The International Labour Organisation has predicted global unemployment will grow by 6m to 202m this year — and warned austerity measures being pursued by countries such as Ireland will lead to further job losses.
In its World of Work report for 2012, the ILO says it is unlikely the world economy will grow at a sufficient pace over the next two years to both close the existing jobs deficit and provide employment for the more than 80m people expected to enter the labour market during that period.
“The trends are especially worrying in Europe, where the unemployment rate has increased in nearly two-thirds of the countries since 2010,” it said, adding labour market recovery has also stalled in other advanced economies such as Japan and the US.
It said in countries in Southern Europe, which have pursued austerity and deregulation “to the greatest extent”, economic and employment growth have continued to deteriorate. “The measures also failed to stabilise fiscal positions in many instances,” it said.
“The fundamental reason for these failures is that these policies — implemented in a context of limited demand prospects and with the added complication of a banking system in the throes of its ‘deleveraging’ process — are unable to stimulate private investment. The austerity trap has sprung.”
It said austerity had resulted in weaker economic growth, increased volatility and a worsening of banks’ balance sheets and that had lead to a further contraction of credit, lower investment and, consequently, more job losses.
“Ironically, this has adversely affected government budgets, thus increasing the demands for further austerity.
“It is a fact that there has been little improvement in fiscal deficits in countries actively pursuing austerity policies.” The ILO said the malaise in jobs across the globe was not a “normal employment slowdown”.
“Four years into the global crisis, labour market imbalances are becoming more structural, and therefore more difficult to eradicate. Certain groups, such as the long-term unemployed, are at risk of exclusion from the labour market. This means that they would be unable to obtain new employment even if there were a strong recovery.” It also found that, for those who do have a job, employment has become more unstable and precarious.
It said: “In advanced economies, involuntary part-time employment and temporary employment have increased in two-thirds and more than half of these economies, respectively.”
“Women and youth are disproportionately affected by unemployment and job precariousness.
“In particular, youth unemployment rates have increased in about 80% of advanced economies and in two-thirds of developing economies.”
In order to move away from “the austerity trap”, it suggested a three-pronged approach:
* Labour market institutions should be strengthened so that wages grow in line with productivity, starting in surplus economies. Consideration could be given to a careful and coordinated increase in the minimum wage;
* Credit conditions should be restored and a more favourable business environment created for small enterprises, particularly in eurozone countries where the policy of the Central Bank to provide liquidity to banks has failed to boost credit to the real economy;
* A fiscally neutral change in the composition of expenditures and revenues would create between 1.8 and 2.1m jobs within one to two years. For advanced economies, the focus should be on ensuring the unemployed receive support to find jobs.
© Irish Examiner Ltd. All rights reserved