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ILO urges worker-friendly recovery policies

May 01, 2012

As the world marks the International Labour Day today, a report by ILO highlights that although economic growth has resumed in much of the world since the 2008 financial crisis, the global unemployment situation remains alarming and could even worsen.

Washington: European governments, in particular, should adopt more worker- friendly approaches in dealing with fiscal austerity, according to the agency's "World of Work Report 2012" that was released in Washington and at its headquarters in Geneva on Sunday.

Such a change in policy could result in adding around two million jobs in the advanced economies over the next year, as opposed to only about 800,000 if current approaches persist, according to the report.

Persistently high rates of unemployment in the Arab world and Africa also put those regions at high risk of social unrest, according to the 128-page report, which noted that most of Latin America and some Asian countries have emerged in relatively better shape in that respect.

The report comes at a critical moment, particularly for key advanced economies where pending elections appear to offer stark choices between candidates and parties that favour very different approaches yawning fiscal deficits and high unemployment.

In France, for example, the current front-runner, the Socialist Party's Francois Hollande, favour more worker-friendly policies than the more austere approach taken by the incumbent president, Nicolas Sarkozy.

And in the United States, the all-but-certain Republican challenger to President Barack Obama, former Massachusetts governor Mitt Romney, has endorsed his party's proposals for sharp cuts to social and government jobs programmes, combined with reductions in already-low tax rates for corporations and wealthy individuals.

The report charged that the combination of fiscal austerity and tougher labour market reforms - or de-regulation - adopted by many advanced economies, especially in the Eurozone, have proved devastating to job creation, in particular, and largely ineffective in reducing fiscal deficits.

"The narrow focus of many Eurozone countries on fiscal austerity is deepening the jobs crisis and could even lead to another recession in Europe," according to Raymond Torres, the director of the International Institute for Labour Studies, the ILO's research arm.

"Countries that have chosen job-centred macroeconomic policies have achieved better economic and social outcomes," added Torres, the report's lead author. "Many of them have also become more competitive and weathered the crisis better than those that followed the austerity path."

The unemployment rate has increased in nearly two-thirds of European Union (EU) countries since 2010, according to the report, which also noted that labour market recovery has also stalled in other industrialised nations, including Japan and the United States.

At the same time, joblessness, especially for younger workers, remains acute in the Middle East and North and Sub-Saharan Africa.

"Four years into the global crisis, labour market imbalances are becoming more structural, and therefore more difficult to eradicate," according to the report.

"Certain groups, such as the long-term unemployed, are at risk of exclusion from the labour market. This means that they would be unable to obtain new employment even if there were a strong recovery," Torres noted, adding that employment has also become "more unstable or precarious" for many workers who have a job.

Where employment growth has resumed, for example, many of the jobs have been short term.

Combined with increases in growing income and wealth inequality in many countries, the unemployment situation is also increasing the risk of social unrest in the most-affected economies, according to the 128-report.

Out of 106 countries with available statistics, 54 per cent reported an increase in the score for the risk of unrest in 2011 compared to 2010, Torres said.

The regions with the highest risk of unrest are sub-Saharan Africa, the Middle East and North Africa, according to the study's barometer, which also found important increases in risk in industrialised economies, particularly in Central and Eastern Europe.

Altogether, the report estimates that some 50 million jobs are missing compared to the situation before the 2008 financial crisis.

Employment rates have increased in only five of 36 advanced economies - Germany, Israel, Luxembourg, Malta, and Poland - since 2007, according to the report.

Youth unemployment rates have increased in half of the developed economies and in one-third of developing economies in about 80 per cent of advanced economies and in two-thirds of the developing economies since the onset of the crisis, according to the report.

In that period, poverty rates increased in half of the advanced economies and in a third of developing countries, while the gaps between rich and poor widened in half of advanced countries and in one quarter of developing nations.

In reacting to the crisis, 28 per cent of the governments of developing and emerging countries reduced social benefits for workers and the poor. By contrast, nearly two-thirds (65 per cent) of developed-country governments reduced social benefits.

The report calls for a "dramatic shift in the current policy approach" to one that would "plac(e) jobs at the top of the policy agenda".

First, core labour standards, including the right to form unions, should be strengthened, and the report calls for all G20 countries to ratify the ILO's core Conventions to send a positive signal in that regard.

Second, more should be done to provide adequate credit and a more favourable environment for small businesses, particularly in the Eurozone countries where the major banks have failed to boost credit where it is most needed.

Finally, in emerging and developing countries, efforts should be centred on public investment and social protection to reduce poverty and income inequality and stimulate demand, while in advanced economies, policies should focus on ensuring that the unemployed, especially among the youth population, receive adequate support to find new jobs.

Policy-makers should "be embracing the perception that job-friendly policies have a positive effect on the economy and that the voice of finance should not drive policy-making," according to Torres.

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