20 December, 1996
THE 1996-97 ILO JOBS REPORT
There's plenty of work to do !!
an essential summary
In this special feature, the Jobs Letter presents an essential summary of the latest ILO report on WORLD EMPLOYMENT 1996/97.
The report covers the widespread debate over job trends today, and fires many criticisms at a range of popular ideas -- from the effects of "labour market flexibility" and the "natural" rates of unemployment ... to concepts such as "jobless growth", "the end of work" and "utopian" solutions such as introducing a basic citizens' income.
The persistence of high jobless rates in industrialised economies and massive underemployment in developing economies only reinforces the strong economic and moral case for reinstating full employment as a primary policy objective.
The ILO disputes the questioning of the usefulness of the concept of full employment that is prevalent in academic and publicpolicy circles worldwide. It also disputes the vogue concepts (jobless growth, end of work etc.) that have replaced it.
These concepts are not related to fact and are potentially harmful. The ILO insists that there is no evidence that there is, or soon will be, a scarcity of useful work such that full employment will no longer be attainable. The ILO maintains that the rise in unemployment has been caused by a decline in economic growth rates rather than the onset of jobless growth.
The definition of full employment as "the absence of involuntary unemployment or the availability of jobs for all active job seekers" remains as valid as ever. Historically, this definition represents an unemployment level of around 2 or 3 per cent, which was the level that prevailed in most industrialised countries until the early 1970s.
Targeting a particular unemployment rate, however, is not the point as there is nothing sacrosanct about these numbers, particularly in light of the many technical and economic changes that have happened since then.
Abandoning the goal of full employment risks becoming a selffulfilling prophecy as the spectre of a jobless future looms for many millions of citizens as labourmarket conditions worsen. "Employment pessimism" is growing, which risks worsening the problem as confusion builds over the real causes of and solutions to unemployment.
The labour markets of the wealthiest industrialised economies continue to be plagued by high and persistent rates of unemployment and rising income inequality. The longterm unemployed in these countries risk becoming permanent, economic "outsiders". Prolonged mass unemployment transforms a proportion of the unemployed into a permanently excluded class.
As these people lose their skills, they are no longer considered as candidates for employment and cease to exert any pressure on wage negotiations and real wages. The result is that the competitive functioning of the labour market is eroded and the influence of unemployment on real wages is reduced.
For its part, the ILO argues that low unemployment, low inequality and adequate social protection need to be part of the full employment ideal.
The notion of a "jobless recovery" is unfounded. In fact, the job content of the current economic recovery is very much as it was in past years and overall job creation has remained constant during most of the last 35 years, although job creation has lagged behind the growth of the labour force.
Technology is not to blame for job losses. The World Employment report cites data showing that total working hours in Canada, Japan and the US rose sharply over the last three decades in spite of the high levels of technological innovation in these countries. During the same period, working hours declined only slightly in the UK, France and Germany, irrespective of technical progress.
Such pessimistic analyses make no allowance for the indirect effects of technical change and the jobs that can be created by the growth of new products and industries.
Globalisation is not to blame for job woes. Quite the contrary, globalisation increases opportunities and incentives to productivity and trade and can provide the stimulus to economic growth necessary to attaining full employment.
The ILO also takes issue with the view that labour market rigidity has been the major cause of unemployment and that greater labour market flexibility is the solution. Labour market rigidities have not been increasing over the period of rising unemployment, and the rise in unemployment cannot be explained by labourmarket factors alone. The major underlying cause of rising unemployment has been the slowdown in industrialised economies since 1974.
Similarly, trade union power was reduced in many countries, together with unemployment benefits and in some cases minimum wages, producing little if any positive employment effect. There is little convincing evidence for the tradeoff between higher earnings and greater employment creation for the lowskilled.
There is another strand of pessimism which maintains that any efforts to tamper with the "natural" rate of unemployment will invariably come to grief by accelerating rates of inflation. If the "natural" rate theorists were right, then today's high unemployment would be cause for no undue concern, amounting to little more than a voluntary equilibrium in labour markets.
The ILO argues that current high rates of unemployment certainly do not represent an equilibrium that is acceptable on social grounds. Social pathologies resulting from longterm unemployment risk becoming unaffordable in both human and economic terms, with macroeconomic imbalances worsening as the costs of joblessness become structural and the savings from finetuning of labour market regulations or benefits programmes prove inadequate.
There are other theories that feed on employment pessimism and propose that a fundamental feature of postindustrial societies would be a perennial increase in productivity and wealth and a corresponding decline in the imperative to work, generating expanded scope for personally satisfying, though perhaps nonmarket activities.
This utopian concept is buttressed by others which see a delinking of income from work by, for example, substituting a basic "citizens' income" for wages, which could be augmented or diminished by parttime, full time or even occasional spells of work.
The underlying assumption here, that the economy is sufficiently productive to pay for such alternative arrangements, is highly dubious, and the impact of such schemes on incentives to work is questionable. Unless there is an imminent switch to higher growth as a result of new technologies, the proposal to delink income from work will face a serious problem of financial sustainability.
Based on its analysis, the ILO concludes that there are no convincing reasons for abandoning all thought of full employment on the grounds that revolutionary changes have taken place in the demand for labour, in the nature of work or in personal attitudes towards employment. While acknowledging incremental changes in all these areas, these are not sufficient to warrant a drastic revision of basic objectives and instruments of policy, including labour market regulations.
The ILO recognises that it has become patently more difficult to achieve and maintain full employment today. However, one can still discuss the causes and possible remedies for high unemployment within the frame work of conventional economic and social policies, without taking on a utopian agenda.
— Increased economic growth rates via a combination of expansionary policies and measures to boost productivity.