Evidence on the impact of the economic crisis on jobs and the policy response challenge: The ILO Global Jobs Pact

1. Evidence on the impact of the economic crisis on jobs and the policy response challenge: The ILO Global Jobs Pact Jos� Manuel Salazar-Xirinachs Executive Director, Employment Sector International Labour Organisation Geneva, Switzerland

2. Contents Global Trends Global Scenarios Policy issues and the ILO Global Jobs Pact

3. I. Global Trends

4. Global Employment Trends, 1998-2008

5. Global unemployment trends by sex 1998-2008

6. II. Three Global Scenarios 1. Unemployment 2. Working Poor 3. Vulnerable employment (own account workers and unpaid family workers)

7. Unemployment-Methodology Scenario 1: Optimistic Scenario. based on the observed long-term relationship between GDP growth and employment at the individual country level (employment elasticities, calculated separately for men and women). This provides the lower bound. Scenario 2: Intermediate: takes the largest drop in GDP observed in each�country since 1991 and its impact on unemployment and applies this relationship in 2009 assuming it happens in all countries simultaneously. It is not a long-term relationship, but a projection on the basis of a particular "crisis" year�in each country (calculated separately for men and women). Scenario 3: worst case scenario. Does not use the relationship between GDP growth and unemployment. It is constructed taking the largest percentage point increase in the unemployment rate�observed in each country in any one year and applies it to each�country in 2009 in comparison to 2008. In other words, the scenario shows what would happen if the worst observed impact on the unemployment rate would repeat itself simultaneously in all countries (calculated separately for men and women). This scenario is not based on the historical relationship between economic growth and employment, so it is not affected by the revisions in GDP growth rates.

8. Global unemployment scenarios 2009

9. Global female and youth unemployment scenarios 2009

10. 2009 Working Poor ScenariosMethodology Scenario 1: Projects trends up to 2007 to 2008 and 2009 based on the IMF estimated growth rates (Nov 2008). Scenario 2: assumes that individuals that are on the fringe (just above the poverty line by 5%) will fall back into extreme poverty in 2008. 10% above for 2009. Scenario 3: assumes that individuals that are just above the poverty line by up to 10% in 2008 and by up to 20% in 2009, will fall back into extreme poverty.

11. Global working poor - Scenarios (USD 1.25)

12. Global working poor - Scenarios (USD 2)

13. Global vulnerable employment scenarios 2009

14. CONCLUSION In 2009 the financial and economic crisis will hit labour markets in both developed and developing countries, creating a jobs crisis, potentially affecting social stability in many countries

15. III. Policy issues and the ILO Global Jobs Pact

16. Present situation Developed countries: A vicious circle of negative interactions between financial markets, product markets, trade and labour markets. Job losses lead to lower consumption, which lowers industrial confidence, which leads to less investment, which results in more job losses Developing countries, multiple transmission mechanisms: Reduced trade flows Decline in commodity prices Reduced liquidity and tightening of credit markets Reduced flows of remittances Drop in FDI Declining flows of ODA

17. Present situation Credit crunch continues; Confidence not restored yet; Trade-FDI continue to contract; Labour market and social impacts not receiving sufficient attention; Neither is the development dimension

18. A Global Jobs Pact A set of principles to provide an agreed basis for policy responses A policy package that recognizes that: The causes of the crisis are interconnected (financial, lack of aggregate demand, trade, labour markets), so the solutions should also be interconnected The crisis should be looked from perspective not only of restoring growth but also of social justice and fair globalization The more central employment and social protection are in expansionary policies, the greater the economic stimulus A commitment to solutions which are local as well as global, coordinated, development oriented, people-centred, inclusive, urgent. A type of fiscal stimulus that is focused on the achievement of productive employment and decent work

19. Principles of the Global Jobs Pact Need to ensure the flow of credit to consumption, trade and investment Use of fiscal and wage measures to stimulate domestic and global aggregate demand, while avoiding wage deflation Extending social protection and unemployment benefits Focusing on the needs of the most vulnerable groups Supporting and sustaining productive and profitable enterprises Implementation of the fundamental principles and rights at work Avoiding trade protectionism Social dialogue within and across borders Maintaining development aid and providing finance to low income countries to cushion the impacts of the crisis

20. Integrated Policy Package: Coordinated fiscal stimulus to maximize the global multiplier effect on aggregate demand. Credit needs to be restored and the financial system mended and properly regulated. The labour market and social dimensions of the crisis need to be addressed nationally and in global cooperation efforts to mitigate the impacts on people.

21. An Operational Decent Work response: Key policy areas Fiscal Stimulus packages that make decent work a cornerstone of the recovery Emergency employment-intensive public works Emergency support to sustain and restructure enterprises and sectors, and stimulus for sectors with strong job generation potential, including green jobs Employment and labour market policies, including: Measures to promote alternatives to layoffs, support re-employment and for new entrants to the labour market (work sharing, training, job search assistance and placement, temporary tax/subsidy measures) Measures to support to self-employed and the informal economy Strengthening of public employment services Social protection programmes for crisis management and response Emergency support to labour administration, inspection Prevent erosion of ILO core principles and standards during crisis Support to social dialogue at enterprise, sectoral and national level for all of the above Adequate governance structures for international funds established with the objective of supporting countries in these areas

22. Conclusion The ILO is in process of preparing and elaborating this Global Jobs Pact concept between governments, employers and workers. We would like to invite all of you to be part of this global exercise on which we are working And we hope the G-20 group could support these ideas and initiatives on the labour market and social policy responses to the crisis that put employment and social protection at the center of the response