1.25 a day)
(2) the moderate working poor (between US$1.25 and US$2)
(3) the near poor (between US$2 and US$4)
(4) middle-class workers (between US$4 and US$13)
(5) above middle-class workers (otherwise called “developed world middle-class and above”, which are those workers living in households with per capita consumption greater than US$13 per person per day).
The new ILO estimates of employment by economic class show that in addition to the 868 million workers living with their families below the US$2 poverty line, there are 661 million “near poor” workers--living between US$2 and US$4 a day, amounting to 25.2% of the developing world’s workforce. The number of near poor workers has increased by nearly 142 million over the past decade, with more than 141 million of this increase occurring outside East Asia. Altogether, 58.4%of the developing world’s workforce remained either poor or near poor in 2011.