The International Labour Organisation’s (ILO), recently published World of Work Report 2011, highlighted that the coming few months will be crucial for avoiding a sharp downturn in employment that could further delay the prospects for a global economic recovery.
The outlook for the world economy has declined markedly, according to QNB Capital. This is largely due to economic weakness in the developed world, which is struggling with the eurozone sovereign debt crisis, fiscal imbalances and slow growth. In its latest World Economic Outlook released in September 2011, the IMF revised downwards its global growth forecasts by 0.3 percentage points to 4.0% in 2011 and by 0.5 percentage points to 4.0% in 2012, compared with its previous forecasts in June.
According to the ILO, it will take around six months for the full impact of this economic weakening to be felt in labour markets. There is a danger that the impact could be more severe than in the aftermath of the 2008 financial crisis. Firms may be more reluctant to retain jobs as the economic difficulties are now perceived as more permanent than immediately after the financial crisis. Furthermore, the ability of many governments to support jobs has been eroded as their fiscal positions have weakened as austerity measures are implemented.
A slowdown in employment has already started to materialise. The ILO states that more than half of the countries with available information (30 advanced economies and 23 emerging and developing countries) have experienced negative job creation in the most recent period and only seven countries have experienced job growth.
The ILO estimates that 80 million new jobs need to be created over the next two years to restore pre-crisis levels of employment. Around 27 million of these jobs need to be created in advanced economies and 53 million in developing economies. However, based on current expectations for growth, only around half of these jobs are expected to be created.
As a result, in advanced economies, the employment rate (this measures the number of people employed as a percentage of the total population of working age excluding those not looking for work such as students or homemakers) is estimated to have fallen from 70% in 2008 to 68% in 2011 and is not expected to recover to 2008 levels by 2016. Meanwhile, in emerging and developing countries, the drop in the employment has been less severe and the employment rate is expected to rise by 1.7 and 1.3 percentage points respectively by 2016.
The ILO suggests a number of measures to help boost employment and income. These include policies that support more productive investment in areas such as agriculture and small and medium sized enterprises, and furthermore regulations and taxes that protect real wages against the instability of commodity prices by restricting speculation through financial derivatives. The ILO report suggests that coordinated global pro-employment policies could be adopted in the near future to stabilise economic conditions, in particular for the emerging and developed markets.