Transcript Employment led Economic Development Process

Growth with Social Justice:
lessons from global economic crisis
Globalization
How is it changing the world of work?
Participants views…
Picture Source: Kate Raworth, Oxfam presentation on Trade & Human Development,
Global economic crisis
- What caused it?
- Why did it affect Asian countries?
-
What can we learn from it?
Implications of current development
policies

Shift from development cooperation to free trade - Open markets for
trade, investment & capital flows;

More competition between Unequals - High income countries have
more than 80% of the world incomes, receive more than 3/4th of the
foreign investment and 3/4th of the world trade is between them.
Equality of “access” does not mean equality of “opportunity” unequal capabilities lead to unequal outcomes

Withdrawal of ‘State’ from its economic & regulatory role;
(markets Know the best, will self regulate)

Strain on international labour solidarity
Root Causes of Crisis

Result of ‘liberalization’, speculation & greed - ‘markets know the
best’ philosophy (in the context of declining rate of profits &
financialisation of economy)

Widening Inequalities – between K & L, between countries, between
regions

Wages lag behind productivity
declining share of wages in
value added & GDP (why this decline?) – debt financed consumption

Consequences of inadequate or lack of social protection on growth &
recovery

Export dependence of Asian Countries
Globalization & Inequalities

Theory: Rich invest, poor consume – so redistribute
income towards the rich to promote growth - and rising
tide will lift all boats
(shift of incomes/value added towards K through privatization,
restructuring , technology , labour and tax policies),
But what has happened?

Growth yes but widening inequalities (Ex. India, China &
Indonesia – fastest growing economies in Asia)

Decline in labour’s share of GDP
Population & Wealth Shares by Region (2000)

the richest 10% own 85% of the global assets (2000).

50% of the world population owns less than 1% of the global assets.
Source: UNU-WIDER
Asia: State of the Workers
2006-2015: Decent Work Decade for A-P region - BUT

Extreme poverty reduced, still about 73% of the world’s working poor are in
Asia - 60% of the region’s workers (abt 1.1 billion), are in vulnerable
employment (low-paid, insecure work with poor working conditions);
{South Asia: 77%, South-East Asia: 62% & East Asia: 51%}
63% of women & 58% of men are in vulnerable employment

Gini-coefficient (measure of inequality) rose from 38 to 47 in the past two
decades

Child Labour: About 114 m (2008), 48 m in hazardous conditions

566 million people are malnourished, 469 million lack access to safe water and
1.8 billion people have no access to sanitation

Over 213 m jobs need to generated between 2010 & 2020 to keep pace with
labour force growth - in addition to jobs for the 94 m currently unemployed
people.
Contribution Rates for SS Programs in
selected Asian countries 2008 (%)
45.00
40.0
40.00
36.1
34.5
35.00
30.00
29.0
25.5
25.3
18.0
20.00
14.5
15.00
13.1
13.8
11.0
13.8
16.1
12.9
8.5
20.0
10.00
5.00
25.0
22.4
25.00
12.4
11.5
10.2
8.3
5.2
7.0
7.6
4.6
5.0
9.5
5.0
4.5
9.0
7.0
2.0
Insured Person
Employer
a
In
do
ne
si
La
os
Ja
pa
M n
al
ay
si
a
Vi
et
So nam
ut
h
Ko
Ph rea
ili
pp
in
es
Th
ai
la
nd
Si
ng
ap
or
e
In
di
a
Ch
in
a
0.00
Total
A-P spends about 5.3% of GDP on public health and
social security –lower than other regions
Over dependence on Exports
Pre-crisis:
Almost 60% of final demand for Asian goods came
from developed countries.
Exports accounted for about 47% of developing Asia’s
output - In Indonesia, Korea, Taiwan and Thailand
exports contributed over 60% to growth - Exports
contributed about 50% to income growth of China
(pre-2008)
(Source: http://www.southcentre.org )
Distribution of the wealth
generated in export sector


Output per worker in Asia grew on average by 4.1% p.a. between
2000 & 2009, much higher than in the rest of the world (0.4%)
East Asia: averaged 8.3% p.a., followed by South Asia at 3.9% &
South-East Asia at 3.0%.
BUT average real wages grew by only 1.9% per year
In Export Sectors, what has been the share of wages? (In China
2/3rd of the income in Export sector goes to capital (a good part of
it to foreign capital), less than 20% goes to labour) – in many
countries share of wages in export sector is lower than that for the
economy as a whole.
Few lessons from ‘crisis’

Shift from export-led to domestic consumption led growth

Address unequal income distribution between capital &
labour - one of the root causes of global economic crisis,
social conflicts & obstacle to countries’ growth.

Need for wage policy and labour standards to ensure that
wage share in the GDP does not go down & prevent debt
financed consumption – Role of right to organize, collective
bargaining & social security
So, how to do this?




Sources of growth in economy - Pvt & Public Consumption
(C), Investments (I) & Exports (E)
If I > C, then dependence on foreign markets (E) is the only
way out to maintain growth – but can Asian countries continue
to export at the same rate as in last decade?
Lessons from the ‘crisis’ – raise domestic consumption
Wages - main source of domestic consumption - but wages
lagging behind productivity & it share in GDP & in value added
has been declining plus no social security for the majority
So, what policies can help to raise wage share & disposable
incomes?
Limitations of Export led model

Requires becoming internationally competitive by keeping
wages low, suppressing domestic consumption & keeping
exchange rate undervalued (weakening of domestic
currency)

Employment does not increase much since domestic
demand and domestic market remain limited. Gains from
growth are invested abroad (often)

Since all countries are becoming export oriented,
competition increases, prices keep falling & gains start
declining.
Wages & labour standards led model

Requires wages to grow along with labour productivity –
increases domestic demand and domestic market

When wage employment increases, the self-employed
also enjoy an increase in demand for their products

Same effect on the economy if labour standards are
ensured - since standards enable sharing in gains of
growth & spread of purchasing powers.
FoA & Collective Bargaining

Asia has the lowest ratification of the Convention 87 (19)
and Convention 98 (25).

Important countries like China, India, Iran, Korea, Burma,
Thailand, Vietnam, etc have not ratified these
conventions although FoA & Right to collective bargaining
exists in some form or the other.

In practice, little or no respect for workers right to form
unions, to union recognition & to negotiate collective
agreements - (TU density & CB coverage range between
1-19%).
Why Labour Standards?

Are labour standards only a question of ‘rights’ of
workers?

Voice, representation & participation

What role do FoA, Collective Bargaining, Social
Security & safe & healthy working conditions play in
economic development?
ILO’s Response
ILO’s Response

Global Jobs Pact adopted in June 2009 –
a framework for Decent Work led policies aimed at
economic recovery with job creation and the provision of
social protection to working people & families at its core

Process: Tripartite dialogue with social partners for
addressing the crisis & developing national policy response

Focused on promoting use of wage policy tools, social
protection and employment-led development policies with
respect for workers rights
Policies required






Right to Organize
Promote Collective bargaining: makes wages more responsive to
economic growth, reduces wage inequalities & improves social
security levels
Pro-active Minimum Wage policy: to be reviewed & adapted thru
tripartite social dialogue - helps to promote wage floor – ensures
sharing in growth – links to social security
Enforce labour contracts & labour law
Social security for all – C 102 as a guide - social protection floor
key to addressing crises and social instability
Training policies
Shifting towards domestic market
requires also

Human Resource policies to facilitate industrial restructuring from
export led to domestic consumption led growth (domestic market)

Factors of production & investment cannot be easily shifted –role of
State in allocation of investment and skills towards areas that need
to expand to meet higher domestic consumption.

Increased public social welfare expenditure on health, education,
social protection, especially in rural areas – this would reduce
precautionary household savings and increase disposable income.
Tax Policies

If share of K in value added /GDP is going up, then tax policies need
to be used to ensure that this increased wealth contributes to
improving social infrastructure and working conditions

Who contributes most to direct taxes?

Improve the taxation system, and reduce the burden on low income
groups – reform tax incentives to corporate sector.

Improve the social security coverage in urban and rural families –
use tax revenues & dividends of SOEs for social transfers & social
investments.
… therefore need for Decent Work