Transcript On the one hand, not bad

Three Policy Responses to the Effects of the
Global Crisis on Labor and Social Sectors in
Arab countries: A Personal View
Professor Zafiris Tzannatos
ILO expert
Presentation at the
Regional High Level Consultative Forum on the Impacts of the
International Financial Crisis on ESCWA Member Countries: The
Way Forward
6 May, 2009
Damascus
1
Outline
1. What are the main challenges arising from the
global crisis on labor markets and employment
for the ESCWA region?
2. What are the expectations with regard to
recovery and its effects on employment and
social protection?
3. Which priority measures would need to be
taken?
2
Question 1
What are the main challenges arising from the
global crisis on labor markets and employment
for the ESCWA region?
Answer:
• On the one hand, not bad
• On the other hand, not good
• On the third hand, the international experience
tells us …many and bad and for many years
3
On the one hand, not bad ….
Economic growth forecast to grow by:
• +2.5% in the Middle East (second only to East Asia)
Latest estimates for GDP change in 2009
• China
+6.5%
• India
+4.5%
• Japan
-6.2%
• Euro Area
-4.2%
• USA
-2.8%
• Other rich countries
-4.1%
MEMO ITEM: Latest estimates for Quarter 1 of 2009
• Global Trade
-11.0%
• GDP change in rich economies
-7.5%
• We have a lot of catching up to do in the next 6 months
4
Let’s hope the recent past for MENA will continue
1998
2008
Change
6.1
11.1
13.0
6.0
9.4
10.7
-1.6%
-15.3%
-17.7%
Adult Employment/Population Ratio
World
66.5
Middle East
53.2
North Africa
51.4
66.6
54.7
54.0
0.2%
2.8%
5.1%
Vulnerable employment
World
Middle East
North Africa
50.6
32.3
37.3
-5.4%
-17.8%
-13.5%
% of working poor in employment ($2/day)
World
54.2
40.5
Middle East
25.8
24.0
North Africa
42.0
30.2
-25.3%
-7.0%
-28.1%
Unemployment Rate
World
Middle East
North Africa
53.5
39.3
43.1
5
Figure 7: Recent Annual Growth in Employment Highest in MENA
2000-2005
5.0
4.0
2.0
1.0
0.0
-1.0
-2.0
South Asia
Europe and
Central Asia
East Asia and
Pacific
East Asia and
Pacific (ex.
China)
Figure 4: Regional Unem ploym ent Rates
MENA
Europe and Central
Asia
2000
Latin America and
Carribean
2006
South Asia
Latin America
and Caribbean
MENA
Figure 9: Labor Force Growth, MENA
percent / millions
Percent
3.0
5
4
3
2
1
0
1980-90
2000-05
2010-20
East Asia Pacific
0
3
6
9 12
percent
15
New Entrants (millions)
Annual LF Growth (%)
6
Things can be better from MENA?
Forecasts of Unemployment and Vulnerable Employment
2008
Change in 2009
(ILO scenarios)
1
2
3
UNEMPLOYMENT
Unemployment Rate (%)
World
Middle East
North Africa
6.0
9.4
10.7
6.3
9.3
10.6
6.7
9.5
10.9
7.1
10.8
11.6
People (million)
World
Middle East
North Africa
193
6
7
203
7
8
217
7
8
231
8
8
Share in total employment (%)
World
Middle East
North Africa
49.4
31.4
35.8
48.4
30.5
34.7
49.9
31.6
36.0
53.0
39.2
42.6
People (million)
World
Middle East
North Africa
1475
19
22
1466
19
22
1510
20
23
1606
25
27
VULNERABLE EMPLOYMENT
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On the other hand, not good:
Economic growth in the EU forecast to
decline by 4.2% (better only than in Japan)
Geographic Orientation (%) of Arab World’s Exports, 2007
Country Group
Asia EU-15
North
Others
America
Oil-exporting
71
4
1
24
Non-oil exporting
27
50
3
20
Arab countries
48
29
2
22
8
Where will new job seekers in MENA go?
Figure 16b: MENA Has the Lowest Employment Rates
(most recent available data, 2000-05)
63.8
65
60
56.9
57.2
East Asia and
Pacific
Sub-Saharan
Africa
Percent
55.2
55
51.8
50
49.5
47.4
45
40
MENA
Europe and
Central Asia
Latin America
and Caribbean
South Asia
EU-25
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And those who are out of school?
Youth inactivity highest in MENA
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Question 2
What are the expectations with regard to
recovery and its effects on employment
and social protection?
Answer:
• What does the international experience tell us to
expect?
11
Alan Greenspan’s expectations
(Fed Chairman, 1987-2006)
– (Oct 2008) The crisis will pass, and America
will reemerge with a far sounder financial
system … the $700 billion program is
adequate to serve the needs
• One more trillion has been added to the rescue
package that is still growing
– (Dec 2008) “the global stock market value
wiped out this year was $30 trillion … Human
nature being what it is, we can count on a
market reversal within 6 months to a year”
• If so, we are nearly there
12
How big is the black hole ?
How much do we have to fight the crisis?
• Global GDP
$55 trillion
• US GDP
$14 trillion
• Sovereign wealth funds
$ 3 trillion (before the bubble burst)
The assets of the global fund management industry in 2007:
• reached a record $74 trillion
– An increase of 14% in 2007 and double from 2002
The trading volume of over-the-counter (OTC) markets:
• Reached $700 trillion by June 2008
– A nine fold increase in a decade, and 15% higher than in December
2007
MEMO ITEM: The Marshall Plan was $13b or 1.5% of the then US
GDP – $120 billion in today’s prices
13
The losses are big everywhere
2008 end of year losses
•
UK’s FTSE
-40%
(worse year on record)
•
FTSEurofirst
-45%
•
Japan’s Nikkei 225
-42%
•
HK Hang Seng
-48%
•
New York’s S&P 500 -39%
•
China got the prize
-65%
A. There were:
•
298 billionaires in 1999
• 1,125 in 2008
•
793 in 2009
• Their wealth is now on average
only $3bl each (collective loss
of 1.4 trillion or 23% in just one
year)
B. The global financial crisis
slashed the value of the
worldwide financial assets by
$50 trillion last year (ADB,
March 9, 2009)
C. It is now expected that:
• +50-100m pushed into poverty
(World Bank)
• +50m unemployed (ILO)
14
A Typical Balance Sheet in 2009
LEFT
SIDE
-----------------------------
RIGHT
SIDE
-----------------------------
NOTHING
RIGHT
NOTHING
LEFT
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Ben Bernanke’s expectations
May 4, 2009
(Fed Chairman, 1987-2006)
• “We expect the US recovery to start in the
last quarter of 2009, earlier than previously
thought, …But unemployment will continue
to increase in 2010 …”
• What does recovery mean? Perhaps, stop
falling as fast a before?
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The crisis will be over in 6 months
or recovery will start by end-2009?
Peak to Trough Effects of Crises
•
•
•
•
•
House prices
Real equity prices
Unemployment
GDP
Public debt
•
C.M. Reinhart and K.S. Rogoff “The Aftermath of Financial Crises”, AEA Meetings, 2009, Jan 3
-36%, duration 6.0 years
-56%, duration 3.4 years
+7%, duration 4.8 years
-9%, duration 1.9 years
+86%
17
Is $1 trillion enough for deleveraging?
Fiscalization of the Debt from Corporations to the Government/Tax Payers/People
(A. Bisat/ Traxis Partners)
18
Don’t expect much from the stock markets
Nikkei 1970 – 2008: 19 long years and going
…
19
How long and deep recession/depression?
We do not know, we do not have models for the long
run (even the short run)
In September 2008, no country admitted it was in recession.
Then forecasts for global economic growth started coming out
….
• September 2008
• November
• December
•
•
•
•
January 2009
February
March
April
4.5% (WB)
2.0% (IMF)
0.9% (WB)
0.5% (IMF)
may be negative (IMF)
-0.5 to -1.0% (IMF)
-1.3% (WB/IMF)
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The crisis will be over in
6 months or 25 years?
• 1873-1897: The Great Long Depression
– 24 years
• 1929-????: The Great Depression
1954: The Dow Jones regains its 1929 value
– 25 years
• 1990-????: The Japanese Crisis
– 19 years and going
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Question 3
Which priority measures would need to be
taken?
Answer:
• Social pensions (old age)
• Unemployment insurance (working age)
• Cash transfers for education (and child labor)
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The Arab world is predominantly middleincome but has no commensurate level
of social insurance/assistance policies
• Practically no unemployment insurance
• Only 10% of the elderly receive a pensions and
only 30% of workers are enrolled in social
security
• Though child labor is not as prevalent as in other
regions, education enrolment remains low (and
may decrease under the financial pressure on
households following the crisis)
23
Time to introduce unemployment insurance?
Constant US$ in 2000
Year of Enactm ent of UI and Country per Capita GDP in Sam e Year
12000
10000
8000
6000
4000
2000
0
1900
1910
1920
1930
1940
1950
1960
1970
1980
1990
2000
The countries that introduced UI when per capita income was below $2,000 are:
Albania, Bulgaria, Yugoslavia, Russia, Tajikistan, Egypt and Japan, Finland, Ecuador.
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Two cash transfers with low fiscal costs,
and high welfare and development impact
Social (non-contributory) pensions
• Paid to all those above, say, age 65 (with some
exclusions e.g. for those already in receipt of a
pension, or above a threshold level of income or
assets)
• Set at low level (self targeting)
Conditional transfers for education
• Increasingly popular and successful
• Need to be well designed and implemented
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Conclusion
• Get the facts, or the facts will get you. And when you get
them, get them right, or they will get you wrong.
– Dr. Thomas Fuller
British physician, preacher and intellectual
Gnomologia 1732
• “If we don't succeed, we run the risk of failure”
– George W. Bush
US President
2001-2009
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Thank you
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