Across range of its membership, governments are increasingly seeking IMF advice on how to promote growth, support job creation (IMF photo)
ECONOMIC GROWTH AND JOBS
In an interview with IMF Survey, Zhu, referring to a recent IMF paper on Jobs and Growth: Analytical and Operational Considerations for the Fund, noted that, while a stable economic environment is essential for generating jobs and growth, there is no single strategy for any country, nor a one-size-fits-all solution.
In its discussion at the Spring Meetings in Washington, the IMF’s policy-steering committee, the International Monetary and Financial Committee, also focused on the need to boost growth and create jobs.
IMF Survey: Why is the IMF doing this work on jobs and growth?
Zhu: I would highlight two main factors. First, looking at the world around us, more than 200 million people do not have jobs. Long-term unemployment is high, as is youth unemployment. At the same time, we are experiencing only a moderate recovery compared with past crises. So low growth and high unemployment are key challenges.
Second, across the range of our membership, governments are increasingly seeking Fund advice on how to promote growth and support job creation. We have to be responsive to these demands.
The IMF is already doing a lot of work on these issues. However, it is good to take stock. This report serves that purpose. Through this report we see what more we can do. I would not say this report is the first step, but I would not say it is the last either.
IMF Survey: With global unemployment exceeding 200 million, as you said, what actions should governments take?
Zhu: The bulk of the increase in unemployment has taken place in advanced countries and reflects the weak state of demand. So a priority should be to support aggregate demand. Fiscal consolidation should proceed as gradually as fiscal space allows, and with protections in place for the poor.
Looking beyond the near term, challenges will remain. Countries are dealing with the impacts of global “megatrends.” There is increased trade and financial integration, there is technological innovation, and there is demographic change. All of these have an impact on jobs, growth, and inequality. Governments need to implement substantive structural reforms to meet these challenges.
IMF Survey: “Inclusive growth” is a key focus of the paper. What is it, why is it important, and how can the IMF address it?
Zhu: There is no one universally accepted definition of inclusive growth. However, most definitions share three common elements: fostering growth while also providing productive employment; providing equality of opportunity so that all segments of society can share in growth and employment; and redressing some of the inequalities in outcomes, particularly those experienced by the poor and vulnerable segments of the populations.
Inclusive growth is important because there are reasons to believe that high degrees of inequality may undermine the level and stability of long-run growth, even if so far the empirical evidence on the effect of inequality on growth is overall inconclusive. For example, poorer parts of societies may be unable to invest sufficiently in education and business ventures.
The Fund can help its members achieve their inclusive growth goals for example by strengthening its advice on labor market policies. We can also advise on fiscal policies that aim at a certain degree of income redistribution without undermining needed incentives.
IMF Survey: Do these topics fall within the IMF’s mandate?
Zhu: Yes. Article I of the IMF’s Articles of Agreement states that contributing to “the promotion and maintenance of high levels of employment and real income” is among the purposes of the institution. Macro-social issues such as inclusion and inequality can be addressed when they threaten to affect economic stability. Hence, jobs and growth have always been important to the work of the IMF.
Obviously, many policy areas that are important for inclusive growth, such as education, are outside the Fund’s core area of expertise. So we reach out and cooperate with other institutions such as the Organization for Economic Co-operation and Development, the International Labor Organization (ILO) and the World Bank. For example, we have worked with the ILO on social protection floor issues, with joint case studies in Africa and Asia. We have conducted social dialogues, with both with ILO and the International Trade Union Confederation, in Europe, Latin America, the Western Hemisphere, and Asia. And we carry out joint research with the ILO.
Overall, the IMF provides policy advice to support members as they look to maintain strong and balanced growth.
IMF Survey: The paper contains a special feature on the gender aspects of jobs and growth. How do you view these challenges?
Zhu: Gender is an important issue to consider when looking at how to support inclusive growth. Female labor market participation has remained persistently lower than that for males and has risen only little in recent decades, to 52 percent. Increasing female participation in the labor market can raise potential GDP in many countries. Removing tax provisions that discourage participation by “second” earners would help women join the labor force and contribute to economic growth.
