Stick with austerity and stifle job growth, warns L20

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The labour and employment ministers of the G20 are meeting in Melbourne, Australia, on 10 and 11 September, a day after being handed a report on the dire state of the global job market.

Conducted by the International Labour Organisation (ILO), the World Bank Group and the Organisation for Economic Co-operation and Development (OECD), the G20 labour markets: outlook, key challenges and policy responses report states that “despite some recent improvement, slow recovery from the financial crisis means that many G20 economies still face a substantial jobs gap, which will persist until at least 2018 unless growth gains momentum.”

“With more than 100 million people still unemployed in the G20 economies and 447 million ‘working poor’ living on less than US$2 a day in emerging G20 economies, the weak labour market performance is also threatening economic recovery because it is constraining both consumption and investment.”

The G20 ministers meeting in Melbourne are therefore confronted with a serious task as they must formulate policy recommendations to bring workers out of the unemployment deadlock.

Recognising that the young and disadvantaged workers are disproportionally affected, the ministers of 19 major economies plus the European Union, promise to discuss “measures to lift labour force participation and create the right conditions for private enterprise to generate employment opportunities.”

Proposals include measures to increase female and youth employment and to address structural unemployment.

The means, however, is likely to stir intense debate in Melbourne.

Global unions, united under the Labour 20, or L20, have already warned in a statement that the G20’s top priority of stimulating the bloc’s GDP “by at least 2 per cent above the currently projected level in the next five years” is “off target”.

“Some G20 governments and international institutions have advocated sticking with austerity policies and structural ‘reforms’ that reduce wages and worker protection. In the current context, such approaches will lead to further stagnation of jobs and economic growth,” says the L20 statement.


Policy recommendations

Another study that will weigh heavily on the G20 ministers is the 2014 Employment Outlook, released last week by the Organisation for Economic Co-operation and Development (OECD).

One of its key findings is that “unemployment will remain well above pre-crisis levels in most OECD countries” until the end of 2015.

The OECD also warns that economic growth alone may not automatically reverse ‘structural unemployment’, which the organisation sees as the result of persistently high levels of joblessness.

The report indicates that 16.3 million people – over one in three of the unemployed in OECD countries – were out of work for 12 months or more in the first quarter of 2014, almost twice the number in 2007.

But even those in work have seen real earnings slow or even fall because of the crisis.

The OECD recommends setting “sensible” mandatory minimum wages, even though they “only have a small adverse effect on employment.”

However, while recognising that the overreliance on temporary work can be damaging, a number of OECD recommendations have been branded “anti-worker” – such as the call to relax “regulations on the dismissal of permanent workers”.

For Roland Schneider, senior policy advisor at the Trade Union Advisory Committee to the OECD (TUAC): “The OECD neglects the fact that relaxing regulations on dismissal of permanent workers respectively deregulating labour markets in times of crisis and high unemployment contributes to a further increase of unemployment.”

Unions are calling for measures to raise wages, invest in infrastructure and reduce inequality.

Relying on a research conducted by Ozlem Onaran of the University of Greenwich in London, unions claim that G20 countries can expect a 5.84 per cent economic growth by increasing the share of wages in GDP by 1 to 5 per cent in the next five years and investing an extra 1 per cent of GDP in infrastructure.

Some 33 million jobs could be created by these measures, say the unions, which should be implemented along with safer workplaces and a focus on women and youth employment.

But six years after the onset of the global financial crisis, gaining people’s trust remains a major challenge.

The International Trade Union Confederation (ITUC) 2014 Global Poll found that 68 per cent of people in 14 countries considered their government bad at tackling unemployment.