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RECESSION AND RECOVERY: The Lucky Are Unemployed – Part 1

IPS Correspondents*

LONDON, Jan 26 2010 (IPS) - The agreed, if dubious, solution to the financial crisis was to get people and governments – in the richer countries – to borrow more in order to spend more. What is not in doubt is the growing numbers of people who will be able to neither borrow nor spend.

A report from the International Labour Organisation (ILO) released Wednesday points to dramatic levels of unemployment in the developed countries.

The unemployment rate in industrialised economies jumped to 8.4 percent in 2009, up from 6.0 percent in 2008 and 5.7 per cent in 2007, the report says.

“The number of unemployed in the (developed economies and European Union) region is estimated to have surged by more than 13.7 million between 2007 and 2009, with an increase of nearly 12 million unemployed in 2009 alone.”

Despite comprising less than 16 percent of the global workforce, “the developed economies and European Union region accounted for more than 40 percent of the increase in global unemployment since 2007,” the report says. “Unemployment in the developed economies and European Union is expected to remain elevated, with a projected increase in the regional unemployment rate to 8.9 percent in 2010.”

“These are dramatic figures,” Jeff Johnson, chief of the ILO employment trends unit told IPS in an interview from Geneva. “But we are also saying that it is not only about unemployment. Of the six billion people on the planet, three billion are engaged in economic activity. So when we say that of these, 212 million are unemployed, it does not sound like a lot. But 1.5 billion of them, about half, are among the ranks of the vulnerably employed.

“Unemployment is the tip of the iceberg. The long-term issue is a massive decent work deficit throughout the world.”

Essentially, the report is also saying that the poor countries may appear to have lost less, because they had less to lose in the first place. They are included in what the report refers to as the working poor and the vulnerably employed.

It might seem, almost, that unemployment in the developed countries is, relatively speaking, a privilege.

“Most workers in developed countries have a social protection mechanism, in terms of unemployment insurance schemes, whereas in the developing world they oftentimes do not,” Johnson says. “They can go down and apply for unemployment protection, so they have an income substitution mechanism.

“If you have a person in Ethiopia in a manufacturing plant that closes, there is no income protection, they have to be able to provide a livelihood for themselves and their family, and so they take up any job. They may set up something like a small food stall, but they will work. In the developed world they transition to unemployment; in the developing world they transition into vulnerable employment.”

The headline figure may be just that; and the ILO report seeks to look beyond it to a collection of factors. And where the fall comes from: in many developed countries salaried work “may be as high as 90 percent; whereas in many developing countries it can be as low as 20 percent or even 10 percent,” Johnson says.

But there are other ways in which the statistics may conceal more than they reveal. According to the U.S. Bureau of Labour Statistics (BLS), the unemployed in the U.S. now make up 10 percent of the potential workforce, or 15.4 million people. However, the real number might actually be a good deal higher.

The figure does not include individuals who have given up looking for work, says Heather Boushey, senior economist at the Centre for American Progress, a Washington-based think tank.

“The 10 percent is based on a household survey conducted by the BLS every month, asking ‘Were you available for work last week and were you actively seeking a job?'” Boushey tells IPS. “When there are more than six workers for every job available, there are a lot of folks who quite frankly have given up.”

The likely figure is around 17.2 percent, said Boushey. “Most economists think the unemployment rate will remain high through 2010 and is likely to continue to rise for some months.

“Given that growth was only 2.2 percent in the third quarter, and that all economists say that was due to the recovery package primarily, there’s a lot of concern that economic growth will be slow through 2010. If that’s true, it will be hard to get the unemployment rate to come back down,” Boushey said.

Fewer jobs mean less buying. “Seventy percent of the U.S. economy is driven by consumer demand, by consumption,” says Boushey. “You can’t have a robust recovery if you’ve got record high shares of folks out of work.”

And for that reason the dip in consumption in the U.S. – due partly also to a rise in savings – is going to hurt the economy and jobs in the rest of the world, which looks to the U.S. as a big market.

Similarly with Western Europe, where unemployment is worsening as official economists boast green shoots of recovery – rather weedy shoots as a commentator called them. In France too unemployment has risen to 10 percent. “Among youth under 25 years of age, unemployment is much worse, and affects almost 25 percent of the population,” Philippe Frémeaux, former director of the Agency for Economic Research and Forecast, and now chief editor of the monthly magazine Alternative Economiques, tells IPS.

“The crisis will continue destroying jobs, which in turn will affect domestic demand,” Xavier Timbeau, director of the French Economic Observatory (OFCE), tells IPS. “In addition, banks and insurance companies suffered losses of well over 1,000 billion euros, and are facing very obscure prospects.”

The statistics themselves are often uncertain, even official ones. In Germany, the Federal Employment Agency reported it expects the number of unemployed to rise to 4.1 million this year. In December it reported a total of 3.3 million jobless, about 8.1 percent of the workforce.

But the Federal Labour Office says unemployment has been declining these past months, and that the number may stop short of four million, though a rise in unemployment is expected this year.

In Britain, meanwhile, a continued rise in unemployment is forecast until at least the middle of the year, to 2.8 million.

Some figures speak of 4.3 percent unemployment in China, but the more likely accepted figure for urban areas is between 8 and 10 percent. And again, these figures may refer to explicit unemployment rather than to large-scale underemployment.

Add that figure to the official unemployment figures in countries as large as China and India, and the number of people counted as unemployed, along with those in vulnerable employment and working poverty, is gigantic, and a very large part of the 1.5 billion that the ILO says are without decent work.

The unemployment rate in India stands officially at 7.32 percent. As with China, the real figures are likely a good deal higher. And in both cases, given the size of the population, that means the real numbers are huge.

*In this set of three reports, IPS correspondents look at the impact of recession by way of unemployment, the push for more people-friendly government, and moves within developing countries to reduce reliance on the industrialised world.

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