Evidence on the impact of the economic crisis on jobs and the policy response challenge: The ILO Glo

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Evidence on the impact of the economic crisis on
jobs and the policy response challenge The ILO
Global Jobs Pact

• José Manuel Salazar-Xirinachs
• Executive Director, Employment Sector
  International Labour Organisation
• Geneva, Switzerland

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Contents

• Global Trends
• Global Scenarios
• Policy issues and the ILO Global Jobs Pact

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I. Global Trends
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Global Employment Trends, 1998-2008
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Global unemployment trends by sex 1998-2008
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II. Three Global Scenarios

• 1. Unemployment
• 2. Working Poor
• 3. Vulnerable employment (own account workers and
  unpaid family workers)

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Unemployment-Methodology

• Scenario 1 Optimistic Scenario. based on the
  observed long-term relationship between GDP
  growth and employment at the individual country
  level (employment elasticities, calculated
  separately for men and women). This provides the
  lower bound.
• Scenario 2 Intermediate takes the largest drop
  in GDP observed in each country since 1991 and
  its impact on unemployment and applies this
  relationship in 2009 assuming it happens in all
  countries simultaneously. It is not a long-term
  relationship, but a projection on the basis of a
  particular "crisis" year in each country
  (calculated separately for men and women).
• Scenario 3 worst case scenario. Does not use the
  relationship between GDP growth and unemployment.
  It is constructed taking the largest percentage
  point increase in the unemployment rate observed
  in each country in any one year and applies it to
  each country in 2009 in comparison to 2008. In
  other words, the scenario shows what would happen
  if the worst observed impact on the unemployment
  rate would repeat itself simultaneously in all
  countries (calculated separately for men and
  women). This scenario is not based on the
  historical relationship between economic growth
  and employment, so it is not affected by the
  revisions in GDP growth rates.

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Global unemployment scenarios 2009
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Global female and youth unemployment scenarios
2009
Female
Youth
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2009 Working Poor ScenariosMethodology

• Scenario 1 Projects trends up to 2007 to 2008
  and 2009 based on the IMF estimated growth rates
  (Nov 2008).
• Scenario 2 assumes that individuals that are on
  the fringe (just above the poverty line by 5)
  will fall back into extreme poverty in 2008. 10
  above for 2009.
• Scenario 3 assumes that individuals that are
  just above the poverty line by up to 10 in 2008
  and by up to 20 in 2009, will fall back into
  extreme poverty.

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Global working poor - Scenarios (USD 1.25)
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Global working poor - Scenarios (USD 2)
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Global vulnerable employment scenarios 2009
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CONCLUSION

• In 2009 the financial and economic crisis will
  hit labour markets in both developed and
  developing countries, creating a jobs crisis,
  potentially affecting social stability in many
  countries

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III. Policy issues and the ILO Global Jobs Pact
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Present situation

• Developed countries
• A vicious circle of negative interactions between
  financial markets, product markets, trade and
  labour markets.
• Job losses lead to lower consumption, which
  lowers industrial confidence, which leads to less
  investment, which results in more job losses
• Developing countries, multiple transmission
  mechanisms
• Reduced trade flows
• Decline in commodity prices
• Reduced liquidity and tightening of credit
  markets
• Reduced flows of remittances
• Drop in FDI
• Declining flows of ODA

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Present situation

• Credit crunch continues
• Confidence not restored yet
• Trade-FDI continue to contract
• Labour market and social impacts not receiving
  sufficient attention
• Neither is the development dimension

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A Global Jobs Pact

• A set of principles to provide an agreed basis
  for policy responses
• A policy package that recognizes that
• The causes of the crisis are interconnected
  (financial, lack of aggregate demand, trade,
  labour markets), so the solutions should also be
  interconnected
• The crisis should be looked from perspective not
  only of restoring growth but also of social
  justice and fair globalization
• The more central employment and social protection
  are in expansionary policies, the greater the
  economic stimulus
• A commitment to solutions which are local as well
  as global, coordinated, development oriented,
  people-centred, inclusive, urgent.
• A type of fiscal stimulus that is focused on the
  achievement of productive employment and decent
  work

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Principles of the Global Jobs Pact

• Need to ensure the flow of credit to consumption,
  trade and investment
• Use of fiscal and wage measures to stimulate
  domestic and global aggregate demand, while
  avoiding wage deflation
• Extending social protection and unemployment
  benefits
• Focusing on the needs of the most vulnerable
  groups
• Supporting and sustaining productive and
  profitable enterprises
• Implementation of the fundamental principles and
  rights at work
• Avoiding trade protectionism
• Social dialogue within and across borders
• Maintaining development aid and providing finance
  to low income countries to cushion the impacts of
  the crisis

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Integrated Policy Package

• Coordinated fiscal stimulus to maximize the
  global multiplier effect on aggregate demand.
• Credit needs to be restored and the financial
  system mended and properly regulated.
• The labour market and social dimensions of the
  crisis need to be addressed nationally and in
  global cooperation efforts to mitigate the
  impacts on people.

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An Operational Decent Work response Key policy
areas

• Fiscal Stimulus packages that make decent work a
  cornerstone of the recovery
• Emergency employment-intensive public works
• Emergency support to sustain and restructure
  enterprises and sectors, and stimulus for sectors
  with strong job generation potential, including
  green jobs
• Employment and labour market policies, including
• Measures to promote alternatives to layoffs,
  support re-employment and for new entrants to the
  labour market (work sharing, training, job search
  assistance and placement, temporary tax/subsidy
  measures)
• Measures to support to self-employed and the
  informal economy
• Strengthening of public employment services
• Social protection programmes for crisis
  management and response
• Emergency support to labour administration,
  inspection
• Prevent erosion of ILO core principles and
  standards during crisis
• Support to social dialogue at enterprise,
  sectoral and national level for all of the above
• Adequate governance structures for international
  funds established with the objective of
  supporting countries in these areas

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Conclusion

• The ILO is in process of preparing and
  elaborating this Global Jobs Pact concept between
  governments, employers and workers.
• We would like to invite all of you to be part of
  this global exercise on which we are working
• And we hope the G-20 group could support these
  ideas and initiatives on the labour market and
  social policy responses to the crisis that put
  employment and social protection at the center of
  the response