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The Economic Crisis Weighs Heavily on the Global Labor Market
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The Economic Crisis Weighs Heavily on the Global Labor Market

Analysis from Sabina Dewan on new data from the International Labour Organization showing that the U.S. economic crisis has far-reaching effects for the rest of the world.

Juan Somavia, director general of the International Labor Organzation, speaks during a press briefing at the United Nations building in Geneva, Switzerland, on June 19, 2009. At an event alongside the International Labor Organization’s annual conference in Geneva last month CAP made the case for countries to strengthen government institutions that help protect workers struggling to maintain their livelihoods. (AP/Martial Trezzini)
Juan Somavia, director general of the International Labor Organzation, speaks during a press briefing at the United Nations building in Geneva, Switzerland, on June 19, 2009. At an event alongside the International Labor Organization’s annual conference in Geneva last month CAP made the case for countries to strengthen government institutions that help protect workers struggling to maintain their livelihoods. (AP/Martial Trezzini)

The International Labour Organization’s most recent Global Employment Trends annual report confirms that the United States is not alone in its woes; the economic crisis has had a dramatic effect on employment worldwide. The contagion, rooted in a decade of weak U.S. economic performance released by the mortgage crisis and the meltdown on Wall Street, has spread to consumer confidence and spending, trade, production, and profits, and has ultimately infected the very livelihood of individuals in almost every corner of the globe. The U.S. economy lost 2.6 million jobs in 2008 and recent news of massive layoffs by companies such as Caterpillar, Harley Davidson, and Pfizer has made the recession ever more real for a growing number of American families. The same is true for families in other parts of the world.

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The ILO’s report notes that an estimated 6.0 percent of the world’s workers were out of work and looking for employment in 2008, up from 5.7 percent in 2007. The youth unemployment rate rose by 0.4 percentage points in 2008, bringing the number of total unemployed youth around the world to 76 million. What’s more, the ILO’s most optimistic forecast for 2009 predicts that global unemployment will increase by an additional 18 million people, leaving 198 million people unemployed worldwide.

Developed economies and the European Union saw the largest increase in the regional unemployment rate from 5.7 to 6.4 percent; 3.5 million people lost their jobs in this region this year. Women account for over half of this rise, and women’s rate of unemployment increased slightly more than men’s.

In developing countries, unlike in developed nations, unemployment does not serve as an appropriate indicator for the health of the labor market. A large proportion of workers, particularly those in the informal sector, must perform some form of work to earn enough for basic sustenance. There is only limited empirical information about how the economic crisis has affected developing nations’ labor markets. The preliminary evidence that is available suggests that the economic crisis has led to churning in jobs, fluctuating stock markets and commodity prices, and declining exports as a result of falling consumer demand that, in the absence of social safety nets, have resulted in a rise in the number of working poor and those in vulnerable employment (unpaid family workers and own-account workers). Youth and women are disproportionately affected by this deficit in opportunities for decent work.

The ILO forecasts that the number of working poor—those unable to earn enough to lift themselves and their families over the US$2/day poverty line threshold per person—may constitute 45 percent of the world’s employed. And their worst-case scenario shows 53 percent of the employed population in vulnerable employment. Further deterioration in the global economy may push as many as 200 million workers, mostly in developing economies, into extreme poverty—below the $1.25/day poverty line threshold.

The United States is a key player in the global economic game, and putting a stop to accelerating job losses in the United States is essential to restoring the health of the global economy, as well as to getting our own economy back on track. This underscores the desperate need for swift action on an economic recovery package with job creation at its core. President Obama’s plan to invest in infrastructure and green jobs, as well as aid to states and expanding unemployment compensation systems, is a needed prescription for the ailing labor market.

A silver lining to these bleak economic times may be, as President Obama noted in his inaugural address, that we are still a nation that enjoys “relative plenty [but] we can no longer afford indifference to suffering outside our borders.” We must prevent backtracking on progress made in poverty reduction and in instituting decent work. These are opportunities for employment that are complete with social protection, fundamental rights at work, and social dialogue and the right to collective bargaining and freedom of association.

Progress on these fronts is central to our moral integrity as well as to our economic and national security interests. A lack of decent opportunities for employment alongside frayed or non-existent social safety nets, particularly among youth, can serve as an impetus for lawlessness, violent conflict, crime, and terrorism. This calls for leveraging foreign assistance and economic policies to foster development through the creation of decent work abroad.

The interconnectedness of the globe impresses upon us the fact that domestic and international challenges are interrelated and must be addressed in tandem.

Sabina Dewan is Associate Director of International Economic Policy. Read more about international economics on the Economy page.

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Authors

Sabina Dewan

Senior Fellow

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