Global Trends by Martin Khor
Thursday 2 February 2006
Problem of “jobless growth” highlighted
At the Davos gathering last week, many economists warned that global growth will likely slow this year. And a UN agency highlighted the problem of “jobless growth”, with an unemployment crisis looming worldwide.
At the World Economic Forum in Davos last week, economists debated whether the world economy will sail along comfortably this year, or face some major problems.
There was no agreed conclusion. One of the main worries is that the high consumer spending in the United States, which has been behind much of the growth in that country is coming to an end.
Some fear that the housing bubble is bursting. "The property bubble is ending, this is the end of the great American spending binge," said the chief economist of Morgan Stanley, Stephen Roach.
The fear is that falling consumer demand will cause the US to buy less goods from the rest of the world, thus dampening global growth.
Another indicator closely watched is the value of the US dollar. With the country's budget and trade deficits having such huge deficits, there could be a reversal of mood among foreign investors, and if the deficits are not financed by capital inflows, the dollar could slide significantly.
"The pattern of strong global growth in the past few years is now shifting," said the Institute for International Finance's director Charles Dallara. "The question is whether it will be gradual or abrupt."
Another problem was highlighted at Davos - that there is a growing crisis of unemployment around the world. Growth of the past many years has not been translated into enough jobs in many countries.
The International Labour Organisation's director general Juan Somavia said in a statement in Davos that there is a growing employment crisis that threatens democracies around the globe, with 192 million people worldwide without jobs.
Despite a robust growth of 4.3 per cent in 2005, the world economy did not deliver the 40 million jobs needed annually over the next decade for people entering the workforce, he added.
He called on world leaders to take concrete steps to tackle a problem that he said threatens to create a more fragmented, protectionist and confrontational world.
"The global jobs crisis is one of the biggest security risks we face today, " said Somavia, "It is time to revisit the commitments made by the global community to promote social inclusion and jobs as the basis of poverty reduction, and respect for fundamental principles and rights at work."
Somavia advocated a shift in economic and social policies to put decent work at the centre of national and international development efforts and government regulatory environments.
A few days earlier, the ILO released its annual Global Employment Trends report which had some gloomy news on the jobs front. The number of people unemployed worldwide climbed to new heights in 2005, as growth failed to offset an increase in people seeking work. Some economists used to term this "jobless growth".
The ILO report showed that in 2005, of the more than 2.8 billion workers in the world, 1.4 billion still did not earn enough to lift themselves and their families above the $2-a-day poverty line - just as many as 10 years ago.
"Economic growth alone isn't adequately addressing global employment needs," said Somavia. "We are facing a global jobs crisis of mammoth proportions. We need new policies."
The unemployment rate in 2005 remained unchanged at 6.3%. The total number of jobless stood at 191.8 million at the end of 2005, an increase of 2.2 million since 2004 and 34.4 million since 1995. Almost half of the world's unemployed are young people aged 15 to 24.
"In many countries,
agricultural workers are leaving a life of rural poverty in the hope
of finding something better in the city but end up little or no better
off in casual labouring jobs or petty trading," according to Somavia.
Such issues need to be addressed by policy makers if they are to make
sure that the development process will lead to poverty reduction.
Also, the Central and Eastern
Europe (non-EU) and Commonwealth of Independent States (CIS) saw unemployment
rise to 9.7% from 9.5% a year earlier. In developed economies and the
European Union (EU), unemployment rates declined from 7.1% in 2004 to
6.7% in 2005.
The ILO also said that rising
energy costs can have an effect on growth and jobs. In Asia the impact
will only become considerable if higher energy costs are sustained.
In sub-Saharan Africa the short-term impacts are considerable.
The global number of jobs
in the clothing sector fell from 14.5 million in 1990 to 13.0 million
in 2000, as a result of a consolidation process and more intensive use
of capital. Likewise, employment in textiles declined from 19.7 million
workers in 1990 to 13.5 million in 2000.