A970079 Module 1

Mapping the Crisis and Its Effects

Module 1 Labour market effects of the crisis A970079The economic crisis and the Global Jobs Pact

Module 1

Mapping the labour market effects of the crisis

Module 1 Labour market effects of the crisis A970079The economic crisis and the Global Jobs Pact

*Learning objectivesAcquire knowledge of the impact of the current economic crisis on employment and labour markets in developing and developed countries.Better appreciate the effects of the crisis on vulnerable groups and the informal economy.

Module 1 Labour market effects of the crisis A970079The economic crisis and the Global Jobs Pact

*Module outlineSpecial features of the crisisCrisis impacts Global employment trends (a gender perspective)Effects on enterprises and the informal economy Vulnerable employment and working povertyEffects on youth and migrants To remember Reflection point

Module 1 Labour market effects of the crisis A970079The economic crisis and the Global Jobs Pact

*Special features of the crisisRapid, deep, prolonged and broad-reachingOn the back of major shocks in global energy and food markets Affecting both financial and real economy Global income imbalances

Module 1 Labour market effects of the crisis A970079The economic crisis and the Global Jobs Pact

Crisis impactsDeceleration of growth economic contractionContraction of world trade and FDI falling primary commodity pricesGrowing budget deficits falling tax revenues and reduction of fiscal spaceNegative effects on balance-of-payments

Module 1 Labour market effects of the crisis A970079The economic crisis and the Global Jobs Pact

*Crisis impacts contd Eroded peoples wealth (declining equity markets and home values)A depressive cycle in motionRising unemployment and povertyImpact on job quality income reduction, loss of non-cash benefits, increase in vulnerable employment

For more, read pages 7-11 of the essential reading for Module 1 titled "A global policy package to address the global crisis", ILO, 2008.

Module 1 Labour market effects of the crisis A970079The economic crisis and the Global Jobs Pact

*Global employment trends (ILO)The economic crisis has affected labour markets visibly since 2008.Due to significant volatility and uncertainty of growth estimates, precise estimate of the crisis impact on labour markets has not been possible.Therefore, the ILO made estimates on the basis of three scenarios on the severity of the crisis (scenario 1 being least severe assumption and scenario 3 being most severe assumption).

Go to the next slide for how the scenarios are computed

Module 1 Labour market effects of the crisis A970079The economic crisis and the Global Jobs Pact

The three scenarios (ILO)Scenario 1 was generated using the historical relationship between economic growth and unemployment at the country level between 1991 and 2008, together with the IMF GDP growth projections for 2009.Scenario 2 was generated on the basis of the relationship between economic growth and unemployment during the worst observed economic downturn in each country, by applying this relationship to the 2009 IMF GDP growth projections.Scenario 3 was generated by taking the worst observed year-on-year increase in each countrys unemployment rate and assumes that this same increase would happen simultaneously in all developed countries in 2009.

Module 1 Labour market effects of the crisis A970079The economic crisis and the Global Jobs Pact

Global unemployment*

Module 1 Labour market effects of the crisis A970079The economic crisis and the Global Jobs Pact

Global unemployment contdUnder Scenario 1Global unemployment in 2009 estimated to increase by 29 million in 2009 compared to its level in 2007; global unemployment rate reaching 6.5%. Under Scenario 2Global unemployment in 2009 projected to increase by 39 million from its level in 2007; unemployment rate reaching 6.8%.Scenario 3Global unemployment in 2009 could increase by 59 million from its level in 2007 with unemployment rate reaching 7.4%*

Module 1 Labour market effects of the crisis A970079The economic crisis and the Global Jobs Pact

*Gender dimension of global unemployment The crisis is detrimental to both women and men. However, women are at a disadvantaged position in labour markets across the world.Women are disproportionately represented in temporary employment and in export-oriented manufacturing industries in developing countries.

Module 1 Labour market effects of the crisis A970079The economic crisis and the Global Jobs Pact

Global unemployment - women *Source: ILO Global Employment Trend for Women, March 2009

Module 1 Labour market effects of the crisis A970079The economic crisis and the Global Jobs Pact

Global unemployment - menSource: ILO Global Employment Trend for Women, March 2009

Module 1 Labour market effects of the crisis A970079The economic crisis and the Global Jobs Pact

The Gender dimension ContdGlobal unemployment rate would rise for both women and men. According to Scenario 3, the global unemployment rate would rise to 7.4 per cent for women, an increase of 1.5 percentage points over 2007, and to 7.0 per cent for men, an increase of 1.4 per cent. At this stage of the economic crisis, the unemployment rate is higher for men than for women in Developed Economies and the European Union where, according to Scenario 3, female unemployment rate would rise to 7.8 per cent, and the male rate would rise to 7.9 per cent. This means that according to this scenario the gender gap in the unemployment rate would almost disappear in this region. In other regions the three scenarios suggest that differences in impact on men and women are either very limited or less detrimental for men than for women (most clearly so in Latin America and the Caribbean).

Module 1 Labour market effects of the crisis A970079The economic crisis and the Global Jobs Pact

*Effect on enterprisesThe crisis has affected enterprises of all sizes in almost all regions and sectors. Although large firms grab headlines, small businesses across a range of sectors and organizational types have been also severely affected by the crisis.Lack of demand and lack of finance (including credit) for business operations were the two main means by which most enterprises were affected by the crisis.As a result, businesses in the real economy have found it hard to survive, resulting in increased layoffs and closures.

Module 1 Labour market effects of the crisis A970079The economic crisis and the Global Jobs Pact

*Effects on micro, small and medium-sized enterprises (MSMEs)MSMEs, account for over 90% of enterprises in all countries and are important source of output and employment.MSMEs could be formal and informal. They account for 33% of formal sector workers in low-income countries and for 62% in high-income countries.For poor countries, informal economies dominated by micro-businesses account for much higher employment; example, for 86% employment in India.MSMEs are severely affected by the economic crisis with severe effect on not only level of unemployment but also on quality of employment (vulnerability and working poverty).

Module 1 Labour market effects of the crisis A970079The economic crisis and the Global Jobs Pact

*Effect on the informal economy (IE)The informal economy accounts for a large portion of the economy of developing countries. It includes own-account workers, the self-employed and small family operations. Effects:Less earningDeterioration of working conditions Size of the IE: labour reallocation may involve an increase in informality and reverse internal migration trends, depending on speed of recovery.

Module 1 Labour market effects of the crisis A970079The economic crisis and the Global Jobs Pact

*Global vulnerable employment

Module 1 Labour market effects of the crisis A970079The economic crisis and the Global Jobs Pact

Global vulnerable employment contdThe projections in the previous graph show that the share of workers in vulnerable employment in 2009 could be between 48.9 per cent or 1.49 billion (Scenario 1) and 52.8 per cent or 1.6 billion (Scenario 3) of the total global workforce. Scenario 2 and 3 show increase in vulnerable employment by 1.1% and 3.4% respectively or by 33 million and 103 million people respectively in 2009 compared to 2008. Scenario 1 shows that vulnerable employment would decrease in 2009 by 0.5% or by 15 million compared to its level in 2008.

Module 1 Labour market effects of the crisis A970079The economic crisis and the Global Jobs Pact

Regional variation in vulnerable employmentSignificant regional variations projected:For developed countries and EU, vulnerable employment is projected to rise from 10.1% in 2008 to between 10.2 (scenario 1) and 11.4 % (scenario 3) in 2009. For central and South Eastern Europe, from 19.1% in 2008 to between 16.9 (scenario 1) and 25.3 % (scenario 3) in 2009.For East Asia, the projection is from 53.4% in 2008 to between 51.8% (scenario 1) and 56.6% (scenario 2) in 2009.For South East Asia, from 5.4% in 2008 to between 5.4% (scenario 1) and 6.2% (scenario 3) in 2009. For South Asia, from 77.1% in 2008 to between 76.2% (scenario 1) and 78.8% (scenario 3) in 2009.For Latin America and the Caribbean, from 31.2% in 2008 to between 31.6 (scenario 1) and 34.5% (scenario 3) in 2009.For Middle east, from 32.8% in 2008 to between 32.6% (scenario 1) and 39.3% (scenario 3) in 2009.For North Africa, from 36.8% in 2008 to between 36.4% (scenario 1) and 42.4% (scenario 3) in 2009.For Sub-Saharan Africa, from 72.9% in 2008 to between 73.2%(scenario 1) and 77.8% (scenario 3) in 2009.

Module 1 Labour market effects of the crisis A970079The economic crisis and the Global Jobs Pact

Vulnerable employment - womenSource: ILO Global Employment Trends for Women, March 2009

Module 1 Labour market effects of the crisis A970079The economic crisis and the Global Jobs Pact

Vulnerable employment - menSource: ILO Global Employment Trends for Women, March 2009

Module 1 Labour market effects of the crisis A970079The economic crisis and the Global Jobs Pact

Gender dimension of vulnerable employment ContdIn all the three scenarios for 2009, male vulnerable employment rates rise more than female rates.However, strong regional variations are projected: In Latin America and the Caribbean: women vulnerable employment rates rise more than men rates.In Middle East and North Africa vulnerable employment rates under the third scenario are projected rise by 5.3 and 3.2 points over the 2007 rate, respectively, while the female rates rise by more than ten percentage points in both regions.

Module 1 Labour market effects of the crisis A970079The economic crisis and the Global Jobs Pact

Effect on extreme working poverty (USD 1.25)Source: ILO, Global Employment Trends - Update, March 2009

Module 1 Labour market effects of the crisis A970079The economic crisis and the Global Jobs Pact

Extreme poverty contdIn 2007, an estimated 624 million workers 21 per cent of all workers and their families lived in extreme poverty on less than USD 1.25 per person per day.For 2009, projections for global extreme working poor in total employment ranges between 20.1 % (Scenario 1) and 28.2 % (Scenario 3).The working poor would increase by 122 million under scenario 2 and by 233 million under scenario 3.

Module 1 Labour market effects of the crisis A970079The economic crisis and the Global Jobs Pact

Effect on working poverty (USD 2)Source: ILO, Global Employment Trends - Update, March 2009

Module 1 Labour market effects of the crisis A970079The economic crisis and the Global Jobs Pact

Working poverty (USD 2) contdIn 2007, an estimated 1.2 billion (or 40%) workers lived and their families lived on less than USD 2 per person per day. The projections for 2009 show the percentage of workers in these category could range from 40% (Scenario 1) to 46.8% (scenario 3).The highest scenario shows the number of USD 2 working poor increasing by more than 200 million in 2009. It highlights enormous increase in the number of workers that are at serious risk of slipping into extreme poverty.

Module 1 Labour market effects of the crisis A970079The economic crisis and the Global Jobs Pact

Regional dimension of extreme working povertyFor Central and South Eastern Europe (non-EU) & CIS, extreme poverty projected to be between 4.4% (scenario 1) and 6.2% (scenario 3) in 2009 compared to 4.6% in 2007. For East Asia, projected to be between 7.6% (scenario 1) and 14.8% (scenario 3) in 2009 compared to 10.5% in 2007. For South-East Asia and Pacific, projected to be between 19.2% (scenario 1) and 30.8% (scenario 3) in 2009 compared to 20.9% in 2007. For South-Asia, projected to be between 45.1% (scenario 1) and 61.1% (scenario 3) in 2009 compared to 46.6% in 2007. Latin America and the Caribbean, projected to be between 6.8% (scenario 1) and 9.5% (scenario 3) in 2009 compared to 6.8% in 2007. For Middle East, projected to be between 8.5% (scenario 1) and 22.7% (scenario 3) in 2009 compared to 8.9 % in 2007. For North Africa, projected to be between 11% (scenario 1) and 21.8% (scenario 3) in 2009 compared to 11.2% in 2007. For Sub-Saharan Africa, projected to be between 58.4% (scenario 1) and 67.9% (scenario 3) in 2009 compared to 58.9% in 2007.

Module 1 Labour market effects of the crisis A970079The economic crisis and the Global Jobs Pact

Effect on youth unemploymentPrior to the onset of the crisis, the youth were 2.8 times more likely to be unemployed than adults world wide. The effect of the crisis on the youth is likely to be disproportionately severe

See the figure on next slide

Module 1 Labour market effects of the crisis A970079The economic crisis and the Global Jobs Pact

Projected changes in youth and adult unemployment rates, 2008-2009

Module 1 Labour market effects of the crisis A970079The economic crisis and the Global Jobs Pact

*Effect on youth unemploymentAccording to the ILO, globally the number of unemployed youth is projected to increase by between 4.9 and 17.7 million from 2008 to 2009. The global youth unemployment rate is projected to increase from 12.2% in 2008 to 13 to 15.1% in 2009. The projected increase in unemployment rate for adults is from 0.5 to 1.2%.

(Source: ILO Global Employment Trends - Update, May 2009)

Module 1 Labour market effects of the crisis A970079The economic crisis and the Global Jobs Pact

Effect on youth unemployment by regionProjected increase of youth unemployment (from 2008 to 2009):From 3.6 to 9.8% for Central and South Eastern Europe and CIS countriesFrom 2.9 to 5.6 % for Developed economies and EU From 1.5 to 4.3 for Latin America and the CaribbeanFrom 0.6 to 3.1 % for East Asia From 0 to 4.6 % in Middle EastFrom 0 to 4 % in North Africa*

Module 1 Labour market effects of the crisis A970079The economic crisis and the Global Jobs Pact

*Effects on migrant WorkersIt is estimated that migrants have been severely and impacted by the economic crisis, however limited availability of date makes it difficult to obtain accurate picture on this. Here are some results from a survey in the United States by the Inter-American Dialogue (2009):Unemployment rates of Latino immigrants in the U.S. rose from 5.1% to 8.0%. Between 4th quarters of 2007 and 2008 while national unemployment rate rose from 4.6% to 6.6% Of those who remain employed, many (approximately 24%) are faced with reduced work schedules; 16% report working fewer hours and 8 percent are finding less work as independent workers.

Module 1 Labour market effects of the crisis A970079The economic crisis and the Global Jobs Pact

*Key points to rememberCrisis hitting labour markets in both developed and developing countries.Crisis exacerbating imbalances, hampering social justice, and a threat to global securityThere are signs of recovery but labour market recovery may take longThe situation of MSMEs and informal economy should not be overlooked Explicit look at the vulnerable groups - the importance of a disaggregated analysis

Module 1 Labour market effects of the crisis A970079The economic crisis and the Global Jobs Pact

*Reflection pointIn a period of weak labour demand, it is important to remain focused on the goals of full, productive and decent work, to reduce the risk high unemployment and increasing working poverty. If so, how can policy make recovery of labour markets more rapid and protect vulnerable groups from permanent damage?