Tough times ahead for labour market and global trade

A new ILO report warns of high global unemployment levels in coming years. It also makes special mention of the vulnerably employed

shreerupa

Shreerupa Mitra-Jha | February 6, 2017 | Europe


#jobs   #unemployment   #international labour organisation   #letter from Europe   #ILO  

Photo: Arun Kumar

US president Donald Trump may have seized the job of running the world’s most powerful government with a promise of bringing work back to American shores, but if international predictions are anything to go by then supporters of Mr Trump should be in for a nasty surprise.

The International Labour Organisation (ILO) released its annual World Employment and Social Outlook (WESO) report for the current year on January 13. The results are not heartening.

“Growth continues to disappoint, both in terms of its level but also in terms of its ability to make important inroads to making growth more inclusive,” the report says.
 
The global unemployment levels and rates are “expected to remain high” in the short term, even as the global labour force continues to grow. From 2016 to the current year, there will be 3.4 million more unemployed people globally, bringing the total unemployment to just over 201 million in 2017. However, the global unemployment rate is expected to rise modestly this year, from 5.7 percent in 2016 to 5.8 percent in 2017. This rate is expected to be relatively steady in 2018 but the numbers of people who are in search of employment will outstrip job creation, which will result in an additional 2.7 million unemployed people in 2018.
 
However, if lower consumption and investment demand – called secular stagnation – intensifies, then global unemployment would rise by an additional 0.3 million in 2017 and almost 1 million in 2018, the UN’s labour agency warns.
 
“Many of the recent labour market dynamics reflect both cyclical factors and structural factors – e.g., low productivity growth and widening income inequality – which may lead to secular stagnation,” the report says.
 
Unemployment in developed countries, right-wing politics
 
Both in Europe and North America, long-term unemployment remains elevated compared to pre-crisis levels. In Europe, long-term unemployment increased recently despite the reductions in the unemployment rate. This augurs well for right-wing parties in Europe, which are steadily gaining popularity tapping the economic anxieties of the population and labeling the “marauding outsider” as the enemy. The attempt to define “insiders” and “outsiders” as causes for undesirable social situations – usually the result of bad policies, global trends, structural deficiencies – is a common refrain for most right-wing parties globally. Such politics is likely to get a shot in the arm this year. Europe will face a spate of elections in 2017 where right-wing and anti-globalist leaders  in France, Austria, Italy, Germany, Poland, Hungary, Sweden, Denmark, among other states – further buoyed by Trump’s win and Brexit – are steadily capturing the imagination of people. As such, questions over the future of the EU itself, at least over the short term, will become louder given the current dynamic situation in the continent.
 
“A strong social dimension of European governance should be at the heart of the roadmap for the future of the EU and would help to reconnect with citizens,” the ILO urged European nations through a press release on January 25.
 
In the EU-28, the share of unemployed people who had been looking for a job for 12 months or longer reached 47.8 percent in the second quarter of 2016, says the report. To add to the unhappy situation, in the second quarter of 2016, more than two-thirds of this group – a total of 6 million people – had been unemployed for over two years.
 
The silver lining to the story is that unemployment is expected to fall in 2017 in developed countries (by 6,70,000), as a whole, bringing the rate down to 6.2 percent (from 6.3 percent in 2016). “In Europe, notably northern, southern and western Europe, unemployment levels and rates are both expected to continue to fall, but the pace of improvement will slow, and there are signs that structural unemployment is worsening,” says the UN. The same applies to Canada and the US.
 
An interesting article titled ‘Peter’s Choice’ published in Mother Jones explains why some young, intelligent, white people like Peter (a pseudonym) voted for Trump. In an essay, referring to those who are left out from enjoying the benefits that typically accrue from the expansion of the economic pie, he writes, “These people are scraping the bottom of the barrel, and they, seemingly, have nothing to benefit from maintaining the system of order that keeps them at the bottom....for those people who have no political voice and come from states that do not matter, the best thing they can do is try to send in a wrecking ball to disrupt the system,” he adds.
 
Developing countries, jobs
 
Unemployment levels in developing countries are also expected to increase in 2017 (by 4,50,000), with unemployment rates hovering at around 5.5 percent in 2017 and 2018, according to the UN estimates.
 
However, for developing and emerging countries, the challenge is not just the unemployment levels but also the chronic poor-quality employment – as represented by high shares of own-account workers and contributing family workers (collectively classified as workers in vulnerable forms of employment) and working poverty.
 
Vulnerable unemployment globally will fall by less than 0.2 percentage points per year over the next two years. According to these estimates, there will be a whopping 4.2 billion people worldwide who are vulnerably employed, accounting for 42 percent of total employment in 2017. “As a result, the number of workers in vulnerable forms of employment is projected to grow globally by 11 million per year,” says ILO. The two regions most affected by vulnerable employment are southern Asia and sub-Saharan Africa.
 
Nearly half of the workers in southern Asia and nearly two-thirds of workers in sub-Saharan Africa currently live in extreme or moderate poverty.
 
“Southern Asia has created most of the new employment, with employment expanding by 13.4 million in 2016, underpinned by population-driven labour force growth. The majority of this new employment was created in India,” says the UN. However, this good tiding is tempered if one consults other data on India like the levels of the working poor, the disguised and vulnerably unemployed and the low quality of work.
 
Interestingly, in India, the unemployed (adults who are looking for work but unable to find work) is below 4 percent as compared to numbers from countries like the US, China, Russia, Australia, Germany (all between 4-6 percent), Sweden and Finland (2-9 percent) and Brazil (9-13 percent). However, when one analyses the indices of vulnerable employment, India is one of the few countries to be at the top of the list – along with countries like Afghanistan, Pakistan, Laos, Myanmar, Nepal and some African and Latin American nations – with above 70 percent listed as vulnerably employed. This shows that though people technically have work, they hold chronically poor quality jobs. Compare this with data from China and Libya (30-45 percent vulnerable employment), Brazil (15-30 percent), Russia, Australia, the US, Canada, Scandinavia and Germany (all below 15 percent). Similarly, India has 35-50 percent of its population as working poor compared to below 20 percent in China, Brazil and Russia.
 
Though the unemployment rate in India will fall from 2016 through 2018 from 3.5 percent to 3.4 percent (in 2017 and 2018), absolute unemployment numbers will increase from 17.7 million in 2016 to 17.8 million in 2017 to 18 million in 2018.
 
In emerging and developing countries, the share of workers living in moderate or extreme poverty is expected to fall from 29.4 percent in 2016 to 28.7 percent in 2017.
 
Furthermore, predictably, women are disproportionately affected more as working poor – in southern Asia, close to 82 percent of women were in vulnerable employment in 2016, compared with just over 72 percent of men. “Women remain twice as likely to be unemployed as their male counterparts, with the female unemployment rate expected to be 20 percent in 2017,” warns the UN. Another ILO report called the Global Wage Report 2016 highlighted the gender gap in hourly wages that sometimes reaches as high as 40 percent in some countries.
 
Similarly, in the medium term, tackling joblessness among youth will remain “a particular challenge”. Youth unemployment is more than three times higher than adult unemployment, with a gap of almost 20 percentage points.
 
Asia and the Pacific region – that accounts for nearly 60 percent of the global workforce – expanded its net employment by over 20 million in 2016, equivalent to growth of around 1.1 percent, with a similar expansion anticipated in 2017.
 
However, in southern Asia, vulnerable employment will increase from 511.4 million in 2016 to 516.6 in 2017 and 521.4 million in 2018. Though extreme working poverty in the region will reduce from 118 million in 2016 to 113.7 million in 2017 and 109.8 million in 2018, moderate working poverty will increase from 217.2 million in 2016 to 221.3 million in 2017 and 224.6 million in 2018.
 
Crowded migratory routes
 
The ILO’s social unrest index, “which seeks to proxy the expressed discontent with the socio-economic situation in countries”, indicates that average global social unrest increased between 2015 and 2016. During this period, eight out of 11 regions experienced increases in the measure of social discontent, particularly in the Arab states. Many different types of protest behaviours are recorded in the social unrest index, such as street protests, riots, rallies, boycotts, road blockages and hunger strikes.
 
Between 2009 and 2016, the share of the working-age population willing to migrate abroad permanently increased in every region of the world except for southern Asia and south-eastern Asia and the Pacific.
 
Discontent with adverse social situations, including the lack of decent job opportunities, is a tangible factor influencing a person’s decision to migrate. This means that, given the current predictions for the global labour market, the flow of African and southeast Asian economic migrants who desperately get on to rickety boats from Libya to reach Italy (as opposed to the migratory route of Syrians who usually land on Greek islands and trudge further inwards into the continent) and, who often meet their watery graves en route, will continue. Similarly, until there is a political resolution in Syria, the war-weary Syrians will continue finding ways to escape the horrible situation at home. Thus, anti-refugee and anti-migrant rhetoric, policies and debates are likely to reverberate as in the past year in political circles across developed and developing nations.
 
Global trade and its performance
 
China continues to prop up regional exports, but pressure is mounting for countries with high export dependence on China to diversify both products and export partners. “In the midst of the transition, India has stepped up, achieving 7.6 percent growth in 2016, thus helping southern Asia achieve 6.8 percent growth in 2016 (6.9 percent expected in 2017),” says the WESO report.
 
Another report, released on January 19 by the UN’s trade agency, called World Economic Situation and Prospects 2017 (WESP) estimated that global trade growth will increase by only 1.2 percent in 2016 – making it the third-lowest rate of growth in the past three decades.
 
“India has positioned itself [among the large countries] as the most dynamic emerging economy. India’s economy is projected to expand by 7.7 percent and 7.6 percent in 2017 and 2018, respectively, benefiting from strong private consumption.”
 
“Investment demand is expected to slightly pick up, helped by monetary easing, government efforts towards infrastructure investments and public-private partnerships, and the implementation of domestic reforms such as the introduction of the Goods and Services Tax Bill,” says the UN’s Conference on Trade and Development (UNCTAD) report.
 
However, the WESP analysis is silent on the recent demonetisation of high-value Indian currencies and its effect on the economy.
 
GDP growth in developing countries, especially in east and south Asia, is expected to remain driven by domestic consumption, says UNCTAD.
 
“We remain trapped in a slow growth situation,” Alfredo Calcagno, head of the Macroeconomic and Development Policies Branch, UNCTAD Division on Globalisation and Development Strategies, said at a press conference.
 
“The recovery that is forecast for 2017 and 2018 will not be enough to recover the pre-crisis growth rates,” he added. 
 
World gross product (WGP) will expand by 2.7 percent in 2017 and 2.9 percent in 2018, the UN estimates suggest.
 
There is considerable uncertainty around emergent international policies, particularly with the new American regime in place. A bill has already been introduced in the Congress to remove the US from the UN. Trump’s declared protectionist trade policies, if carried through, will go against the World Trade Organisation’s trade rules. Along with that, there is considerable uncertainty with Washington’s attitude towards people flow along with goods and services that could potentially destabilise financial markets worldwide. Ditto for the UK post Brexit. Unpredictable socio-economic situations also confront large economies like Brazil, Russia, Turkey and some European states post elections this year in their respective countries. This makes any kind of reliable prediction of the potential consequences of the interaction between global labour markets and trade challenging.
 
“The intensification of global supply chains has slowed down significantly since 2009 compared with the period 2000 to 2008 (Timmer et al., 2016), implying that trade volumes and global production could become increasingly disconnected from one another (Hoekman, 2015),” the UN labour agency says.
 
“A coordinated effort to provide fiscal stimulus – an increase in public investment – that takes into account each country’s fiscal space would provide an immediate jump-start to the global economy. This could lower global unemployment, relative to the baseline, by 0.7 million in 2017 and 1.9 million by 2018,” the ILO advises. 
 
shreerupa@gmail.com
shreerupa@gmail.com
shreerupa@gmail.com
(The column appears in the February 1-15, 2017 issue of Governance Now)

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