Worst jobless crisis since the 1930s says ILO
The world faces its worst employment crisis since the Great De
pression in the 1930s, according to the ILO in its report 'world Employment
1995'. In 1994. about 820 million people were either unemployed or underemployed
throughout the world - a situation which ILO Director-General Michel Hansenne
describes as 'both morally unacceptable and economically irrational'. It is
creating, he says, 'an enormous waste of resources and deepening human
suffering'. Hardest hit are the developing countries which account for 95% of
the 820 million.
The report, prepared for the March World Summit for Social
Development in Copenhagen, warns that, except for a few countries, job-creation
prospects remain gloomy throughout the world. Current growth trends will not 'be
sufficient to cure Europe's endemic employment ills, reverse the decline in real
incomes, halt the spread of poverty and underemployment in developing countries
or prevent the marginalisation of Africa'
However, if appropriate economic policies are adopted both
nationally and internationally, resulting in higher growth, joblessness in the
industrialised countries (35m in 1994) could be halved in the next decade and
the impact felt in the developing countries Mr Hansenne argues for an
international commitment to full employment, such as was made after World War
II. This will provide the basis for international cooperation, without which, he
says, the present crisis will not be resolved.
Four key steps need to be taken. The first concerns trade
liberalisation for which the new Gatt agreement provides the framework This
treaty must be fully implemented if maximim benefits are to be derived from it.
Tariff cuts will increase not only North-North trade flows in menu factured
goods and job opportunities in the industrialised countries, but also
North-South trade, which could fuel migration of low-skilled manufacturing jobs
to the South. The agreement will liberalise, in particular, northern textile and
other manufactured goods markets for the developing countries. Although the
South in this regard will present a challenge to the North, the situation will
provide the latter with countless business opportunities enabling it to create
'the next generation of jobs'. The report calls on developing countries to
abandon 'failed policies of import substitution' and end the practice of
allocation of scarce capital resources which creates distortions.
The second step relates to increased international cooperation
in respect of financial markets, balance of payments problems and long-term
interest rates. The overall objective will be to channel more of the world's
savings to productive real investments and to achieve lower interest rates which
are vital for investment and job creation. Foreign direct investment (FDI), the
report notes, can be a powerful spur to growth and employment. Unfortunately,
the vast majority of developing nations have received little of this in recent
years: although, as a whole, developing countries attracted $70 billion in FDI
in 1993, 70% of this went to just 10 advanced developing countries while the 47
least-developed received only a marginal and declining percentage. The need for
LDC policies that favour FDI could not be greater. These policies must include
'economic and political stability, a favourable attitude towards private
enterprise, and clear and transparent policies towards investors, especially
multinational enterprises.' I he report recognises that creating the right
environment for investment promotion will involve extensive (and unavoidable)
reforms for many countries, including labour market reforms.
The third step is the adoption of export-led development
strategies, which have proved so successful in economic growth and employment in
test Asia However, the report warns developing countries to guard against
'artificial promotion or protection of activities which have no hope of becoming
internationally competitive., More open economic policies should guide
production and trade, but they should be in line with each country's comparative
advantage.
The fourth concerns the labour market. The report rejects the
argument that deregulation will resolve the unemployment and poverty afflicting
most of the industrialised world Proponents of deregulation, it says, point to
various features of market regulation in Europe- including strong unions,
stringent protection and generous welfare provision as an explanation for high
unemployment levels in comparison to those prevailing in the less regulated USA.
This, it explains, overlooks the fact that labour market
performance has deteriorated in all OECD countries since the first oil shock of
1974 'irrespective of differences in labour regulations' The report also rejects
the view that high wages in Europe are directly responsible for high
unemployment. It admits. how ever, the need for positive adjustment measures to
be taken to improve labour markets, including reduction of non-wage labour
costs, retraining of workers and reforming unemployment benefit systems which,
it acknowledges, have a link with the duration of unemployment. Generally
speaking,'a 10% increase in benefits leads to a 3% increase in the average
duration of unemployment spells.' The appropriate response, in Michel Hansenne's
opinion, is to 'make it more profitable for firms to hire the long-term
unemployed.'
The report warns developing countries to be on their guard in
seizing the opportunities presented by the new Gatt agreement They need to adopt
a balanced, two-pronged strategy aimed at generating more modern sector jobs,
while upgrading the skills and living standards of the vast majority of the
labour force in the low-productivity rural and urban sectors 60% of urban
workers in sub-Saharan Africa are engaged in unorganised activities in the
informal sector. Most are vastly underemployed. Given the magnitude of poverty
and underemployment in the developing countries, the report says that it 'is
important that development policies should not be biased against them and that
measures to reduce unemployment and poverty be given priority in government
programmes.
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