World economy going badly wrong, says ILO
The ILO released its World of Work Report 2012 on Monday, and it’s grim reading, especially in the advanced economies where there are over 43 million unemployed workers. The International Institute of Labour Studies, the bit of the ILO which produced the report, found that although growth has returned to some economies since the crisis, jobs are not recovering, the risks of social unrest are increasing in most parts of the world, and, as lead report author Raymond Torres says pithily about fiscal consolidation or austerity: “the prescribed cure is killing the patient.”
The ILO’s social unrest index is based on research showing that people care more about jobs and incomes than growth per se. Torres’ own analysis of the report lists the following points about the current employment outlook:
- the current mix of tight fiscal austerity and tough labour market reforms is not having the desired effect, but actually making matters worse in terms of jobs and incomes. In over 90% of countries that have implemented austerity, unemployment is above its 2007 level;
- austerity cannot succeed in creating employment in the short term. Real investment is being hit by the lack of demand, limited credit access and confidence is ebbing away;
- austerity has failed to reduce fiscal deficits significantly. Despite aggressive cuts, Southern European countries face roughly the same fiscal deficits as before, unemployment has increased disproportionately and thousands of small businesses have closed;
- ill-conceived labour market reforms carried out in some advanced economies – particularly in Europe – have exacerbated precariousness and inequalities, while failing to generate new jobs.
“It is simply unreasonable to carry on down a path that is so evidently failing to heal the economy and create employment. Labour markets worldwide are still in intensive care … there are some 50 million fewer jobs now than at the start of the crisis. In the meantime, around 40 million people enter the global labour market each year.
“To insist on a cure that is killing the patient is a folly we can no longer indulge in. Europe could take a more balanced approach which – unlike austerity pure and simple – has proven to work. … The mood in the streets is becoming increasingly hostile to the austerity approach.”
But the ILO report, subtitled Better Jobs for a Better Economy, maintains that there is an alternative: a strategy focused on growth and jobs, including reform of the financial sector so that it supports the real economy rather than vice versa, progressive taxation and public investment. The ILO estimates that with just a moderate stimulus, 1.8-2.1 million jobs could be created in just one year in the advanced economies. The ‘job-rich growth’ that the ILO maintain would result would eventually deal with deficits without huge social dislocation and unrest.