World unemployment rate continues to rise - ILO report
Latin America and the Caribbean hardest hit

Guyana Chronicle
January 26, 2003

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TWO years of economic slowdown has pushed the number of unemployed to new heights worldwide, with little prospect of any improvement in the global employment situation this year, according to a new report entitled Global Employment Trends 1 issued Friday by the International Labour Office (ILO).

"The world employment situation is deteriorating dramatically," says Mr. Juan Somavia, Director-General of the ILO. "While tens of millions of people join the ranks of the unemployed or the working poor, uncertain prospects for a global economic recovery make a reversal of this trend unlikely in 2003."

In the new study, the ILO estimates that the number of unemployed worldwide grew by 20 million since the year 2000 to reach a total of 180 million at the end of last year. In addition, the report says the weakness of labour markets has reversed recent reductions in "working poverty" achieved in the late 1990s.

Particularly hard hit have been women and youth, who often have jobs that are particularly vulnerable to economic shocks, the report says. What's more, unemployed workers pushed into informal jobs in search of work faced even more uncertainty due to the sector's near total lack of unemployment or social security coverage.

"This deteriorating world employment picture and the prospect of a weak or delayed recovery is very disturbing," Mr. Somavia said. "A continuation of these trends will dramatically increase the number of unemployed and working poor. A full-scale global recession could have grave consequences for the social and political stability of large parts of the world."

Among the major findings in the report are:

-At the end of 2002, the number of working poor, or workers living on $1 or less a day, resumed its upward trend, returning to the level of 550 million recorded in 1998;

While the global economic slowdown and post September 11 developments increased unemployment worldwide, Latin America and the Caribbean were hit hardest, with recorded joblessness rising to nearly 10 per cent;

To absorb new entrants into the labour market and reduce working poverty and unemployment, at least one billion new jobs are needed during the coming decade to get on track for the UN goal of halving extreme poverty by 2015.

"Our measures of unemployment largely record the jobless who have some form of social protection," Mr. Somavia said. "The record numbers worldwide is worrying enough, but even more disturbing is the evidence of worsening conditions in the informal economy of the developing world where the struggle to survive on poverty wages is getting even tougher."

ECONOMIC PROSPECTS AND REGIONAL TRENDS
Unemployment began to grow soon after the information and communication technology (ICT) bubble burst in spring 2001, sparking an economic slowdown. The aftermath of the September 11 attacks in New York and Washington, D.C. brought further shocks and amplified the economic downturn. This slower growth in industrialised nations meant job losses in the export-oriented industries of developing countries. Worst hit were labour-intensive, export-oriented sectors, such as the garment industry which largely employ women.

In addition, weakening confidence among investors brutally exposed the financial fragility of countries in several regions, with the ensuing crises putting many people out of work. In Argentina, for example, unemployment jumped above 20 per cent in 2002, with knock-on effects in neighbouring countries. Armed conflicts and violence also contributed to higher unemployment and poverty in countries as far apart as Colombia and Nepal. In the Middle East, joblessness spiralled in the West Bank and Gaza Strip, while the recession in Israel continued.

Employment growth in industrialised countries decreased between the years 2000 and 2002, with the exception of Italy and New Zealand, where employment growth continued in 2001 but at the cost of falling productivity.

Overall, unemployment has been rising steadily in the industrialised countries, from 6.1 per cent in 2000 to 6.9 per cent in 2002. In the European Union, unemployment decreased between 2000 and 2001, from 7.8 per cent to 7.4 per cent, but began rising again in 2002 to 7.6 per cent. Meanwhile, in North America, unemployment increased rapidly in 2001 and 2002, from 4.8 per cent to 5.6 per cent in the United States and from 7.2 per cent to 7.6 per cent over the same period in Canada 2.

In Latin America and the Caribbean, the 2001 global economic slowdown sent the unemployment rate skyrocketing in many countries. Falling economic growth increased joblessness in almost all of Latin America and the Caribbean between 2001 and 2002, bringing the unemployment rate to nearly 10 per cent despite fewer people entering the work force. Youth unemployment in the region hit 16 per cent in 2001, up from 12 per cent in 1997, with nearly all new jobs for young people emerging in the informal economy.

Asia suffered most severely from the bursting ICT bubble, which cut exports to the industrialised countries. Child labour and human trafficking remain major issues for the Asian region as a whole. South-East Asia faced the 2001 downturn just as it was beginning to recover from the 1997-98 financial crisis, posting a rise in unemployed from 6 per cent in 2000 to 6.8 per cent in 2001, with a slight fall to 6.5 per cent projected for 2002.

Individual South-East Asian countries varied considerably. Indonesia, Malaysia, Philippines, Singapore and Thailand, which depend heavily on trade, suffered from exposure to global economic trends. In contrast, Cambodia, Lao PDR and Vietnam sustained high growth rates, due to improved access to markets in industrial economies or improved performance in the agriculture sector.

East Asia also recorded significantly lower output growth and deteriorating employment during the two-year period with joblessness rising from 3.2 per cent in 2000 to 3.6 per cent in 2001 and 4 per cent in 2002. While the official figure covering the unemployment rate in urban areas of China was 3.6 per cent in 2001, recent estimates suggest that it might be as high as 7.5 per cent today as a result of high underemployment in the agricultural sector and of ending the practice of keeping redundant workers in the public enterprises' employment roles, often known as labour hoarding.

South Asian economies proved resilient in the face of the global economic difficulties during 2001-2002. Nevertheless, security concerns, poor weather conditions, a slowdown in exports and declining tourism revenues caused the employment situation to worsen. Poverty increased, as did the number of working poor. The region's unemployment rate rose from 2.9 per cent in 1995 to 3.4 per cent in 2002, with unemployment rates in Pakistan, for example, climbing in recent years to nearly eight per cent. The unfavourable employment situation in 2001 and 2002 also points to an increase in the number of people with low incomes and poor working conditions in the informal economy, rather than sharp increases in unemployment rates.

Sub-Saharan Africa managed to sustain a fairly constant economic growth rate, though in per capita terms it is often below one per cent. The open unemployment rate increased from 13.7 per cent in 2000 to 14.4 per cent in 2002, though estimates for 2002 may be revised due to a growing food crisis. In addition to child labour and job loss due to conflicts, an issue of growing importance for the region is the "brain drain" syphoning off much-needed human capital.

The health situation, especially HIV/AIDS, is also having a severe impact on human capital. In Tanzania, for example, a recent study showed the HIV/AIDS epidemic was forcing more and more children and juveniles aged 10-19 into the labour force as the number of adults aged 20 to 35 fell ill or died.

Middle East and North Africa experienced a dramatic decline in overall economic conditions over the past two years with GDP growth falling from more than six per cent in 2000 to 1.5 per cent in 2001. Dismissals and redundancies resulting from reductions in the size of the public sector pushed up unemployment, which reached double-digit levels in some countries. Youth unemployment was distressingly high in some countries, including Syria, Algeria, Bahrain and Morocco. Moreover, the Gulf countries are increasingly adopting policies to replace migrant workers with their own nationals, a move that could have significant consequences for employment as well as remittances to countries supplying labour.

Unemployment in transition economies is on the increase again after falling from 13.5 per cent in 2000 to 12.6 per cent in 2001. Despite the economic recovery and high growth rates these countries experienced during 2000 and 2001, unemployment returned to the 13.5 level in 2002 due largely to the continuing trend of enterprises seeking to become more competitive by phasing out labour-intensive technologies and ending labour hoarding.

At the same time, governments are cutting employment in the public sector. Accelerating structural change in anticipation of accession to the EU has also pushed up unemployment in the candidate countries.

Employment prospects are uncertain

Nearly 60 per cent of the world's labour force will be in Asia by 2010, with China alone making up one-quarter of the global labour force. The other developing regions (Sub-Saharan Africa, the Middle East and North Africa, and Latin America and the Caribbean) will also account for an increased portion of the world labour force by 2010.

Meanwhile, the share of industrialised countries and transition economies in the world labour force will decrease to about one-fifth by 2010. Thus, the bulk of the jobs that need to be created by 2010 must come in Asia (60 per cent) and Sub-Saharan Africa (15 per cent).

"If these jobs are to contribute to alleviating poverty, they must be productive and offer decent conditions," Mr. Somavia said. "Both faster economic growth and policies to promote the creation of decent and productive work opportunities are needed."

Greater unemployment and poverty will place severe pressure on governments' budgetary targets, given the fragile financial position of many countries, the report says. Policy makers should focus on measures to secure and spread the recovery and ensure that faster growth yields the maximum number of decent work opportunities, reduces unemployment and poverty and restarts employment growth.

First, a "pro-jobs" policy involving fiscal and other measures to "jump-start" growth and stimulate employment -intensive investment is essential. This must be accompanied by an incentive structure for the private sector that favours the choice of employment creation.

Second, policy makers need to focus on reducing the vulnerability of developing countries and the poorest members of society to external shocks. Active labour market policies, including social safety nets, are needed to reduce economic insecurity in a globalised world.

In addition, development strategies should include diversification of the output base to spread and dilute risks of vulnerability, a cut in industrial country tariff barriers to manufactured goods, reducing exposure to swings in commodity exports, and reduced protection of rich countries' agricultural sectors. Also, needed are stronger transport, energy and communications infrastructures.

Third, countries should adopt "pro-poor" policies to help women and men secure productive and decent work in conditions of freedom, security and human dignity. This involves supporting the growth of small and medium-sized enterprises and their integration into the formal economy as well as investment in education and health care systems, which improve the ability of the labour force to work productively.

In addition, ending restrictions on the right to organise, tackling discrimination and child and forced labour are essential steps toward the economic, social and political empowerment of the poor.

"Only through pro-jobs and pro-poor policies can we address this growing employment crisis and place decent work at the heart of economic and social policies," Mr. Somavia says. "Faster economic growth is necessary, but it is not enough. Failure of policy makers to act now could have grave consequences for us all."

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