November/December 2003, Vol. 126, Nos. 11 & 12
Trends in world employment
Book reviews from past issues
Trends in world employment
Global Employment Trends. Geneva, International Labour Office, 2003, 118 pp., $22.95/softcover.
The International Labour Office (ILO) reports that worldwide unemployment rose by 20 million persons between early 2001 and the end of 2002, to 180 million men and women. Unemployment rates generally did not rise very much, high levels of unemployment having been persistent in a number of the regions surveyed. Moreover, unemployment data disclose only a part of the worldwide employment problem that is widely characterized by underemployment. A large part of underemployment consists of jobs in the "informal" sector of developing countries, in rural as well as urban areas. Unemployment rates also do not capture withdrawals from the labor force because of lack of jobs.
ILO does not define an informal sector for the industrial countries. It states, however, that temporary work—performed mainly in small enterprises by young persons with low levels of education, and earning on average 15 percent less than permanent workers with similar backgrounds—contributed roughly one-third to employment growth during the 1990s. Long-term unemployment as a proportion of total unemployment, while low in the United States, has remained very high in European Union countries, accounting for more than 40 percent in 2001. Nevertheless, poverty among the unemployed in the industrial countries is low (estimated at 6 percent in the United States), and the working poor constitute only a small proportion of total employment (5 percent in the United States).
That, however, is not the case in many, perhaps most, developing countries. The working poor in Latin America, for example, make up 12 percent of total employment; in China, 20 percent; and in South Asia, 36 percent. (ILO defines a poverty income at $1 a day per worker.) The working poor find jobs mostly in the informal sector (including agriculture) of their countries’ economy. The informal sectors, contrary to the longer term expectations of economists in general, have not diminished and may have increased over time. Again, in Latin America, the sector accounts for an estimated 47 percent of all employment; for all but 9 percent of India’s; and all but 20 percent of Indonesia’s.
ILO relates the evident inability of the formal sector—and of the more general problem of creating "decent work" for an estimated one billion jobseekers over the remainder of this decade (2001–10)—to "three sets of fundamental structural obstacles." Here, ILO’s first concern is the persistent low demand of the formal sector for workers. To some unquantifiable extent, such low demand is traced to the low employment intensity of output growth—an intensity that appears to have diminished over time. China exemplifies the problem. Over the 1980–85 period, the growth rate of value added in China’s manufacturing industry was 9.9 percent annually; that of employment, 4.5 percent. Over the 1995–99 span, the rate for the former was 10.3 percent; that for the latter had turned negative, to –4.6 percent. True, the annual rate of increase of real wages rose fairly strongly. But the rate for the total wage bill diminished, leaving "a major surplus for investment." Capital accumulation now accounts for one-half of China’s economic growth; and the declining elasticity of employment relative to value added betokens a "structural change from employment-intensive growth toward capital intensive growth." ILO notes a similar development in India, where employment has declined relative to the gross domestic product (GDP), and where productivity advances in agriculture curtail job opportunities in that sector. Very large increases in growth would be necessary to absorb the labor force thus made redundant. ILO urges expansion of service industries where employment elasticity tends to be higher.
The second set of structural obstacles is the vulnerability of developing countries, and in particular their poorest citizens, to the external shocks of global trade and capital movements, such as they experienced in the late 1990s. Here, ILO urges active labor market policies and programs ensuring greater security from job and income loss. (Extensive information on these matters can be found in ILO’s World Labour Report 2000, which deals with income security and social protection in a changing world.) The impediments that poverty itself presents to employment growth represent the third fundamental set of structural obstacles. These obstacles, ILO argues, would be overcome by targeting international assistance to generating employment; encouraging small and medium enterprise and integrating those businesses into the formal economy; and investing in education and health services on a large scale.
The shorter term employment outlook in developing countries is closely tied to the economies of the industrial countries. Demand for goods incorporating information and communication technologies slumped, spelling sharp export contractions for China and a number of Southeast Asia developing states. Economic growth rates declined substantially—to an average annual rate of 1.2 percent in 2001 in the United States (from 3.0 percent during the 1989–99 span); –0.4 percent in Japan (as against 1.7 percent during the earlier period); and 1.7 percent in the European Union (versus 2.1 percent earlier). These growth recessions have been among the root causes for higher unemployment in the exporting countries of Asia and Latin America. For the industrial countries, ILO notes, the outlook appears to be uncertain at best.
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