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Bleak prospects of taming global unemployment.

Despite visible signs of economic growth in many industrialised and developing nations, unemployment remains at unacceptably high levels in most parts of the world. Equally disturbing is the phenomenon of steadily rising numbers of workers in low-paid and often insecure employment. Prospects of an early improvement in the situation remain bleak, says a just published ILO study?

Unemployment in the OECD region peaked at 8.9 per cent in 1983 when there were more than 32 million people out of work. And although the economic recovery has lasted five years, the level of unemployment registered only a modest decline to 7.3 per cent or 28 million in 1988, and it is forecast to remain at this level until 1990. In most member countries of the European Community as well as in Turkey, however, the jobless rate in 1988 was still twice or more than in 1979.

In the OCED countries wages registered only modest increases. The exceptions were Australia and New Zealand where the purchasing power of wages in manufacturing dropped by 8 and 18 per cent respectively between 1983 and 1987. In countries such as Finland, the Federal Republic of Germany, Ireland, Spain and the United Kingdom, wage increases topped 10 per cent.

In most industrialised planned economy countries of Eastern Europe too, recorded real wages went up slightly. In Poland, however, real wages declined by a massive 25 per cent, due mainly to domestic social and political upheavals.

It is difficult to foresee the eventual employment impact of the current economic reforms on Eastern Europe. As the East European enterprises and public administrations trim their workforces, workers will become redundant. The authorities hope to avoid unemployment and labour scarcities through the placement, training and retraining services. "But in the long run, everything will depend on the pattern and extent of economic growth and on the consistency with which reforms (in particular in the area of prices and enterprises autonomy) are pursued", notes the ILO report.

In Asia, the picture is relatively bright. The newly industrialised countries (NICs) performed rather well, with an 'increase in wage employment which surpassed the addition to the labour force between 1975 and 1985. In Indonesia and Thailand too, wage employment growth kept pace with increases in labour force while in the Philippines and Malaysia it has lagged behind, particularly during 1980-85.

A notable feature of the Asian labour scene, says the report, is the role of the informal sector as the provider of many more jobs than the formal industrial sector. In India, twice as many jobs have been created in the unorganised manufacturing sector as in the organised part of the sector over the past two decades. Small and informal sector manufacturing absorbed more workers in the 1970s and 1980s in several other Asian countries, including Pakistan, Bangladesh and the Philippines.

According to the ILO, there has been an increase in the casualisation of Asian labour. In many medium and large-scale enterprises, a growing share of the workload is being entrusted to workers who are either engaged on short-term contracts or who are not employed directly by the enterprise even though their place of work may be on its premises.

Latin America and sub-Saharan Africa represent the bleak spots in the global economic map. Between 1980 and 1988, Latin America's GDP grew at an average annual rate of 0.7 per cent while the population grew by 2.5 per cent per year. The result has been a 6.6 per cent decline in per capita. Government debt financing led to a surge in inflation which prevented any significant investment and employment creation in the private sector.

Recorded open urban unemployment was low in the large countries such as Argentina, Brazil and Mexico, but remained fairly high in the smaller countries of Central America and the Caribbean. Employment in the urban informal sector recorded strong growth accounting for about one third of all non-agricultural employment by 1987. But these were largely confined to low-paid low-productivity jobs. There was an all-round drop in real earnings, ranging from 40 per cent in the urban informal sector to 10 per cent in manufacturing and 20 per cent in the public sector. The decline in labour incomes was much more than the 7 per cent drop in GDP per capita between 1980 and 1988. The result: a disproportionate share of adjustment has been borne by labour income earners.

The picture is even bleaker in sub-Saharan Africa where, as a result of "the longest and most severe crisis in living memory:, standards of living and real wages have fallen sharply since 1980. In Sierra Leone, Somalia, the United Republic of Tanzania, Madagascar, the Sudan and Zambia, for example, the average wage rate has dropped by 10 per cent or more every year since 1980.

Latest available figures for the region show that unemployment rates of between 31 per cent (Botswana - 1984-85) to 13 per cent (Liberia - 1984). Says the ILO report: "Typically youth represent between two-thirds and three quarters of the unemployed population in the region. Available information indicates that their unemployment rate is universally higher and averages about three times the adult unemployment rate".

The urban informal sector has however helped to relieve the unemployment problem, by increasingly playing the role of an "urban labour sponge", says the ILO report. "By 1985, the informal sector employed about 60 per cent of the urban labour force, more than twice the modern sector, and equivalent to about 15 per cent of the total labour force in the region". Overall, the informal sector created some 6 million new jobs between 1980 and 1985 while the modern section added only 0.5 million new jobs on the urban labour market.

The ILO report notes that an annual economic growth rate of at least five per cent [underscore] instead of the 1.7 per cent recorded between 1978 and 1987 [underscore] is needed to arrest and reverse and downward employment trend. Current structural adjustment programmes, however much needed, are not making satisfactory progress to achieve this goal. These programmes have tended to overlook the distributional implications and their short-term effects on the living standards of the vulnerable groups. Clearly increased international support and the integration of economic and social aspects of structural adjustment programmes are key conditions for the long-term development prospects in sub-e Africa, the report concludes.
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Title Annotation:Global Outlook
Publication:Economic Review
Date:Jan 1, 1990
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