The Global Jobs Crisis— Sustaining the Recovery through Employment and Equitable Growth

IMF News, April 13, 2011

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Canonical URL: The Global Jobs Crisis— Sustaining the Recovery through Employment and Equitable Growth

Speech by Dominique Strauss-Kahn, Managing Director, International Monetary Fund.
Washington, April 13, 2011.
Core message: Recovery is present but not delivering enough jobs or broadly shared growth; unemployment and inequality threaten economic, financial, and political stability.
Noted consequence: "The crisis threw 30 million people out of work. And over 200 million people are looking for jobs all across the world today."
Emphasis on linking employment and equitable distribution to macroeconomic and political stability.

Diagnosis:
- Recovery in advanced economies is not creating sufficient jobs.
- Youth are hit especially hard; short-term unemployment risks becoming long-term and creating a "whole lost generation."
Key policy prescriptions:
- Financial sector reform and repair to "put the banks back in the service of the real economy" and direct credit to small and medium-term enterprises—described as "key drivers of employment and indeed of growth."
- Supportive monetary policy while unemployment remains high and underlying inflationary pressures are weak.
- Fiscal policy should place advanced countries on "sustainable medium-term paths" but fiscal adjustment must be implemented "with an eye kept keenly on growth" to avoid raising long-term unemployment.
- Direct labor market policies: decent unemployment benefits combined with education and training to help the unemployed adapt to a changing economy, especially when job losses concentrate among the young and the unskilled and when unemployment becomes long-term.
- Move beyond the binary contrast of "flexibility" versus "rigidity" and evaluate whether policies effectively create and sustain jobs.
- International cooperation on financial sector regulation, cross-border resolution, and global rebalancing; emerging markets should shift toward domestic demand supported by a vibrant middle class.

Findings:
- IMF research indicates inequality can make countries more prone to financial crises, "especially if associated with a large financial sector."
- IMF research also shows "sustainable growth over time is associated with a more equal income distribution."
- Inequality is at record highs in too many countries.
Policy recommendations:
- Reduce inequality and ensure fairer distribution of opportunities and resources.
- Combine strong social safety nets with progressive taxation to dampen market-driven inequality.
- Invest in health and education.
- Support collective bargaining rights to address stagnating real wages.
- Use social partnership frameworks to share both growth gains and adjustment pains fairly.

Shifts and actions described:
- Jobs issue is becoming more central in IMF surveillance, as reflected in the WEO.
- IMF research on inequality has been highlighted and the institution has supported "a tax on financial activities."
- Greater attention to the social dimension in IMF programs—protecting social safety nets for the poor and supporting equitable burden-sharing.
Collaborative initiatives:
- Follow-up to the Oslo conference organized jointly with the ILO and the Norwegian government.
- Working with the ILO to better understand policies behind job-creating growth.
- Supporting social partnership consultations between labor, employers and the government in three countries: Bulgaria, the Dominican Republic, and Zambia.
- Working with the ILO toward building effective social protection floors in low-income countries.

Core assertion: Employment and equity are "building blocks of economic stability and prosperity, of political stability and peace."
Middle class centrality: Quoting Aristotle—stability depends on a "strong middle class that can propel demand."
Policy imperative: Place employment and equity "at the heart of the policy agenda" to ensure growth leads to decent jobs and does not concentrate rewards among the few.

Date of speech: April 13, 2011.
Job losses attributed to the crisis: 30 million people.
People looking for jobs worldwide: over 200 million people.
Countries explicitly mentioned for social partnership support: Bulgaria, the Dominican Republic, and Zambia.

By Dominique Strauss-Kahn, Managing Director, International Monetary Fund; Washington, April 13, 2011.