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From ILO
World of Work Report 2011 31 October 2011
Market turbulence, employment and social unrest: Trends and outlook.


The next few months will be crucial for avoiding a dramatic downturn in employment and a further significant aggravation of social unrest. The world economy, which had started to recover from the global crisis, has entered a new phase of economic weakening. Economic growth in major advanced economies has come to a halt and some countries have re-entered recession, notably in Europe. Growth has also slowed down in large emerging and developing countries.
Based on past experience, it will take around six months for the ongoing economic weakening to impact labour markets. Indeed, in the immediate aftermath of the global crisis it was possible to delay or attenuate job losses to a certain extent, but this time the slowdown may have a much quicker and stronger impact on employment. After the collapse of Lehman Brothers in 2008, many viable enterprises expected a temporary slowdown in activity and so were inclined to retain workers. Now, three years into the crisis, the business environment has become more uncertain and the economic outlook continues to deteriorate. Job retention may therefore be less widespread.

1. Market turbulence, employment and social unrest: Trends and outlook

According to new survey data presented in the Report, the inability to address the jobs crisis has led to rising social discontent. It is estimated that 40 per cent of the 119 countries with available information face the prospect of increased social unrest. The estimated risk of increased social unrest is especially high in advanced economies, the Middle East and North Africa and, to a lesser extent, Asia. By contrast the estimated risk of social unrest may have stabilized in sub-Saharan Africa and has declined in Latin America. Moreover, in 50 out of 99 countries with available data, survey respondents indicate that their confidence in national governments is declining. Lack of good jobs is at the heart of these developments as the Report shows that these trends are strongly linked to the employment situation and perceptions that the burden of the crisis is shared unevenly.

Main findings
A. Labour market conditions have weakened
B. Employment outlook: Insufficient job creation
C. Recent trends in social well-being and unrest 
D. Making markets work for jobs: The way forward
Appendix A. Country groupings by income level
Appendix B. The impact of financial crises on employment:
An empirical analysis
Appendix C. Determinants of social unrest: An empirial analysis

2. Making profits work for investment and jobs

Pre-crisis gains in growth were distributed unevenly: between 2000 and 2009, among 56 countries with available information (which account for roughly 90 per cent of world GDP), more than 83 per cent enjoyed an increase in the share of profits in GDP. However, the chapter shows that, while the profit share increased, productive investment as a percentage of GDP stagnated globally. This disconnect between growing profits and productive investment reflects three main factors.
• First, much of the increase in profits accrued to the financial sector. Between 2000 and 2007, in advanced economies, financial-sector profits grew by 13 per cent annually, compared with 6 per cent in the case of the non-financial sector, i.e. the real economy. In emerging and developing economies, the figures are around 85 per cent and 20 per cent, respectively. Financial-sector profits declined somewhat in 2008–09, but have since strongly recovered – both in absolute terms and vis-à-vis profits in the real economy...

Main findings
A. Trends in income distribution and productive investment
B. Profits and productive investment of non-financial firms: Causes of a growing disconnect
C. Policy considerations
Appendix A. The dividends–investment–employment dynamic: An ampirical analysis

3. The labour share of income: Determinants and potential contribution to exiting the financial crisis

The global economic outlook has deteriorated significantly since 2010, signalling that the policies implemented to date have failed on a number of fronts. First, despite the significant and coordinated efforts of governments, the boost to economic activity was short-lived. Second, the modest gains in output, notably in advanced economies, have not yielded sufficient job creation. Third, against the backdrop of weak private sector demand, governments have now come under pressure by financial markets, limiting their ability to address persistent and emerging challenges, particularly as regards job creation. Fourth, efforts to curb public spending have been poorly designed – cuts to employment-friendly programmes have exacerbated labour market conditions and are likely to worsen fiscal conditions.

Main findings
A. Wage shares: Trends and implications
B. Determinants of declining wage shares
C. Policy considerations
Appendix A. Definition of the wage share
Appendix B. Data sources
Appendix C. Regression analysis

4. Investing in food security as a driver of better jobs

Given that food prices have tended to increase over the past few years, the purpose of this chapter is to examine the employment and distributional impacts of this trend in developing countries. On the positive side, higher food prices could benefit many developing and emerging economies where a large proportion of the labour force is engaged in agriculture (the “agricultural-income effect”). On the negative side, higher food prices could aggravate the income inequalities identified in Chapter 1 and poverty within vulnerable groups, such as urban net buyers and rural smallholders (the “poverty effect”).

Main findings
A. Macroeconomic, employment and income effects of higher food prices
B. Factors contributing to food price increases
C. Policy challenges and the way forward

5. Tax reform for improving job recovery and equity

Given the shift in public discourse from stimulus to consolidation, the purpose of this chapter is to present an overview of government revenue measures that could be taken to support the reduction in the debt while making room for pro-employment programmes and moving towards more equitable growth patterns. Following the global crisis, increased expenditures coupled with the fall in revenues pushed fiscal deficits to 5.2 per cent in advanced countries and 3.7 per cent in developing countries in 2009. Additionally, tax systems have become less progressive, placing a heavier burden on real investment and employment than on other activities, such as financial revenues or property.
• The chapter finds that the tax structure in both advanced and developing countries has changed considerably over the past decade or so. Particularly since the global crisis, there has been an increasing reliance on indirect taxes and social contributions for revenue generation. This creates an extra burden on poor households and workers, while at the same time a declining trend has been observed in top personal income tax and corporate tax rates in at least the past decade:...

Main findings
A. The evolution in tax structure
B. Tax burden and employment
C. Broadening the tax base: Selected options
Appendix A. Definitions of various taxes

6. Effective employment policy under tight fiscal constraints

Countries have stretched their fiscal space in dealing with the consequences of the global crisis. In G20 advanced economies, public debt reached, on average, 79 per cent of GDP in 2011, compared with 56 per cent in 2007. In emerging economies, the figures are 40 per cent and 36 per cent, respectively. Ensuring fiscal consolidation has therefore become a major medium-term priority for a number of countries. At the same time, however, it is crucial for advanced economies to boost employment, and for emerging and developing countries to support quality jobs and social protection. These employment policies may require some fiscal spending in the short term, but the chapter shows that, if well-designed, employment policies will boost the recovery while at the same time supporting fiscal goals over the medium term. When complemented with an adequate tax base, as identified in Chapter 5, employment programmes are a crucial component of a strategy for sustainable recovery...

Main findings
A. Fiscal challenges
B. Employment policies under tight fiscal conditions
C. Policy considerations
Appendix A. Model mechanisms

Recent publications

List of figures, tables and boxes by chapter


Chapter 1
Figure 1.1 Composition of capital inflows to emerging markets
Figure 1.2 Employment growth developments in the most recent period 
Figure 1.3 Current employment levels compared to pre-crisis peaks
Figure 1.4 Employment developments in the EU-27 by job type, 2008 to 2011
Figure 1.5 Long-term unemployment and inactivity rates
Figure 1.6 Employment projections: Advanced economies
Figure 1.7 Employment projections: Emerging economies
Figure 1.8 Employment projections: Developing economies
Figure 1.9 Change in the risk of social unrest between 2006 and 2010
Figure 1.10 People reporting confidence in their national government,
2006 to 2010
Figure 1.11 Change in perception of standard of living getting worse,
2006 to 2010
Figure 1.12 Determinants of social unrest, 2010

Chapter 2
Figure 2.1 Capital share and investment developments among
non-financial firms
Figure 2.2 Capital share developments by country, 2000 to 2009
Figure 2.3 Evolution of capital shares by type of corporations,
2000 to 2007/09
Figure 2.4 Payouts of non-financial corporations by type, 2000 to
Figure 2.5 Growth of the share of non-productive income received
and retained earnings over gross operating surplus in
non-financial corporations, 2000 to 2007/09
Figure 2.6 Investment over total resources received for
non-financial corporations, 2000 to 2007
Figure 2.7 Total financial assets of non-financial firms as
a share of GDP
Figure 2.8 Rate of unsuccessful loan applications by small- and
medium-sized enterprises

Chapter 3
Figure 3.1 Trends in wage shares
Figure 3.2 Wage shares, hours worked and wage dispersion by skill level, selected advanced economies 
Figure 3.3 Financialization and changes in the wage share,
1985 to 2005
Figure 3.4 Changes in minimum wages and wage shares in selected
middle- and low-income countries, 1993 to 2005
Figure 3A.1 Ratio of total employees to total employment in
different regions

Chapter 4
Figure 4.1 Trends in food and oil prices
Figure 4.2 International and domestic wheat prices
Figure 4.3 Share of food expenditure in total household income,
developing countries
Figure 4.4 Net poverty effects of a 10 per cent and 30 per cent food
price increase
Figure 4.5 Employment impact of food price increases among
low-income earners
Figure 4.6 Top five producers of staple foods in 2005
Figure 4.7 Food prices and commodity markets, in billion US$
Figure 4.8 Total returns from commodity index funds

Chapter 5
Figure 5.1 Government revenues, expenditures and deficits in advanced
Figure 5.2 Government revenues, expenditures and deficits in emerging
Figure 5.3 Sources of revenue (percentage of total government revenue)
Figure 5.4 Top personal income tax rate — world average
Figure 5.5 Trends in corporate tax rates
Figure 5.6 VAT revenue
Figure 5.7 Corporate tax revenue as percentage of total tax revenue
and GDP
Figure 5.8 Financing gap of social expenditures
Figure 5.9 Average effective tax rates in OECD countries for a single
person with no children
Figure 5.10 Tax wedge and structural unemployment in OECD countries 109
Figure 5.11 GDP growth, employment and tax revenue as a
share of GDP
Figure 5.12 Revenue generation with a 3 per cent wealth tax, 2010
Figure 5.13 Stamp duty revenue

Figure 5.14 Revenues from environmental taxes

Chapter 6
Figure 6.1 Employment and fiscal impact of a budget cut
Figure 6.2 Efficiency of active labour market spending
Figure 6.3 Additional unemployment rate under different degrees
of income support measures


Chapter 1
Table 1.1 Economic growth projections for 2012, by date of forecast
Table 1.2 Estimated employment shortages over 2012 to 2013
Table 1.3 Dissatisfaction with the availability of good jobs, by age
group, 2010
Table 1B.1 Definitions and sources of variables used in the regression
Table 1B.2 Regression results
Table 1B.3 Alternative estimators
Table 1C.1 Definitions and sources of variables used in the
regression analysis
Table 1C.2 Weights of the variables used for the social unrest score
Table 1C.3 Estimations of the social unrest score, unstandardized
Table 1C.4 Estimations of the social unrest score, standardized variables

Chapter 2
Table 2.1 Corporate governance reforms: Some country examples
Table 2A.1 Definitions and sources of variables used in the
regression analysis
Table 2A.2 The investment model: Regression results
Table 2A.3 The employment model: Regression results

Chapter 3
Table 3C.1 Output, employment, hours and inflation effects of policy
changes under different degrees of social dialogue
Table 3C.2 Baseline regression: 16 high-income countries, 1981 to 2005
Table 3C.3 Estimation across skills: 10 high-income countries,
1981 to 2005
Table 3C.4 Estimation across medium- and low-income countries,
unbalanced panel

Chapter 4
Table 4.1 Summary effects of distributional impacts of
rising food prices

Chapter 6
Table 6.1 Public debt dynamics in G20 countries
Table 6.2 Output, employment, hours and inflation effects of policy
changes under different degrees of social dialogue


Chapter 1
Box 1.1 European financial safety measures and recovery prospects
Box 1.2 The decline in employment quality: The case of the
European Union
Box 1.3 Determinants of social unrest

Chapter 2
Box 2.1 Definitions and other measurement considerations
Box 2.2 Research and development by the private sector
Box 2.3 Advantages of profit sharing

Chapter 4
Box 4.1 Reduced access to nutrient-rich foods through
export-oriented price distortion
Box 4.2 Regulations on commodity speculation in India

Chapter 5
Box 5.1 China’s tax revenue supported by foreign companies
Box 5.2 A more progressive (or less regressive) consumption
tax: Lessons from Canada
Box 5.3 Unemployment and labour taxes
Box 5.4 The United Kingdom stamp duty
Box 5.5 Environmental tax design

Chapter 6
Box 6.1 Reinforced public employment services: The case of Germany 127

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