## Summary

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### Employment trends and the emerging structural jobs crisis
- Labour markets remain weak following the 2008 global crisis, with a deficit of around 50 million jobs in comparison to the pre-crisis situation.
- It is unlikely world growth over the next couple of years will both close the existing jobs deficit and provide employment for the over 80 million people expected to enter the labour market during this period.
- Regional and group-specific developments:
  - Europe: unemployment rate has increased in nearly two-thirds of these countries since 2010; employment situation is deteriorating.
  - Other advanced economies: labour market recovery has stalled in countries such as Japan and the United States.
  - Emerging economies: employment gains have weakened in countries such as China.
  - Arab region and Africa: jobs deficits remain acute.
- Labour market imbalances are becoming more structural; certain groups (e.g., the long-term unemployed) risk exclusion from the labour market even if recovery occurs.
- Job quality and stability have worsened:
  - In advanced economies, involuntary part-time employment has increased in two-thirds of these economies and temporary employment has increased in more than half.
  - The share of informal employment remains high, standing at more than 40 per cent in two-thirds of emerging and developing countries for which data are available.
  - Women and youth are disproportionately affected; youth unemployment rates have increased in about 80 per cent of advanced economies and in two-thirds of developing economies.
- Job instability reduces future productivity gains by causing excessive rotation between jobs and long periods of unemployment or inactivity.
- Investment deficit:
  - Uninvested cash in large firms has reached unprecedented levels.
  - Small firms in advanced economies continue to have difficulty accessing credit.
  - Investment has become more volatile, which has exacerbated job precariousness across advanced, emerging and developing economies.
- Social tensions:
  - The Social Unrest Index increased in 2011 compared to 2010 in 57 out of 106 countries.
  - Regions with heightened risk include Europe, the Middle East, North Africa and sub-Saharan Africa.
  - Latin America has experienced a decline in the risk of social unrest on average.

### The austerity trap and policy failures
- Since 2010 policy emphasis shifted from job creation to cutting fiscal deficits, often to calm financial markets or pre-empt market reactions.
- Majority of advanced economies have relaxed employment regulations and weakened labour market institutions, with further deregulation measures announced.
- Outcomes where austerity and deregulation were pursued most intensely (principally Southern Europe):
  - Economic and employment growth continued to deteriorate.
  - Measures often failed to stabilize fiscal positions.
- Mechanisms of failure:
  - In a context of limited demand and bank deleveraging, austerity and deregulation failed to stimulate private investment.
  - Austerity led to weaker economic growth, increased volatility, and worsening bank balance sheets, causing further credit contraction, lower investment and more job losses — aggravating government budget positions and prompting further austerity.
  - There has been little improvement in fiscal deficits in countries actively pursuing austerity policies.
- Deregulation limitations:
  - Labour market reforms are unlikely to boost growth and employment in the short term; effects depend heavily on the business cycle.
  - In recession, less stringent regulation may lead to more redundancies without supporting job creation.
  - Weakening of collective bargaining is likely to provoke downward wage spirals and delay recovery.
  - No clear link exists between labour market reforms and employment levels; within the majority range, adequate regulation tends to be positively associated with employment, while badly designed regulations may harm performance.
  - Reforms are best considered within social dialogue and combined with social protection measures (examples cited: Austria and Brazil).

### Alternative job-centred approach and policy recommendations
- Three-pronged approach (building on last year’s Report):
  1. Strengthen labour market institutions so wages grow in line with productivity, beginning in surplus economies.
     - Consider a careful and coordinated increase in the minimum wage.
     - Implement core labour standards; ratifying ILO core Conventions in all G20 countries would send a positive signal.
  2. Restore credit conditions and create a more favourable business environment for small enterprises.
     - Address the failure of Central Bank liquidity provision to translate into credit to the real economy, especially in the Euro-zone.
     - Consider higher taxation of firms that do not reinvest profits and/or lower taxation of firms that emphasize investment and job creation.
  3. Promote employment while meeting fiscal goals.
     - A fiscally neutral change in the composition of expenditures and revenues would create between 1.8 and 2.1 million jobs within 1 to 2 years.
     - For emerging and developing countries, focus public investment and social protection to reduce poverty and income inequality and stimulate aggregate demand.
     - For advanced economies, ensure unemployed people, especially youth, receive adequate support to find new jobs.
- Europe-specific measures:
  - Move towards a growth- and job-orientated strategy that includes a coordinated approach to solving the debt crisis.
  - Use innovative funding mechanisms and improved utilization of European Structural Funds — properly reformed to better tackle present job deficits.

### Governance, institutions and global coordination
- Rebalance the relative influence of the financial sector and the real economy; job-friendly policies should have greater voice in policy-making.
- National institutional proposals:
  - Create national employment and social observatories to identify upper bounds for acceptable unemployment and to monitor and forecast labour market trends.
  - Establish independent and authoritative observatories to provide independent evaluations of the employment impact of policy proposals and to forewarn governments against policies unlikely to achieve unemployment goals.
  - Establish consultative national forums where government and social partners discuss economic and social policies; forums would provide feedback and collaborate with observatories.
- Global governance reforms needed to support national efforts:
  - Ensure effective global coordination of economic policies to eliminate “beggar-my-neighbour” policies that lead to global imbalances and restrict potential global growth.
  - Remove the threat to global economic stability from volatile and unregulated cross-border financial flows.
  - Develop coordinated macroeconomic policies for dealing with future global economic crises.

### Key findings and projections (numeric fidelity preserved)
- Jobs deficit relative to pre-crisis situation: around 50 million jobs.
- People expected to enter the labour market over the next couple of years: over 80 million.
- Informal employment share: more than 40 per cent in two-thirds of emerging and developing countries for which data are available.
- Social Unrest Index change: increased in 2011 compared to 2010 in 57 out of 106 countries.
- Youth unemployment increases: about 80 per cent of advanced economies and in two-thirds of developing economies.
- Job creation potential from fiscally neutral compositional change: between 1.8 and 2.1 million jobs within 1 to 2 years.

*International Labour Organization — World of Work Report 2012: Better jobs for a better economy (Summary)*

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_Source: http://www.ilo.org/wcmsp5/groups/public/---dgreports/---dcomm/documents/publication/wcms_179450.pdf_