Growing unemployment across the globe

Global Unemployment Getting Bigger

· Vidyanand Acharya

Employment generation has become important parameter to measure the success of developmental policies adopted by the governments at state and at national level. However, the approach to tackle the problem of unemployment has varied from time to time and also from place to place. The gap between the GDP growth rate and employment growth rate in any country and also across the globe has attained its peak today. As a result the global unemployment situation have increased to nastiest level. The unemployment across the globe has reached at alarming height as per latest International Labour Organisation’s Global Employment Trends Report. The report warns that there could spur an increase in global unemployment by an estimated 5 million persons in 2008.

As per the report, the new projection for 2008 is in contrast to 2007, a watershed year in which sound global GDP growth – of more than 5 per cent, led to a “stabilization” of global labour markets with more people in work, a net increase of 45 million new jobs and only a slight increase in the number of people unemployed, to a total of 189.9 million persons worldwide.

“This year’s global jobs picture is one of contrasts and uncertainty”, said ILO Director-General Juan Somavia. “While global growth is annually producing millions of new jobs, unemployment remains unacceptably high and may go to levels not seen before this year. What’s more, though more people are in work than ever before, this doesn’t mean that these jobs are decent jobs. Too many people, if not unemployed, remain among the ranks of the working poor, the vulnerable or the discouraged.” Significantly, the ILO report noted that the reduction in the growth in developed economies attributed to credit market turmoil and higher oil prices so far had been “compensated for in the rest of the world”, especially in Asia, where economic and job growth remained strong. However, the ILO report warned that an expected slowdown in growth during 2008 could increase the global unemployment rate to 6.1 per cent, with a resulting absolute increase of at least 5 million unemployed worldwide.

Though the Global economy growth of 5.2 per cent created an estimated 45 million new jobs in 2007, but failed to have any significant impact on the growth of unemployment. Overall, 61.7 per cent of the global populations of working age –or an estimated 3 billion people – were employed in 2007. Although the global unemployment rate remained virtually constant at 6 per cent, that meant an estimated 189.9 million people, compared to 187 in 2006, were unemployed worldwide in 2007.

The report said five out of 10 people in the world are in vulnerable employment, either contributing family workers or own-account workers with a higher risk of being unprotected. In developing countries these two categories are most likely to work informally and hence have jobs that leave them vulnerable to poverty and risks such as low earnings, dangerous working conditions and lack of health insurance. The ILO report said an estimated 487 million workers – or 16.4 per cent of all workers – still don’t earn enough to lift themselves and their families above the US$1 per person, per day poverty line while 1.3 billion workers – 43.5 per cent – still live below the US$2 per day threshold.

The report also underlined that the service sector continued to grow during 2007, further surpassing agriculture as the world’s most prevalent source of employment. The service sector now provides 42.7 per cent of the world’s jobs, compared to agriculture, which provides 34.9 per cent. The industrial sector, which had seen a slight downward trend between 1997 and 2003, has continued a rather slow upward trend in recent years, representing 22.4 per cent of global jobs.

Regional trends

The report has produced a comprensive picture of unemployment prevailed at regional level. The report observed that the Middle East and North Africa still had the highest unemployment rates at 11.8 and 10.9 per cent respectively in 2007, followed by Latin America & the Caribbean, Central & South Eastern Europe (non EU) & the Commonwealth of Independent States (CIS) at 8.5 per cent. The situation in the Developed Economies & European Union (EU) seemed to be stagnating, the ILO report said, with job growth at its lowest in the last five years and unemployment up by 600,000 over 2006.

The ILO report said it appeared that, on current information, the initial impact of the credit crisis on Developed Economies & EU growth would result in an estimated 240,000 fewer new jobs in the region. However, the ILO analysis also indicated that from a global perspective this downward tendency in the developed economies would be “offset by the rest of the world”, largely due to strong economic and jobs growth in Asia.

ILO’s employment report said that South Asia was the leader in jobs growth during 2007, contributing 28 per cent of the nearly 45 million jobs created during the year worldwide. At the same time, the region has the highest share of vulnerable employment much of which reflects the poor quality of jobs created. More than seven out of 10 people are either own-account workers or contributing family workers, carrying a higher risk of being unprotected, without social security and without a voice at work.

The report said East Asia appeared to be on its way to becoming a middle income region, as sustained productivity growth had increased incomes and helped lift millions of people out of poverty. The ILO said the estimated share of East Asian workers living with their families below the US$2 per day poverty line dropped to 35.6 per cent today from 59.1 per cent 10 years ago, while the percent living below US$1 per day had decreased to 8.7 per cent from 18.8 per cent over the same period.

The report also noted that although the Middle East saw a considerable increase in the employment-to-population ratio the share of people of working age who were employed increased from 46 per cent in 1997 to 50.1 percent in 2007. At the same time, the Middle East was also the only region where labour productivity decreased within the same period.

The global unemployment trends clearly reveal that the process of ongoing globalisation and economic progress based on western developmental model, doesn’t automatically translate into new jobs. This shows once again that labour market policies must be at the centre of macroeconomic policies to ensure that economic growth is inclusive.