Transcript In search of increased aggregate demand and sustainability

Human rights-based approaches to
financial regulation, macroeconomic
policies, and economic recovery: An
ILO perspective
Vinicius Carvalho Pinheiro
Deputy Director, ILO Office for the UN in New York
NYC, 24 April 2013
Global employment figures – 2012
There was a crisis before the crisis
• Total population – around 7.1 billion people
▫ Working age population – 5.3 billion
 Labor force – 3.344 billion (60.3 % participation
rate)
 Employed – 3.147 billion
▫ Working poor (less than USD 2/day) – 869 million
 Unemployed – 197.3 million (5.9% U rate)
▫ Youth unemployed 73.8 million (12.6% U rate) – risk of
loosing a generation
 Labor force annual growth – 1.2% (44 million per
year)
 Social protection coverage – 25 %
Source: ILO Global employment trends 2013
The global employment crisis toll
(2007/2012)
• 67 million jobs gap (28 million increase in unemployment + 39
million dropped the labour force)
• Unemployment rate increased from 5.4% (2007) to 5.9% (2012) and
tend to keep growing to 6-6.2% in 2017
• Youth unemployment increased form 11.6 to 12.6% from 2007 to
2012 (+3.7 million unemployed) since 2007 and around 19 million
young dropped the LF. Increase in Youth neither in employment nor
in education or training (NEETs)
• Lesson from previous crisis – employment recovery takes 5-7 yrs
• Divergent unemployment picture in developed and developing
economies
▫ Developed economies: unemployment increased from 6.9 to 8.6%
regions
 Long term unemployment
▫ Developing economies: reduction in unemployment
 Informality and job quality
Structural challenges – job unfriendly growth
• Surges in long term unemployment
• Major shifts in labour force participation mostly in
developed economies - increases in discouraged workers,
which worsens labour force participation rates that are
already low
• Persistence of high shares of informal and precarious
employment
• Labour income as share of national income has declined,
reducing aggregate demand
• Austerity measures contribute further to the decrease in
labour income share reducing household consumption
and depressing aggregate demand
In sum…
• The global economy is not growing fast enough to create enough
decent jobs to return to pre-crisis employment levels – the pace of
growth actually appears to be slowing further.
• Wages are lagging behind productivity, and wage shares as a
percentage of income are shrinking in favor of profits –but this has
not yielded an investment-led recovery, and has only increased
inequality
• Employment focused policies are need to sustain aggregate demand
and to put into motion a virtuous circle of expanding and inclusive
economic growth
▫ Increased investment in infrastructure and maintenance
▫ Ease of credit conditions for micro and SMEs
▫ Minimum wage policies
▫ Investment in education and training, particularly for those who
face exclusion
▫ Extension of social protection and establishment of SPFs
What should be done?
1. Employment and social protection must at the
heart of the macroeconomic policies….
• Minimum wage policies
▫ China, Brazil and Indonesia in particular have used minimum wage
increases to address inequality with beneficial effects on household
consumption.
▫ An ILO-European Commission Study shows that minimum wages helped to reduce
wage disparity and limit the number of low paid workers in European countries
that established them.
• Collective bargaining, which can better link productivity increases to
wage increases and narrow wage dispersion
• Financial and tax incentives for productive investment, and for small
and microenterprises (SMEs) – the real job creator machine. While
too much attention was given to those too big to fail, those too small
to matter were forgotten. Financial regulations must ultimately
favour lending to SMEs and housholds
• Social protection
2. Call for action on youth
employment - averting the risk of a
lost generation
• employment and economic policies to increase aggregate
demand and improve access to finance;
• education and training to ease the school-to-work
transition;
• labour market policies to target employment of
disadvantaged youth;
• entrepreneurship and self-employment to assist
potential young entrepreneurs; and
• labour rights that are based on international labour
standards to ensure that young people receive equal
treatment and are afforded rights at work.
• Opportunities deriving from the transition to a greener
economy
A growing concern about skills
mismatch…
• For many workers, job destruction and
unemployment means look for jobs in new sectors
and occupations
• Structural change in the labour market with
reallocation of workers from low- to higher
productivity sectors (from agriculture and industry
to services) can reduce vulnerabilities if the
adequate skills are in place
• Transition to a greener economy can have a positive
impact in job creation pending on adequate skills
adaptation strategies
3. Social protection floors
• ILO Recommendation 202 – Income transfers +
social guarantees
• Policy coherence approach to overcome
fragmentation of social goals
• Triple effect: Protect and empower people and
contribute to boost the aggregate demand
• ILO + IMF: It is feasible even in poor
economies: not a matter of resources, but of
political will
Conclusion
• In 1948, the Universal Declaration of Human Rights called for social
protection for all with adequate living standards, access to health
and education, food and housing, and social security.
• Despite of more than 6 decades of strong economic grow - in 2010
the global GDP was 10 times larger than in 1950 an increase of 260
per cent per capita, access to adequate social protections services
and benefits remains a privileged offer to a few people. 75 per cent
still lack access to adequate Social Protection.
• The current economic model is clearly not delivering enough on
social protection and generation of decent jobs.
• The global community has an opportunity to deliver on the promises
made half a century ago, by making clear commitments to full and
productive employment, decent work and social protection floors as
part of the post 2015 development agenda.