Born into Crisis
Rooted in the Real Economy
Responding Today
The International Labour Organization
1919-2009
Born into Crisis
Rooted in the Real Economy
Responding Today
The International Labour
Organization
• Specialized agency of
the UN
• 182 member States
• 40 field offices
throughout the world
• Devoted to advancing
opportunities for women
and men to obtain decent
and productive work in
conditions of freedom,
equity, security and
human dignity
• Placing employment at
the heart of development
policy
The ILO: Born into Crisis
• Founded in 1919 as part of Treaty of Versailles that
ended First World War
• A response to the extraordinary economic development
of the Industrial Revolution, which was accompanied by
intolerable human suffering and social unrest
– Workers demanding democratic rights
and decent working conditions
– Visionary industrialists saw social
progress as critical to
survival of private
industry
The ILO: Reaching deep into
the Real Economy
• The only tripartite organization in the UN family.
– Employers’ and workers’ representatives have an equal voice
with that of governments
• Operates with practical, concrete and specific
contributions from its tripartite constituents
– Promote labour standards
– Create greater opportunities for decent employment
– Enhance coverage and effectiveness of social protection
– Strengthen tripartism and
social dialogue to advance
these goals.
The ILO: Experience
Responding to Crisis
• In its first year, the ILO adopted 6 conventions, including
those covering…
–
–
–
–
Hours of Work
Unemployment Insurance
Maternity Protection
Minimum Age
The ILO: Experience
Responding to Crisis
• In the 1930s, in the wake of global financial collapse, the
ILO worked to coordinate a global approach toward
raising labour standards and rebuilding employment.
The ILO: Experience
Responding to Crisis
• At the end of Second World War, the ILO adopted the
Declaration of Philadelphia as nations looked to a future
of peace and security
– Labour is not a commodity
– Freedom of expression and association are
essential to sustained progress
– Poverty anywhere constitutes a danger to
prosperity everywhere
– All human beings have the right to
pursue their material well being in
conditions of freedom and dignity,
economic security and equal
opportunity
The ILO: Experience
Responding to Crisis
• 1950s – 1970s
– Creation and expansion of technical cooperation to help newly
de-colonized nations build sustainable economies
• 1980s – 1990s
– Response to end of Cold War, helping newly democratic
countries restore functioning labour markets
– Response to Asian financial crisis
– Declaration on Fundamental Principles and Rights at Work
• 2000s
– Decent Work Agenda responds to global poverty
– World Commission on the Social Dimension of Globalization
– Declaration on Social Justice for a Fair Globalization
The ILO’s Decent Work
Agenda
• Work is central to people’s well being
• Creating decent work should be at the heart of
development policy
• Make globalization more
inclusive and fair
The ILO’s Decent Work
Agenda
• Centered on the ILO’s key strategic objectives…
– Employment
• The principal route out of poverty is work
– Rights
• People in poverty need
representation, participation
and voice
– Protection
• Earning power is suppressed
by marginalization and lack
of support systems
– Dialogue
• The only way to solve
problems peacefully
A World in Crisis
• Current world financial meltdown worst since the
Great Depression
• World growth in 2009
will be lowest since the
Second World War
• World trade expected to
contract by 2.8% in 2009
after growing 7.8% annually over the
past three years
The crisis is spreading…
• From largest industrialized nations to emerging
economies to least developed countries
• Beyond the financial markets
– Credit crunch
– Waning consumer and business confidence
– International linkages
• World trade
• Commodity price drops
• Fall off in FDI and
private capital flows
• Remittances falling for first time
in decades
• Drop in development assistance?
…and affecting the real
economy
• Global unemployment in the formal sector could rise to
6.5% this year
– A total of 210 million people out of work
• 77 million workers in developing countries
to be pushed into poverty
• Some hit especially
hard
– Women
– Youth
– Migrants
Case in Point:
Women and the Crisis
• Number of unemployed women will rise by as much as
22 million in 2009
• Women are often regarded as a flexible reserve, to be
drawn into the labour market in upturns and expelled in
downturns - i.e. casual, temporary, contract, and home
workers
• Women concentrated in export-oriented
firms that are exposed to global slowdown
• Shrinking economies and reduced
social protection tend to hit
women and children harder
It’s having far-reaching
consequences
• Risk of prolonged labour market recession
– Job losers tend to lose skills and get discouraged after one year
of unsuccessful job search
• Rise in informal employment and working poverty
• Threats to social cohesion and stability, public
support for globalization, achievement
of MDG’s
• Sense that innocent victims are hit,
largely because benefits from
earlier growth went mainly to
high-income groups
• A social crisis is at hand
Problem: Unemployment
and informalisation are
difficult to reverse…
Duration of
output recovery
and job market
recovery after the
1991 and 2001
recessions in the
U.S. (in months)
50
45
40
35
30
25
20
15
10
5
0
Output
Job Market
Recovery
1991
2001
Source: Irons, John (2009) 'How long would a job-market recovery take'? , Economic Policy Institute, January 7
Vulnerable employment to
increase by 113 million
Change, in millions, 2007 - 2009
South Asia
Sub-Saharan Africa
S.E. Asia & Pac.
North Africa
Middle East
Cent., SE Eur. & CIS
Lat. Am. & Caribbean
0
5
Source: ILO, 2009, Global Employment Trends
10
15
20
25
30
35
Low Unemployment Insurance
coverage in many economies
Brazil
China
Share of
unemployed
workers NOT
receiving
unemployment
benefits
Japan
U.S.
Canada
UK
France
Germany
0
20
40
60
Percentage
80
100
Source: IILS estimates based on national statistics. For
Brazil, recipiency rate is taken from Vroman and
Brusentsev (2005), Unemployment Compensation
Throughout the World: A Comparative Analysis, and
applied to the level of unemployment from
the Dec. 2008 Labour Force Survey.
The challenge to be met
• Preventing the financial crisis from becoming a
long-lasting labour market and social crisis
– Averting widespread, major
increases in unemployment
– Avoiding long-lasting
shift to informal work
– Staving off large
increases in poverty
among the world’s
working poor
What countries are
already doing
• Most have taken some action
– Much of focus is stabilizing financial markets and
attempting to restore liquidity
– Many economic recovery packages are targeted at
the real economy to stimulate demand
• Cutting taxes and boosting government
spending
• Targeting infrastructure development
• Spending on education and health
• Extension of unemployment benefits,
hiring incentives, retraining and other
actions targeted to help workers and
employers weather the crisis
Multilateral action
• In April 2009, statement of the G20 London Summit of
world leaders:
– Support those affected by the crisis by
creating employment opportunities and
through income support measures
– Support employment by stimulating growth,
investing in education and training, and
through active labour market policies,
focusing on the most vulnerable
– “We call upon the ILO, working with
other relevant organisations, to assess
the actions taken and those required for
the future.”
But there are still many
shortcomings…
• Action has been swift, but relatively unfocused
• Financial rescue measures are generally far in excess of
fiscal tools to stimulate demand
• Impact has been limited to date
• Lack of coordination among countries
• Little attention to development
assistance for poorer countries
• Structural causes are not being
addressed
– Return to status quo (the “crisis
before the crisis”) would leave the
world vulnerable to future downturns
Financial rescue efforts vs.
fiscal rescue efforts
Spain
Portugal
U.K.
Fiscal Rescue Efforts
Financial Rescue Efforts
France
Germany
U.S.
0
10
20
30
40
Percentage of GDP
Source: IILS, based on ILO, OECD & Bloomberg.
Case in Point:
Unemployment Insurance
• United States
– 2008 financial stimulus included extension of Unemployment
Insurance benefits
– New administration indicates further extensions to come
• Europe
– Many countries expanding Unemployment Insurance duration,
benefits and eligibility
• OECD recommends strengthening
safety net in countries with short
duration of Unemployment
Insurance benefits
• China
– Financial stimulus package
expected to include income
and employment support to
jobless families
Case in Point:
Skills and Job Training
• Canada: Economic recovery plan emphasizes training
– $1 billion for job training delivered through unemployment
insurance programme
– $500 million strategic training and transition fund available to all
individuals
– $40 million for apprenticeship
programmes
– Long-tenured worker programme to
extend Unemployment Insurance
benefits while worker is being
retrained
The “Crisis Before the Crisis”
• Prior to the onset of the current meltdown…
– Global economy was not producing sufficient jobs
where people live
– 86 million young people were
unemployed
– Existing framework of
development not working
for many people
– Globalization not delivering
for them
Fate of developing
countries hangs in the
balance
“This is truly not the moment to let
them down and to say ‘sorry, we have
to fend for ourselves’… One of the
biggest problems we have is an
enormous lack of coordination among
all these stimulus packages, and that
can easily lead to beggar-thy-neighbor
policies, and we are already seeing
indications of that.”
Juan Somavia, Director-General, ILO
ILO Recommended
Measures
• Ensure flow of credit and stimulate demand
• Extend social protection and retraining
– Focus on the vulnerable
• Support productive and sustainable enterprises
– Small and medium-sized
businesses and cooperatives
– Employment-intensive
investment
– “Green jobs”
– Ensure restructuring of
enterprises and sectors
is socially sensitive
ILO Recommended
Measures
• Ensure core labour standards are promoted and not
undermined or eroded
• Strengthen social dialogue, tripartism, and ILO role in
multilateral system
• Maintain and expand
development aid
Case in Point:
Social Protection
• Brasil’s Bolsa Familia: Federal cash transfer programme
focused on poor families
– Serves 11 million poor families, with a monthly income up to
per capita (US$ 60.00)
– 2009 Budget: approx. US$ 5 billion - 0.4 % GDP
• Conditioned on health monitoring for pregnant women and
infants, child school attendance
• Integrated with programmes addressing child labour and
forced labour
• Studies show significant success in reduction of poverty and
child malnutrition, raising gender equity and economic activity
• Studies also show programme does not create disincentive
to work
Case in Point:
“Green Jobs”
• Renewable energy – 20 million jobs by 2030
– Germany boosted jobs in renewables from 160,000 to 260,000 in
just two years
– China has 1,000 manufacturers of solar thermal panels
employing 600,000 workers
– Recycling in China employs
10 million workers
– Columbia’s ethanol mandate is
expected to create
170,000 jobs
– World Bank: Biofuels
could generate
1.1 million jobs in Africa
Case in Point:
Employment Intensive Investment
• Productive and social infrastructure, protection of the
productive resource base
– Roads, irrigation, construction and rehabilitation of schools and
health centres, forestation, soil and water conservation
• 3-5 times more direct jobs created
• Multiplier effect: 1.6 – 2.0
• Foreign exchange: typically
50% savings
• Costs: typically 20% cheaper
• Contribution to
increased GDP
Case in Point:
Social Dialogue’s Value in Crisis
• Ireland
– Faced serious economic difficulties into the 1980s
– 1987 - Social partners and government
concluded first in series of tripartite
agreements on national recovery
– Country subsequently became
economic leader in Europe
Case in Point:
Social Dialogue’s Value in Crisis
• Republic of Korea
– History of hostile relationship between unions and the state
– Creation of Tripartite Commission to address 1997-98 Asian
financial crisis
– Social Agreement of 1998
enabled
layoffs, expanded
workers’ rights and
gave
government flexibility
to
act against crisis
– Economic recovery
followed soon
thereafter
Needed: A Global
Jobs Pact
• Address similar problems at the same time with a global
approach
• Stimulus packages should be more employment oriented
• Target small- and medium-sized enterprises
– Responsible for most of new and existing jobs in most countries
• Avoid wage deflation and pave the
way toward a more sustainable
economy through greater emphasis
on…
– Social Protection
– Workers’ Rights / Social Dialogue
How a Global Jobs Pact
would work
• To restore credit…
– Condition government financial support on provision of credit for
viable new projects
– Direct access to government loans for small- and medium-sized
businesses
• To ensure fiscal stimulus boosts economic activity…
– Target employment-intensive areas
– Support to small- and medium-sized
enterprises
– Ensure workers have the skills to
respond to new requirements
– Promote rural and agricultural
dimensions – critical in developing
countries
How a Global Jobs Pact
would work
• To account for the lags in launching new infrastructure
projects…
– Provide support to existing jobs through shorter working hours,
partial Unemployment Insurance benefits and training
– Enhance social protection through well-designed programme
and make it broad-based
• To strengthen the safety net for those
or cannot find jobs…
– Unemployment Insurance benefits
and employment guarantees
– Active labour market and training programmes
– Specific attention to vulnerable groups –
women, youth, migrants
who lose
Case in Point:
Small and Medium Enterprises
• More than 95% of OECD enterprises are classified as
SME’s
– Account for up to 70% of the working population
– Dynamism and flexibility
• However, they are also among most vulnerable in crisis
– Weaker financial structures and limited access to credit
– Often dependent on global value chains
• ILO has resources and provides policy advice aimed at
strengthening SME finance
– Microfinance, mico-leasing, micro-insurance and mutual
guarantee systems
Summing it up
• Global economic crisis is deepening
• Risk of prolonged labour market recession
• Countries are acting but rescue packages thus far not
sufficient
– Too much financial, not enough fiscal
– Need more focus on creating decent work and protecting people
– Too little coordination among nations
• Not enough attention to development dimensions of the
crisis
– Social stability is at risk, particularly in developing countries
Summing it up
• Prescriptions for a more sustainable economy
– Restore credit and ensure that banks lend to viable businesses
– Target small and medium enterprises, the engines of job growth,
in credit restoration and infrastructure projects
– Provide employment benefits and broad-based social protection
to help workers and families weather the downturn
– Use social dialogue and worker protections in countries to avoid
wage deflation
– Motivate multilateral institutions to work cooperatively toward
more balanced globalization that promotes sustainability from
economic, social and environmental viewpoints
Looking Ahead
• International Labour Conference, June 2009
– Restructuring agenda to place emphasis on the crisis
• Special Committee on the Crisis
• Two-day Global Summit on Dealing with the Jobs Crisis
• ILO Declaration on Social Justice for a Fair Globalization
– Reaffirms commitment to open economies and open societies
– Calls for a stronger action nationally and internationally
• Achieve social cohesion
• Combat poverty and rising inequality
“This is our contribution to making sure that once the mess is cleared
up, there will be no room for the destructive behavior of financial
actors to ruin people’s lives and the real economy.”
Juan Somavia, Director-General, ILO