IMF and ILO Launch Background Paper on the “Challenges of Growth, Employment and Social Cohesion” for High-Level Conference on September 13 in Oslo

Press Release No. 10/324
September 2, 2010

The International Monetary Fund and the International Labour Organization have issued a stark assessment of the outlook for employment in the wake of the global financial crisis, saying that the world faces major challenges in creating enough quality jobs to sustain growth and development.

The assessment is contained in a discussion document issued for a joint high-level IMF-ILO conference on September 13 in Oslo, hosted by Norwegian Prime Minister Jens Stoltenberg, to explore new ways of forging a sustainable, job-rich economic recovery. The one-day conference on “The Challenges of Growth, Employment and Social Cohesion” will bring together political, labour and business leaders, as well as leading academics. Lead speakers include President Ellen Johnson Sirleaf of Liberia; Prime Minister George Papandreou of Greece; Prime Minister José Luis Rodríguez Zapatero of Spain; Finance Minister Christine Lagarde of France; U.K. Secretary of State for Labour Iain Duncan Smith; and International Trade Union Confederation General Secretary Sharan Burrow.

The conference will be chaired by IMF Managing Director Dominique Strauss-Kahn and ILO Director General Juan Somavia.

“The Great Recession has created a painful legacy of unemployment,” Mr. Strauss-Kahn said, “and this devastation threatens the livelihood, security, and dignity of millions of people across the world. The international community must rise to meet this challenge. Now is the time for our collective action.”

“We are now seeing signs of a fragile recovery, but for millions of people and enterprises around the world the crisis is far from over,” Mr Somavia said. “A jobs-centered growth strategy should be our number one priority. Otherwise, the economic recovery may take years to reach those who need it most, or it may not reach them at all. We must connect our policies with people’s legitimate aspirations for a fair chance at a decent job.”

Two years after the onset of the global economic crisis, unemployment remains at record levels in many countries—the ILO estimates that unemployment is up by more than 30 million worldwide since 2007—with little sign of an early decline. As world leaders seek the appropriate short-term and longer-term policy responses, the IMF and ILO have come together to stimulate discussion of the international cooperation and policy innovation that can improve the capacity of economies to generate enough good jobs to strengthen social cohesion. The conference paper is intended to promote debate, with an online discussion forum simultaneously being launched on the conference website (www.osloconference2010forum.org).

The IMF and ILO have different mandates and constituencies, although in more or less the same member states. As a result, they bring different analytical approaches to the paper, which contains a joint overview; an IMF section on the human cost of recessions, and how to assess and reduce that cost; and an ILO section on building an employment-oriented framework for strong, sustainable and balanced growth.

“Our objective at the Oslo Conference is to improve the integration of employment and social policies with international and national macroeconomic policy strategies,” the discussion document says, and “focus thinking and action on how to ensure that policies have the same priorities as people – more and better jobs.” Improving policy coherence “is likely to play a big part in finding a better way to shape a fairer globalization,” the paper says.

The IMF reports that “if the effects of past recessions are a guide, the cost to those who become unemployed could be a persistent loss in earnings, reduced life expectancy, and lower academic achievement and earnings for their children. And unemployment is likely to affect attitudes in a manner that reduces social cohesion, a cost that all will bear.” The IMF states that the impact on lifetime earnings is demonstrated in studies in the U.S. that show that “even 15-20 years after a job loss in a recession, the earnings loss amounts on average to 20 per cent.” In terms of health, layoffs “are associated with higher risk of heart attacks and other stress-related illnesses in the short run. In the long run, the mortality rate of laid-off workers is higher than that of comparable workers who kept their jobs.”

The IMF adds that “a recovery in aggregate demand is the single best cure for unemployment.” It states that “as a general strategy, most advanced economies should not tighten fiscal policies before 2011, because tightening sooner could undermine the recovery. The consolidation plans that these countries have for 2011 imply an average change in the structural balance of 1¼ percentage points of GDP. Clearly, however, the fiscal situation varies across countries, requiring adaptation of this general strategy to the available fiscal space.” Monetary policy can also remain supportive of aggregate demand as inflation pressures remain subdued.

Referring to the public debt challenges many countries are facing, the ILO warns that “a premature fiscal retrenchment could damage growth and lead to even larger deficits and debts.” It also calls for “well-sequenced coordinated short-term exit strategies and deficit reduction policies,” that are linked to “a progressive recovery of the real economy and jobs and are fair in the sharing of the benefits and burdens of adjustment, especially in the protection of the most vulnerable.”

The ILO paints a grim picture of the current global employment situation, with 210 million people out of work – the highest level in history – and 80 percent of the global population without any access to social protection. It also says that “despite impressive gains in recent years, approximately 1.2 billion women and men, or 40 per cent of the world’s labour force, still did not earn enough to keep themselves and their families above the $2-a-day poverty level in 2008.”

Analyzing the longer-term policy challenges of unemployment, the ILO estimates that “in the next 10 years, more than 440 million new jobs will be needed to absorb new entrants into the labour force, and still more to reverse the unemployment caused by the crisis.”

The ILO goes on to explain that the pressures of globalization have increased the vulnerability of workers through increased intensity of work, a shift towards more flexible contracts, diminishing social protections, and decline in workers’ bargaining power and voice, adding: “Improving the quality of employment – more productive jobs offering better earnings – is also essential to sustain poverty reduction and development.”

“The strength and quality of labour market institutions can make a substantial contribution to international efforts to generate sustainable growth and development," the conference document says. "Although each country’s labour market institutions have a particular history and character, countries face many common challenges in shaping policies that create decent work opportunities for all. A consensus is building for the coordination of efforts to prioritize employment growth, because strong and steady growth in jobs and household incomes in many countries at the same time will buttress global demand, creating still more jobs.”

Note to Correspondents

For more information about the conference, please visit: www.osloconference2010.org.

Video statements about the conference by Prime Minister Jens Stoltenberg of Norway, IMF Managing Director Dominique Strauss Kahn, and ILO Director General Juan Somavia are also available on the conference website.

Journalists interested in covering the conference should please visit www.government.no/osloconference2010 for registration and practical information. Full video coverage of the conference and press conferences will be available through the conference website.



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