Stability no longer the norm for world job market since recession

PUBLISHED : Tuesday, 26 May, 2015, 1:39pm
UPDATED : Tuesday, 26 May, 2015, 1:39pm

World employment has not recovered following the 2008/9 Great Recession. Today, over 200 million are unemployed worldwide, up by 30 million from the 2008 level. That estimate more than doubles when the count includes those who have dropped out of the job market.

According to the main findings of the International Labour Organization’s World Employment and Social Outlook report issued last week, it is against this background that global job markets have undergone a dramatic transformation.

The report’s core theme is “the changing nature of jobs”. Jobs have become less secure, and less permanent, with fewer stable work contracts. These developments, the report says, have crimped demand and fed growing inequality.

The benchmark against which current employment conditions are gauged is the standard employment model, where wage-earning or salaried employees have contracts for stable, full-time jobs. According to the report, in a sample of 180 countries representing 84 per cent of the world workforce, only one in four workers enjoy these conditions of employment.

The other three quarters of the workforce have temporary or short-term contracts, jobs in the informal economy (often without a contract), are self-employed, or work in family enterprises.

Overall, 60 per cent of workers globally do not have employment contracts.

According to the ILO, these growing trends in labour markets bring economy-wide consequences beyond their human impact on individuals in the workforce. Let us look first at the link between conditions in the labour market and growth.

The report emphasises a virtuous causal link here, with the clear implication that efforts focused on creating jobs pay dividends across the entire economy.

It estimates that the post-2008 jump in unemployment – referred to as the jobs gap – amounts to US$1.2 trillion in lost wages. If those wages were paid, global production would expand by 3.6 per cent.

This is not a particularly controversial claim. These quantitative estimates of the link to growth refer to employment levels, not to the nature of jobs. But the report also suggests that the nature of work contracts may similarly affect GDP growth. That is a more contestable claim.

Whatever their contractual conditions, wage earners consume, save or invest their earnings. Through different channels, and perhaps within different time frames, any of these will feed into GDP.

Asia leads the world with 90 per cent or more on average of its employed workforce lacking permanent contracts. Yet the region registers the highest global average rate of GDP growth.

Another key conclusion in the ILO report – that contractual conditions will tend to affect inequality and social stress – is beyond serious dispute. Workers with temporary contracts and no job security are likely to hold their jobs for a shorter time and experience periods of joblessness, lowering net incomes and increasing inequality.

Core sources of social stress are the quality of work conditions and a sense of insecurity fed by uncertainty. Firms can contribute to improvements in the workplace. Governments can act positively to address both growing inequality and social stress.

As noted in the ILO report, sound regulation of both physical and contractual working conditions is essential.

Governments can also do more by way of providing social protection, such as unemployment coverage, and access to pensions. The report notes that progress is being made in these domains in some emerging economies.

Joan Robinson, the eminent socialist economist, famously stated that the “misery of being exploited by capitalists is nothing compared to the misery of not being exploited at all”.

Provocative as it sounds, this statement does suggest that having a job tends to be better than not having one. While the Robinson dictum could in some circumstances bear a link to wage levels, it need have nothing to do with the physical or contractual conditions of work.

The ILO report is at pains to recognise that beyond certain red lines such as child labour, regulatory frameworks will vary with circumstance. Over-regulation or regulations that are blind to incentive structures can kill jobs. Proper policy design matters and attaining inclusiveness depends upon it.


Patrick Low is vice-president of research at Fung Global Institute