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From International Labour Organization

World of Work Report 2010
from one crisis to the next?

This new report by the research arm of the International Labour Organization (ILO) says a long “labour market recession” is worsening the social outlook in many countries.
The new study entitled “World of Work Report 2010 – from one crisis to the next?” acknowledges that three years into the crisis, the global economy has resumed growing, with some countries witnessing encouraging signs of employment recovery – significantly in emerging economies in Asia and Latin America.
However, the report by the ILO’s International Institute for Labour Studies also warns that “despite these significant gains ... new clouds have emerged on the employment horizon and the prospects have worsened significantly in many countries”.
The ILO study says that, if current policies persist, a recovery in employment to pre-crisis levels will be delayed until 2015 in advanced economies, instead of 2013 as it projected one year ago.
At the same time, the report says, while employment in the emerging and developing countries has resumed growing, over 8 million new jobs are still needed to return to pre-crisis levels in those countries.
“The longer the labour market recession, the greater the difficulties for jobseekers to obtain new employment,” the ILO report says. “In the 35 countries for which data exists, nearly 40 per cent of jobseekers have been without work for more than one year and therefore run significant risks of demoralisation, loss of self-esteem and mental health problems. Importantly, young people are disproportionately hit by unemployment.”
“Fairness must be the compass guiding us out of the crisis,” said ILO Director-General Juan Somavia. “People can understand and accept difficult choices, if they perceive that all share in the burden of pain. Governments should not have to choose between the demands of financial markets and the needs of their citizens. Financial and social stability must come together. Otherwise, not only the global economy but also social cohesion will be at risk.”

Executive Summary

The first reason behind the deteriorated outlook is that fiscal stimulus measures, which were critical in kick-starting a recovery, are being withdrawn. Governments are worried about larger public deficits in view of investors’ reluctance to fund these deficits. In the majority of countries analysed in the Report, fiscal policy has shifted to austerity which, if badly designed, will prolong the job crisis.
A second, more fundamental factor is that the root causes of the crisis have not been properly tackled.
The coexistence of debt-led growth in certain developed countries with export-led growth in large emerging economies has proved to be the Achilles’ heel of the world economy. Before the start of the financial crisis, real labour incomes grew less than justified by productivity gains, thereby leading to growing income inequalities. In certain advanced economies such as the US and several EU countries, this situation pushed households to borrow in order to fund their housing and consumption plans –which was possible because of a dysfunctional financial system.
In other advanced economies like Germany and emerging countries such as China, growing inequalities translated into relatively modest domestic demand growth. But this was outweighed by higher exports to high-spending, debt-led economies. The private-debt bubble exploded with the onset of the global financial crisis and for a while was replaced with public debt as an engine of growth.
However, there is a limit as to how much public debt can increase in order to stimulate the economy.
For a sustainable exit from the crisis, it is therefore crucial to address both the income imbalances and the dysfunctional financial system.

Editorial - Contents - Cover
Chapter 1. World of work outlook: The challenge of job-rich recovery

Chapter 2. Global social climate: Trends and challenges for policy

Chapter 3. Job recovery in times of constrained public finances

Chapter 4. Rebalancing global growth: The role of an income-led strategy

Chapter 5. Reforming finance for more and better jobs

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