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The role of the ILO Global Jobs Pact in supporting recovery and sustainable development in the Caribbean
Paper for Tripartite Caribbean Symposium, January 25/6 2011, Barbados
Stephen Pursey, Director, Policy Integration Department, International Labour Organization
Crisis intensifies economic and social challenges facing the Caribbean
The financial crisis of 2008 that initially burst out in the USA rapidly developed into a global economic and employment crisis in 2009. To varying degrees 2010 saw the beginnings of recovery in most countries. However the pace of rebound was much quicker in emerging Asia than in the main industrialized countries of North America and Europe. Most of Latin America also experienced a relatively shallow recession and robust recovery. Prospects for 2011 remain mixed. Optimists hope for a stabilization and spread of the recovery. Pessimists point to a large number of downside risks.
One of the most worrying features of the crisis and of the still fragile recovery is that employment and wage incomes were hit hard by the slowdown and are picking up much more slowly than output in most countries. In addition to the widespread hardship that unemployment, underemployment and reduced earnings cause to working families, this lag in the recovery of the jobs market jeopardizes the whole economy as household consumption is the main driver of overall growth.
The period running up the financial crash of 2008 was relatively good for the Caribbean region. Global growth and the demand for the region’s main export earning sectors enabled some progress on the long standing challenges of economic diversification, financial stabilization and sustainable employment growth.[1] Nevertheless unemployment and the number of working poor remained disturbingly high in many countries.
The year beginning with the last quarter of 2008 and through most of 2009 was very difficult for enterprises and for workers and their families in the region. Unemployment increased sharply in all countries and labour force participation declined in most. (Labour force participation rates give some indication of likely trends in hidden unemployment.) While a slow recovery began in 2010 in several countries, recorded open unemployment levels of over 10 per cent had not started to come down by year end. Youth unemployment, long a major worry for the region, increased still further with the crisis.[2]
Prospects for 2011 are uncertain depending to a large extent on the course of recovery in the global economy and in particular in the region’s main markets of North America and Europe. Latest indications are that global economic conditions will continue to improve in 2011 but will be led by the emerging economies of Asia and Latin America.
Transmission mechanisms connecting Caribbean labour market to global economy
The financial crisis of the USA and several European countries became a global economic crisis as result of a major slowdown in trade in late 2008 and the first half of 2009. Global trade plunged by 30 per cent relative to GDP driven by the major shock to demand delivered by the credit crunch that followed the collapse of Lehman Brothers. This resulted in sharply lower demand for the region’s commodity and manufactured exports, a fall in receipts from tourism and some declines in remittances from workers of Caribbean origin. This in turn affected the demand for labour in the region which, as a result of reduced employment and wage incomes, added to the downward economic spiral.[3]
According to ILO estimates, worldwide over 27 million people are unemployed at the end of 2010 than before the crisis in 2007, bringing the total number of unemployed to 203 million. “Unemployment rates… are expected to remain elevated for a protracted period in most developed economies. In developing countries, many workers have been pushed into vulnerable employment and the number of working poor may still increase further in the immediate outlook.”[4] High-income economies recoveries “… will remain fragile for as long as improving business investment does not translate into higher employment growth.” [5]
The situation in the US jobs market makes familiar reading to the Caribbean region. After a heavy job loss in 2008/9, at the end of 2010 hires were beginning to exceed fires some months but the employment-population ratio was down to 58.3 well below its 63.4 pre-crisis peak, which is a clear sign of underutilization of labour. With a rising working age population the US needs to increase employment by around 130,000 -- 150,000 per month but has recently only managed just over 100,000. Unemployment is hovering just below 10 per cent with long-term joblessness still rising.
A weak and prolonged jobs recovery in the Caribbean’s major trading partner does not bode well for the prospects of a quick turnaround in the region.
One bright spot is the high level of demand (and prices) from the emerging economies of Asia and Latin America for the region’s hard commodity exports notably bauxite and oil. This has helped sustain jobs in these sectors however the direct and indirect employment effects are not sufficient to compensate for weaknesses in other aspects of the economy.
World output is expected to grow by 4.2 per cent in 2011, according to the October 2010 World Economic Outlook of the International Monetary Fund. However, several years of growth at this pace is needed to fill the output and employment gaps created by the recession. Growth for the Latin American and Caribbean region as a whole is expected to be around 4 per cent. The Caribbean may struggle to reach this pace as its major trading partners, the USA, Canada and the European Union are projected to grow at only 2 per cent, 2.7 per cent and 1.7 per cent respectively.
The Global Jobs Pact
Faced with the prospect of a prolonged global increase in unemployment, poverty and inequality and continued distress for enterprises, in June 2009 the International Labour Conference, with the participation of government, employers’ and workers’ delegates from the ILO’s member States, unanimously adopted a "Global Jobs Pact". This global policy instrument addresses the social and employment impact of the international financial and economic crisis. It promotes a productive recovery centred on investments, employment and social protection. The fundamental objective of the Global Jobs Pact is to provide an internationally agreed basis for policy-making designed to reduce the time lag between economic recovery and a recovery with decent work opportunities. It is a call for urgent worldwide action: national, regional and global.
The Pact offers a set of balanced and realistic policy measures that countries, with the support of regional and multilateral institutions, can adopt to ease the impact of the crisis and accelerate recovery in employment. It calls on ILO member States to put decent work opportunities at the core of their crisis responses. It addresses the social impact of the global crisis on employment and proposes job-centred policies for countries to adapt according to their national needs. Guided by the Decent Work Agenda and commitments made by the ILO constituents in the 2008 Declaration on Social Justice for a Fair Globalization, the Pact recalls that respecting fundamental principles and rights at work, strengthening social protection, promoting gender equality and encouraging voice, participation and social dialogue, are critical to recovery and development. It proposes a portfolio of policies aimed at:
· Generating employment
· Extending social protection
· Respecting labour standards
· Promoting social dialogue
· Shaping fair globalization
RECOVERING FROM THE CRISIS:A GLOBAL JOBS PACT (selected excerpts)There is a need for coordinated global policy options in order to strengthen national and international efforts centred around jobs, sustainable enterprises, quality public services, protecting people whilst safeguarding rights and promoting voice and participation…
The ILO [should] engage with other international agencies, international financial institutions and developed countries to strengthen policy coherence and to deepen development assistance and support for least developed, developing and transition countries with restricted fiscal and policy space to respond to the crisis…
Sustainable social protection systems to assist the vulnerable can prevent increased poverty, address social hardship, while also helping to stabilize the economy and maintain and promote employability. In developing countries, social protection systems can also alleviate poverty and contribute to national economic and social development…
International labour standards create a basis for and support rights at work and contribute to building a culture of social dialogue particularly useful in times of crisis…
Social dialogue is an invaluable mechanism for the design of policies to fit national priorities. Furthermore, it is a strong basis for building the commitment of employers and workers to the joint action with governments needed to overcome the crisis and for a sustainable recovery. Successfully concluded, it inspires confidence in the results achieved…
For many developing countries, the global recession exacerbates large-scale structural unemployment, underemployment and poverty. We recognize the need to:
(1) give much greater priority to the generation of decent work opportunities with systematic, well-resourced, multidimensional programmes to realize decent work and development in the least developed countries;
(2) promote the creation of employment and create new decent work opportunities through the promotion and development of sustainable enterprises;
(3) provide vocational and technical training and entrepreneurial skills development especially for unemployed youth;
(4) address informality to achieve the transition to formal employment;
(5) recognize the value of agriculture in developing economies and the need for rural infrastructure, industry and employment;
(6) enhance economic diversity by building capacity for value added production and services to stimulate both domestic and external demand;
(7) encourage the international community, including international financial institutions, to make available resources for countercyclical action in countries facing fiscal and policy constraints;
(8) keep commitments to increased aid to prevent a serious setback to the Millennium Development Goals; and
(9) urge the international community to provide development assistance, including budgetary support, to build up a basic social protection floor on a national basis.
Giving effect to the recommendations and policy options of the Global Jobs Pact requires consideration of financing. Developing countries that lack the fiscal space to adopt response and recovery policies require particular support. Donor countries and multilateral agencies are invited to consider providing funding, including existing crisis resources, for the implementation of these recommendations and policy options.
The damage to employment created by the financial and economic crisis has caused hardship to many working women and men, families and communities, and worsened poverty. It has threatened the achievement of the Millennium Development Goals, heightened risks to social cohesion and eroded the confidence of decision-makers. Recovery will not be sustainable unless jobs are created and maintained. With approximately 45 million young people entering the workforce annually, at least 400 million new jobs need to be created between now and 2020 just to keep up with the growth in the labour force.
The Economic and Social Council of the UN (ECOSOC) endorsed the Pact at its 2009 High-Level Substantive Session and called upon member States to make full use of the Pact in post-crisis plans. At the G20 summit in Pittsburgh in November 2009, world leaders welcomed it as an “an employment-oriented framework for future economic growth”.
The Pact calls for coordinated global action to maximize the positive impact of policy initiatives on jobs and sustainable enterprises worldwide. Its successful implementation depends on national and international decisions, by governments, business, labour, parliaments, local authorities and civil society, as well as by donors and multilateral institutions.
The strategic objective of the Pact is to put investment, employment and social protection at the core of stimulus packages and other relevant national policies to alleviate the effects of the crisis and support a jobs-rich recovery. The Pact and the tripartite global commitment it represents, offers a unique opportunity for countries and the multilateral system to apply its provisions, which are embedded in the ILO Decent Work Agenda. In seeking support and advice from the ILO, constituents are encouraged to apply the elements of the Pact that respond best to each country’s needs and priorities.
The Caribbean and the Global Jobs Pact
Many Caribbean countries have adopted policies that correspond closely to those advocated in the Global Jobs Pact. Support for small businesses, efforts to improve social protection, measures to strengthen skills and policies to help women, men and young persons find jobs or continue their education, training and re-training are being widely used in the region to mitigate the damage caused by the recession and strengthen recovery. Governments of many countries have also consulted extensively with the social partners on policy measures.
However, the weak fiscal position of most countries, as well as the pressure of widening balance of payments deficits and a heavy burden of foreign debt, has constrained the scale of responses. The integrated approach proposed by the Pact, in which a package of policy measures work together to stimulate a jobs-rich recovery has so far proved beyond the reach of the region.
Caribbean countries, as well as acting themselves to accelerate a jobs recovery, need action by other countries to stimulate growth. Small open economies such as those of the Caribbean are particularly vulnerable in an international recession but also well placed to benefit from coordinated actions to speed recovery. As argued in the Pact, international cooperation in the face of a worldwide jobs crisis is vital. For the Caribbean such cooperation has both a regional and global dimension.
These themes were the focus of the remarks of the President of the Caribbean Development Bank (CDB), Dr Compton Bourne in March 2010 to the ILO Governing Body Working Party on the Social Dimension of Globalization discussion on “Recovering and sustaining growth and development: the contribution of the Global Jobs Pact”. Dr Bourne outlined the nature of the global economic crisis by commenting on its main features and negative effects on real GDP growth, world trade, and oil as well as non-energy commodity prices. He highlighted four main channels of transmission of the crisis to developing countries which led to depressed economic growth, massive job losses, rising unemployment and higher levels of poverty; 1)reduced foreign trade, 2)reduced foreign direct investments; 3)reduced foreign financial capital flows and; 4) reduced migrant remittances.
He pointed out that unlike the governments of the industrialized countries, most developing countries couldn’t engage in strong countercyclical economic policies, direct subsidies, and budgetary grants to enterprises and social protection measures, because they lacked the fiscal capacity to implement them on a sufficient scale and in a sustainable manner. This situation did not spare the Caribbean sub-region where many countries were acutely dependent on foreign trade and couldn’t incur commercial debt because of already high levels of indebtedness. Dr Bourne observed that growth forecasts were uncertain and depended on the recovery of consumption and investment expenditures in response to monetary and fiscal stimulus. Other factors supporting this view were the macroeconomic problems created by the large fiscal deficits in the US, the UK, Spain and other countries. Given the depth and spread of the recession and its consequential substantial job losses, it was likely that recovery would be protracted.