EMPLOYMENT AND OUTPUT
Changing Trends Call for Policy Mix on Jobs, Growth
April 4, 2013
- Quest for jobs, inclusive growth is universal challenge for policymakers
- Many countries also face changing trends in technology, demographics
- IMF expanding analysis, advice on jobs, growth, inclusion
A stable economic environment, with low inflation and low output volatility, is the essential foundation for generating jobs and growth in a national economy, the IMF says in a report.
But changing trends— including technological advances, globalization, and shifting demographics—now require a broader range of national policies as governments strive to boost employment and raise output.
The report, Jobs and Growth: Analytical and Operational Considerations for the Fund, discusses how the IMF can help governments devise strategies to improve job prospects and raise output levels. Its main finding is that while there is no single “silver bullet” strategy for any country, nor any “one size fits all” approach for all countries, macroeconomic stability is key.
With over 200 million people out of work and global output subdued, job creation and growth that is widely shared are imperatives that resonate today in every country. While world growth remains well below levels experienced before the Great Recession, global employment is at its lowest in two decades, with young people and the long-term unemployed particularly hard hit.
Macroeconomic stability not only supports job creation, but also encourages investment and growth and helps tackle inequality, the study says. But the report also finds that while some advanced countries face the need to support aggregate demand with limited fiscal space following the global recession, many countries have to generate growth and create jobs in the face of broader trends.
These “megatrends” include technological change, globalization, and shifting demographics. Over the last twenty years, the world’s labor force has doubled and emerging markets have become increasingly integrated into the global economy, raising incomes in these countries and reducing global inequality. In some advanced economies and emerging markets, however, demand for lower-skilled workers has fallen, particularly in manufacturing. This has increased inequality within countries.
While countries with younger populations stand to benefit from the “demographic dividend” in the form of robust growth, other countries are faced with the fiscal and social implications of aging populations. In many countries, low female labor force participation represents a significant missed opportunity to strengthen economic development and growth. Adding to the complexity of these challenges, the global recession has produced high unemployment and further exacerbated income disparities.
In the face of these trends, governments around the world are aiming for inclusive growth. This involves fostering higher growth while supporting productive employment, and providing equality of opportunity while redressing some of the inequalities in outcomes.
Job creation and inclusive growth
Once macroeconomic stability—in the form of low inflation and steady output—is in place, governments can look to additional measures to support jobs and growth, the report says. On the jobs side, depending on circumstances, this could include steps to
• Support aggregate demand
• Enhance how labor markets function through short-term interventions, and
• Foster job growth and productivity through longer-term structural reforms.
The report notes that the toolkit for supporting inclusive growth includes fiscal policy. Depending on circumstances, policymakers have a range of options including implementing progressive tax structures, tackling tax avoidance and evasion, improving how social benefits are targeted, and strengthening education and skills training.
The report also highlights policy measures to increase female employment and thereby support higher, and more inclusive, growth. Equal rights and access to services are important fundamentals.
Other steps include: removing tax code provisions that discriminate against second earners; facilitating the transition from part-time to full-time work; and scrutinizing medical insurance and pension plans for explicit or implicit gender bias.
Role of IMF
The report concludes that, although there has been increasing coverage of issues related to growth and inclusion in the IMF’s surveillance and programs, there is scope to improve the institution’s analysis and policy advice. Specifically, the report sees scope for the IMF to
• Provide more tailored and relevant policy advice through more systematic diagnostic analysis of growth and employment challenges, as well as by identifying the most binding constraints to inclusive growth and jobs.
• Better integrate policy advice to create conditions that encourage greater labor force participation, including by women; more robust job creation; more equity in income distribution; and greater protection for the most vulnerable.
• Enhance advice on labor market policies based on empirical evidence and stronger collaboration with other international institutions such as the World Bank, the Organisation for Economic Cooperation and Development, and the International Labor Organization on the impact of these policies on growth, productivity, job creation, and inclusion.