ILO forecasts economic gloom amidst slow growth

Global leaders must move swiftly to ensure that the current trend of rising inequality and slowing growth are quickly reversed to reduce inequality, generate decent jobs and sustainable enterprises, the International Labour Organization (ILO) has said.

Reacting to the gloomy global economy, the ILO stressed that massive investment in infrastructure is urgently needed for faster, greener and more inclusive growth in line with the Paris Agreement on climate change adopted in December 2015.

The global employment watch body observed that the growth of the global economy has slipped gradually but steadily to the weakest pace since the immediate aftermath of the financial crisis. With the latest downward revisions in growth prospects, the jobs gap of people not in work who would have had a job if pre-crisis growth had resumed could rise to over 80 million by 2020.

It further added that weakening growth has slowed the transformation into better work opportunities of low productivity, poorly remunerated jobs. Reductions in the share of working poverty in total employment and the absolute numbers of people living and working in poverty have stalled.

It highlighted that with private investment and household consumption weak in many countries and unlikely to revive with sufficient vigour and pace to reinvigorate growth in the near term, governments need to take the initiative.

While different countries face different constraints and opportunities in taking action, a package of employment and social policies can add to fiscal action to make an important contribution to macroeconomic strategies for inclusive growth especially if pursued in concertation with other countries.

ILO hinted insisted that since work is central to people’s lives saying under-performance of the global economy especially in terms of jobs and wages is a major cause of heightened political and social tensions and that access to decent work has to become part of the international approach to the refugee crisis.

It warned that the consequences of inaction in 2016 will make it harder to escape a low growth trap and put at risk the world envisioned by leaders at the UN General Assembly last September in the document ‘Transforming our world: the 2030 Agenda for Sustainable Development.’

It argued that slow growth widens global jobs gap and slows progress in poverty reduction.

It explained: “The growth of the global economy has slipped gradually but steadily to the weakest pace since the immediate aftermath of the financial crisis. There are over 70 million people not in work today who would have had a job if pre-crisis growth had resumed. With the latest downward revisions in growth prospects the jobs gap could rise to over 80 million by 2020. Outright unemployment remains high in many advanced countries and is rising in some emerging economies.
Participation rates are falling in many countries. Between 1995 and 2015, the global female labour force participation rate decreased from 52.4 to 49.6%. The corresponding figures for men are 79.9 and 76.1 per cent, respectively (see ILO – Women at work: Trends 2016). Over 70 million of the 200 million unemployed worldwide are young women and men. Overall, two in five economically active youth are either unemployed or working yet living in poverty.”

It also noted that weakening growth has slowed the transformation into better work opportunities of low productivity, poorly remunerated jobs.

In 2015, an estimated 327 million employed people were living in extreme poverty and 967 million in moderate and near poverty. The share of own account and unpaid family workers in total employment, which accounts for most of those working in the informal economies of the developing world, has stuck at around 46 per cent and is over 70 per cent in sub-Saharan Africa and South Asia.

It said:“There is a broad trend toward rising inequality and declining labour income share, although the developments vary across countries. In most advanced economies, income inequality has risen significantly in recent years. This is largely driven by the increasing concentration of income at the very top of the distribution. The bottom 40% has fallen significantly behind in many countries, particularly since the recent crisis.”

ILO also stressed that labour shares in national income are on a downward trend in most large economies in recent years, saying, “if the dramatically rising ‘labour incomes’ of the senior executives in the top 1% were counted as a return to capital rather than a wage the shift from labour to capital would be still larger (see ILO – Global Wage Report 2014/15). The declining labour income share in many countries at the same time limits household consumption and reduces overall aggregate demand, which is further weakened by low investment leading to low global economic growth.”

It noted that there is a rapidly growing body of evidence that high-income inequality can have adverse consequences for the pace and sustainability of economic growth.