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Crisis response

ILO seminar on ways out of the jobs crisis

While the massive increase in unemployment due to the global economic crisis has left some countries reeling from joblessness and recession, others – including for the first time some less-developed and emerging economies – have experienced a much quicker and smoother recovery process.

News | 26 March 2010

GENEVA (ILO News) – While the massive increase in unemployment due to the global economic crisis has left some countries reeling from joblessness and recession, others – including for the first time some less-developed and emerging economies – have experienced a much quicker and smoother recovery process.

“In order to achieve a sustainable and more global recovery, there is a need to take stock of experiences and share effective policy interventions,” said ILO Director-General Juan Somavia, speaking at a seminar sponsored by Brazil and France on “Overcoming the Jobs Crisis: what do we know about experiences that work?”. However, Mr. Somavia warned that “despite signs of economic recovery, the global jobs crisis is far from over.”

The seminar, which was organized by the ILO International Institute for Labour Studies (IILS), also heard remarks by experts from the Republic of Korea, Brazil, Egypt, Germany and France.

“This is the first time that the global economic recovery has started from less developed and emerging economies,” said Márcio Pochmann, President of the Institute for Applied Economics, IPEA, Brazil.

Mr. Pochmann pointed out that between 2000 and 2007, 75 per cent of the world’s growth came from less developed countries, particularly Brazil, India and China.

He said that unlike developed economies, less developed economies like Brazil were not deeply affected by the crisis, although the recovery was in part due to the policies that were put in place. Speaking about Brazil’s experience, Mr. Pochmann highlighted policies geared towards energy and infrastructure projects and income support, as well as minimum wage increases and the reduction of tax burden in sectors that employed a relatively large share of the labour force.

Jong-Cheol Kim, from the Republic of Korea, commended the ILO for the Global Jobs Pact describing it as “comprehensive and most relevant to the crisis situation.” He added that the Pact has been a very useful analytical tool for finding ways out of the crisis.

Mr. Kim said that his country’s experience in overcoming the 1997 crisis has been a great help in dealing with the present recession. He said South Korea had built a social safety net in the 1990s which proved essential in recovering from the current crisis.

He also pointed out that South Korea’s labour market recovery depends greatly on the Green New Deal – a 5-year “green growth” plan introduced as a response to the crisis that is expected to generate more than one million jobs.

Bruno Coquet, representative from the French Ministry of Finance and chair of the EU Employment Committee, said that the experience among EU countries has been very diverse, both in terms of the impact of the crisis and its recovery.

Mr. Coquet said there were big differences among EU countries, namely in terms of fiscal space, enterprise competitiveness and labour market rigidity/flexibility. “There is also a difference in terms of crisis exposure,” he added, “especially in terms of the situation of the financial system, existence or lack of a real estate boom, and whether or not growth was export and/or credit dependent.”

Mr. Coquet said differences in the speed and scope of recovery were a result of the different rescue packages implemented. “First, there was a variation in terms of the size and timing of the packages introduced. The different policy instruments applied were also a factor.” However, he said, that there are 10 to 12 key policy instruments that seem to have worked, including investment in training, supporting household purchasing power, encouraging flexible working time, and maintaining/reinforcing social protection.

Egypt – considered one of the success stories – has focused mostly on infrastructure spending, which has been employment intensive, according to Dr. El Hamaki, from Ain Shams University in Cairo and Deputy Chairman of the Economic Committee of Egypt’s Parliament.

Egypt has also provided subsidies to the export sector and reinforced measures like food support and social protection. Ms. El Hamaki said that Egypt has focused on training programmes, especially those involving the civil society and universities that seek to enhance entrepreneurship among recent graduates.

Germany is also credited with maintaining labour market stability despite negative economic growth in 2009. Dr. Ulrich Walwei, Vice-Director, from Institute for Employment Research, (IAB) Nuremberg, said “the reasons behind Germany’s success were a long-established culture of social dialogue for maintaining jobs via short-term work.”

Mr. Walwei said that “among the policies that have worked well for Germany are the adherence to labour market reforms to make work incentives stable over time, and facilitating structural change of the economy through effective training and facilitating job mobility.”

Michael Sommer, Chairman of the German Confederation of Trade Unions (DGB), pointed out that a new common spirit among workers, employers and government was crucial for the German success.“ But we have not yet come to an end,” he said. “Now we have to invest in prevention, in clean technologies and green jobs.”

Mr. Mdwaba, Deputy CEO of the Kelly Group from South Africa commended the quick response to the crisis in his country. He pointed out that policy makers should ensure labour market flexibility by introducing short-term measures. “You should not regret later,” he warned.

IILS Director Raymond Torres said that in the medium to long-run, there is no trade off between fiscal sustainability and labour market policies. He said that countries that do not posses adequate fiscal space can learn from the experience of countries like Brazil, Egypt, and South Korea. “Indeed, these countries have targeted programmes that have helped in the recovery while being cost effective,” he said.

According to Mr. Torres countries should address three main issues in order to recover from the crisis: “First, we have to emphasize jobs as part of the stimulus efforts, and put in place programmes to combat long-term unemployment, underemployment, and informality. Second, there is a need to ensure that aggregate demand stays afloat through the support of fiscal measures. Third, introducing financial reforms, not just from a developed country perspective but from a global perspective, is vital to achieving a sustainable recovery.”

In his closing remarks, Mr. Gilles de Robien, representative of the French government, referred to some of the lessons emerging from successful crisis responses. In particular, he highlighted recent initiatives to make social protection employment-friendly while at the same time providing adequate coverage to the needy. “The National Rural Employment Guarantee in India and the recently introduced Active Solidarity Income in France are two interesting examples in this respect,” he said.