Global unemployment still at stubbornly high levels

Despite claims that the 2007 Great Recession is over and notwithstanding the fact that some countries are experiencing impressive economic growth, the global unemployment picture is as stark as ever.

Kanaga Raja

DESPITE a sharp rebound in economic growth in a number of countries, the number of unemployed globally stood at 205 million in 2010, essentially unchanged from the previous year, and 27.6 million higher than in 2007, with little hope for this figure to revert to pre-crisis levels in the near term.

This assessment was highlighted by the International Labour Office (ILO) in its Global Employment Trends 2011 report released on 24 January.

The ILO noted that the elevated level of global unemployment stands in stark contrast to the recovery that has been seen in several key macroeconomic indicators: real global GDP, private consumption, gross fixed investment and world trade had all recovered by 2010, surpassing pre-crisis levels.

With global unemployment, as officially measured, at record high levels for the third straight year since the start of the economic crisis, the ILO warned that weak recovery in jobs is likely to continue in 2011, especially in the developed economies.

On the basis of current macroeconomic forecasts, the ILO projected the global unemployment rate to be at 6.1% in 2011, corresponding to global unemployment of 203.3 million. This represents little improvement over 2010 levels, it added.

The ILO's annual employment trends survey also pointed to a highly differentiated recovery in the labour markets, with persistently high levels of unemployment as well as growing discouragement in developed countries, and with employment growth along with continued high levels of vulnerable employment and working poverty in developing regions.

'In spite of a highly differentiated recovery in labour markets across the world, the tremendous human costs of the recession are still with us,' said ILO Director-General Juan Somavia.

'There is one common challenge: we need to rethink our standard macroeconomic policy mixes and make quality job creation and decent work a central target of macroeconomic policies, alongside high growth, low inflation and balanced public budgets. We must not forget that for people, the quality of work defines the quality of a society,' he added.

Output-unemployment gap

In its global employment trends survey, the ILO said that despite the negative GDP growth rate registered in 2009, real global GDP never actually shrank below the 2007 level during the crisis and is estimated by the International Monetary Fund (IMF) to have been more than 7% higher in 2010 as compared with 2007. Similarly, private consumption declined only modestly in 2009 and is estimated to have been 3.3% higher in 2010 than in 2007.

Furthermore, gross fixed investment contracted sharply in 2009, falling by nearly 10%; however, investment is estimated to have surpassed the 2007 level in 2010. Global trade dropped by nearly 12% in 2009, but this too is estimated to have risen above the 2007 level in 2010.

'Thus, while there is clearly tremendous regional and country-level variation in economic performance and recovery patterns, despite the massive and widespread shock that accompanied the collapse in growth in 2008 and 2009, based on these four key macroeconomic indicators, the global economy has recovered,' says the report.

Unfortunately, the ILO says, the contrast between recovery in the macroeconomic indicators and the unemployment indicator could not be starker. Global unemployment began to grow in 2008 as the crisis increased uncertainty and led to reduced hiring. This was followed by a massive increase of more than 22 million in global unemployment in 2009. The year 2010 brought little change to this elevated level of unemployment.

In all, there were 27.6 million more unemployed people in the world in 2010 as compared with 2007, with little hope for this figure to revert to pre-crisis levels in the near future. The current projections for these indicators for 2011 show a further widening of the gap between the macroeconomic recovery and a recovery to pre-crisis unemployment levels.

Employment and unemployment trends

The ILO report provides an overview of global trends in employment and unemployment, labour force participation, productivity and a number of other key labour market indicators.

With  respect  to  the  issue  of employment, the report finds that contrary to what may be expected, global employment has continued to grow  throughout  the  crisis,  though at  less  than  half  the  rate  observed prior to the crisis.  Employment contracted sharply in 2009 in the Developed Economies and European Union (-2.2%) and Central and South-Eastern Europe (non-EU) and Commonwealth of Independent States (CIS) (-0.9%) regions, but total employment continued to grow in all other regions during the crisis.

While global employment continued to grow, the employment-to-population ratio, which represents the share of people of working age in employment, declined from 61.7% in 2007 to 61.2% in 2009 and was little changed at 61.1% in 2010. In the Developed Economies and European Union region, the employment-to-population ratio dropped from 57.1% in 2007 to 55.5% in 2009, with a further drop to 54.7% in 2010.

Clearly, the report explains, many developed economies are simply not generating sufficient employment opportunities to absorb growth in the working-age population, which again reflects the ongoing lag between economic recovery and a recovery in employment in this region. This contrasts with many developing regions, some of which saw an initial decline in the employment-to-population ratio but where, in all developing regions except East Asia, the estimated employment-to-population ratio in 2010 is little changed versus 2007.

Turning to the issue of unemployment, the report notes that despite the rapid recovery in the global economy that took place in 2010, following two years of severely adverse labour market conditions, global unemployment remained elevated in 2010. The number of unemployed stood at 205 million in 2010, essentially unchanged from the year earlier and 27.6 million higher than in 2007.

Given that the number of unemployed increased by more than 22 million in 2009 alone, 2010 brought about a halt to the surge in unemployment in the world as a whole, but conditions in labour markets did not improve enough to significantly roll back any of the damage that had been done. The global unemployment rate stood at 6.2% in 2010, versus 6.3% in 2009 and 5.6% in 2007.

While the global unemployment rate halted its rise in 2010, regional estimates reveal a clear divergence between developed and developing regions. In the Developed Economies and European Union region, which saw the largest regional increase in the unemployment rate between 2007 and 2009 (2.6 percentage points), the unemployment rate continued to increase in 2010, rising 0.4 percentage points, to 8.8%. In Central and South-Eastern Europe (non-EU) and CIS and East Asia, unemployment rates declined in 2010. All other regions saw little change in the incidence of unemployment.

Hence, the report underlines, a picture emerges of a continued rise in joblessness in the developed regions versus a steady to slightly improving unemployment picture in the developing regions.

Unemployment by sex and age

The report also draws attention to trends in unemployment among women and men, finding that globally, the number of unemployed men stood at 118.4 million in 2010, an increase of 17 million since 2007. The number of unemployed women stood at 86.5 million in 2010, up 10.6 million since 2007. The unemployment rate among men changed little (an estimated 6.0% in 2010 versus 6.2% in 2009), while the rate for women remained unchanged at 6.5%.

This difference in trends between the sexes is mainly driven by developments in the East Asia and Central and South-Eastern Europe (non-EU) and CIS regions, says the report. In other regions, there is no discernible sex-based difference in unemployment rate trends in 2010.

Globally, men had been somewhat harder hit than women during the crisis in terms of rising incidence of unemployment (an increase from 5.4% to 6.2% between 2007 and 2009, versus an increase from 6.0% to 6.5% for women). This was mainly due to a large increase in male unemployment in the Developed Economies and European Union region, where widespread layoffs occurred in predominantly male industries, especially construction and the financial sector.

As regards the trends among youth and adults, the report finds that based on the latest available data, the number of unemployed youth (aged 15-24) is estimated to have declined from 79.6 million in 2009 to 77.7 million in 2010, but still well above the pre-crisis level of 73.5 million in 2007.

The unemployment rate among youth aged 15-24 stood at 12.6% in 2010, 2.6 times the adult rate of unemployment, the ILO said, warning however that among 56 countries with available data, there were 1.7 million fewer youth in the labour market (between 2007 and 2009) than expected based on pre-crisis trends, and that such discouraged workers are not counted among the unemployed because they are not actively seeking work.

'This represents a huge waste of human potential, which could have serious long-term repercussions for the affected young people themselves and for societies at large,' the report stresses.

The ILO report notes that the youth unemployment rate rose in the Developed Economies and European Union region in 2010, where it stood at 18.2%, versus 12.4% in 2007. The rate declined sharply in the Central and South-Eastern Europe (non-EU) and CIS region, from 20.8% in 2009 to 18.9% in 2010, but still remains well above pre-crisis levels.

In contrast to the trend in youth unemployment, the number of unemployed adults (aged 25 and above) continued to rise in 2010, by an estimated 1.7 million, giving a total increase of 23.5 million since 2007. This corresponds to a global unemployment rate of 4.8% among adults in 2010. This is unchanged versus 2009 and up 0.7 percentage points since 2007.

As to the global outlook for growth and unemployment in 2011, the report cites the IMF as projecting global economic growth of 4.2% in 2011, down from 4.8% in 2010.

'Downside risks continue to be the dominant concern. As the effects of fiscal stimulus begin to wane and increased private sector investment is unlikely to fully compensate for reduced government expenditures, decelerations in growth are expected to occur in all regions except the Middle East and Sub-Saharan Africa (where growth is expected to accelerate) and North Africa (where growth is expected to remain roughly constant),' said the ILO.

On the basis of these macroeconomic forecasts, the ILO report projects the global unemployment rate at 6.1% in 2011, corresponding to global unemployment of 203.3 million, versus a rate of 6.2% in 2010.

Examining the trends in labour productivity and real wages, the report points out that the problem of delayed labour market recovery can be seen not only in the lag between output growth and employment growth and reduced unemployment but also, in some countries, in the lag between productivity growth and resumption in real wage growth.

'This phenomenon can threaten future recovery prospects, given the strong linkages between employment and growth in real wages on the one hand, and consumption on the other.'

In this respect, the report suggests that strong tripartite dialogue between workers, employers and governments is essential at the national level to ensure a fair distribution of the gains of productivity improvements and also to appropriately account for the concerns of both workers and employers when designing and implementing policies to foster labour market recovery.

The report also studies trends in employment across the three broad economic sectors: agriculture, industry and services. It finds that at the global level, a long-term trend is observed in which employment in agriculture has been on a steady downward march in terms of the share of total employment, while employment in services has steadily risen. Employment in services surpassed employment in agriculture in 2001 and the gap between the two has grown ever since.

While employment in agriculture has been on a steady decline, there were still an estimated 1.068 billion workers in the agricultural sector in 2009, and the number of workers in agriculture actually grew over the past decade, though the share of workers in the sector declined as employment grew at a faster rate in the other sectors. Total employment in the services sector reached 1.317 billion in 2009, an increase of more than 300 million from 1999. Employment in industry stood above 660 million in 2009, growing by more than 130 million since 1999.

On the effect of the crisis on employment across the three sectors, the report underlines that at the global level, it is clear that employment in industry suffered the worst outcome, which is not surprising given the impact of the crisis on manufactured exports and the construction industry. Total global employment in industry declined slightly in 2009, a major divergence from the historical annual growth rate of 3.4% over the period from 2002 to 2007.

The hardest-hit region in terms of industrial employment was the Developed Economies and European Union, where employment in the sector declined by 9.5 million between 2007 and 2009, with a drop of nearly 7% of total employment in the sector in 2009 alone. The Central and South-Eastern Europe (non-EU) and CIS and Latin America and the Caribbean regions also saw a major drop in industrial employment in 2009.

Vulnerable employment and working poverty

The report also examines trends related to workers in 'vulnerable employment', defined as the sum of own-account workers and unpaid family workers, which it says provides valuable insights into trends in overall employment quality.

On the basis of available data, the report says that the current estimate of the number of workers in vulnerable employment in 2009 is 1.53 billion, an increase of more than 146 million since 1999. This corresponds to a global vulnerable employment rate of 50.1%. The incidence of vulnerable employment has remained broadly unchanged since 2008, in sharp contrast to the steady and significant average decline in the years preceding the crisis.

Increases were observed in the vulnerable employment rate in three regions in 2009: Latin America and the Caribbean, North Africa and Sub-Saharan Africa. The number of workers in vulnerable employment is estimated to have increased by 8.5 million in South Asia, by 7.4 million in Sub-Saharan Africa and by 1.5 million in Latin America and the Caribbean in 2009, with smaller increases in South-East Asia and the Pacific, North Africa and the Middle East.

The report also finds that there were 630 million workers (20.7% of all workers in the world) living with their families at the extreme $1.25-a-day level in 2009. This corresponds to an additional 40 million working poor, 1.6 percentage points higher than projected on the basis of pre-crisis trends.

The share of workers living with their families below the $2-a-day poverty line is estimated at around 39%, or a total of nearly 1.2 billion workers worldwide.

Regional indicators

With respect to regional economic and labour market developments, the report finds that in the Developed Economies and European Union region, for instance, the unemployment rate rose from 5.8% in 2007 to 8.4% in 2009 and 8.8% in 2010. Hence, while the economic recovery began to take shape in earnest in 2010, unemployment continued to climb.

Fifty-five percent of the total increase in global unemployment between 2007 and 2010 occurred in the Developed Economies and European Union region, while the region only accounts for 15% of the world's labour force.

The outlook for 2011 is for a modest deceleration in economic growth, to a rate of 2.0% versus 2.3% in 2010. On the basis of current macroeconomic projections, the region's unemployment rate is expected to see little change in 2011, projected at 8.6% versus a 2010 estimate of 8.8%. This would represent a decline in unemployment of only 300,000, leaving the level of unemployment in the region more than 15 million above the level in 2007.

Following a sharp contraction in GDP growth in 2009, economic growth in Latin America and the Caribbean expanded strongly in 2010. The unemployment rate in the region decreased by 0.9 percentage points from 8.5% in 2000 to 7.7% in 2010. However, the economic crisis resulted in an increase in the share of vulnerable employment in 2009, the first increase in the region since 2002. The outlook for 2011 is continued growth but at a lower rate of 4.0%. The unemployment rate is projected to decrease by 0.3 percentage points to 7.4%.

In contrast to many regions around the world, the labour market in East Asia has recovered relatively quickly. The unemployment rate in the region is estimated to have declined from 4.4% in 2009 to 4.1% in 2010. Nonetheless, this still represents a higher rate than in 2007. Youth unemployment remains a major challenge as the youth unemployment rate, at 8.3% in 2010, is 2.5 times higher than the rate for adults. In 2011, economic growth is projected to slow to 8.6%, reflecting reduced stimulus measures, while the unemployment rate is expected to show little change at 4.0%.

In Central and South-Eastern Europe (non-EU) and CIS region, unemployment declined to 9.6%, having peaked in 2009 at 10.4%, the highest regional rate in the world. Youth unemployment rose more than in any other developing region in 2009, and one in five economically active youth in the region was unemployed in 2010. The 2011 prospects are sober, says the report, with GDP growth expected to slow, following global trends, to 4.3%. The unemployment rate is projected to remain relatively constant at 9.7%.

The report says that the economies of South Asia have largely held up well during the crisis and the region resumed rapid economic growth in 2010. Yet, the region has the highest rate of vulnerable employment in the world, at 78.5% of total employment in 2009. The regional unemployment rate is projected to see little change in 2011, at 4.1%. A key risk in 2011 is inflation, particularly in the price of food and basic commodities, which underlines the importance of expanding social safety nets for the poorest.

Sub-Saharan Africa has rebounded from the global economic crisis, although the region has not yet fully returned to pre-crisis rates of growth. The region's economic growth in 2010 is estimated at 5.0%, supported by exports and commodity prices in oil-exporting and middle-income countries.

The report notes that in 2009, more than three-quarters of workers (75.8%) in the region were in vulnerable employment, a rate significantly exceeding all other regions except South Asia. Due to the global economic crisis, the vulnerable employment rate is estimated to have increased by 0.5 percentage points in 2009, which is the first increase since 2001.

According to the report, Sub-Saharan Africa is also characterised by very high working poverty rates; in 2009, around four out of five workers were among the ranks of the working poor (at $2 a day). The report projects economic growth for the region in 2011 at 5.5%, which is the same rate as just before the global economic crisis in 2008. Current projections of the unemployment rate show little change between 2010 (8.0%) and 2011 (7.9%).                 

Kanaga Raja is Editor of the South-North Development Monitor (SUNS), which is published by the Third World Network. This article is reproduced from SUNS (No. 7074, 26 January 2011).

*Third World Resurgence No. 245/246, January/February 2011, pp 31-34