World of Work Report 2013

Repairing the economic and social fabric

Summary

INTERNATIONAL LABOUR ORGANIZATION INTERNATIONAL INSTITUTE FOR LABOUR STUDIES

Repairing the economic and social fabric

The labour market and income situation is uneven The employment and soc al outloo! d ""ers cons dera#ly #oth across countr es and $ th n them% O&er the past three years' the ma(or ty o" emer) n) and de&elop n) econom es ha&e posted pos t &e employment )a ns *+hapter ,-% In add t on' they ha&e mana)ed to reduce ncome ne.ual t es some$hat / al#e t "rom relat &ely h )h le&els% The result s a )ro$ n) m ddle0 ncome )roup' $ th part cularly encoura) n) pro)ress n some Lat n Amer can and +ar ##ean countr es' as $ell as n parts o" As a and some su#0 Saharan countr es% The s tuat on amon) ad&anced econom es' ho$e&er' s more comple1% In the a"termath o" the )lo#al " nanc al cr s s $h ch erupted n 2334' some ad&anced econom es ha&e mana)ed to reco&er some o" the (o#s lost% Th s s part cularly the case n Austral a' +anada' Ne$ Zealand and the Repu#l c o" 5orea% 6ore recently' encoura) n) s )ns o" reco&ery ha&e also #een o#ser&ed n the Un ted States and n 7apan% Europe' #y contrast' s st ll con"ronted $ th s )n " cant challen)es and n many respects ts la#our mar!et and soc al outloo! cont nues to deter orate% On the present course' )lo#al unemployment s e1pected to approach 234 m ll on n 23,8' up "rom 233 m ll on today% And lon)0stand n) la#our mar!et m#alances 0 such as h )h le&els o" la#our mar!et n"ormal ty n de&elop n) countr es and lon)0term unemployment n ad&anced econom es 0 $ ll rema n acute% Th s report h )hl )hts the cruc al role o" $ell0des )ned employment and soc al pol c es #oth n consol dat n) the )a ns $here a reco&ery s under$ay and n ! c!0start n) (o# creat on n countr es st ll se&erely a""ected #y the cr s s% but can be improved by consolidating the rebalancing process in emerging and developing countries +ountr es that are already on the path to a (o# reco&ery $ould #ene" t "rom cont nu n) to mplement $ell0des )ned soc al protect on and to #oost la#our ncomes% The success o" many o" these countr es l es n the r attempts to underta!e a re#alanc n) process that

Summary

st mulates domest c sources o" )ro$th% Re n"orc n) these e""orts $ ll #e cr t cal to consol dat n) the pro)ress to date #ecause e1ports to ad&anced econom es $ ll no lon)er pro& de the same st mulus as they d d dur n) the t$o decades preced n) the )lo#al cr s s% In&estment n !ey n"rastructure pro(ects' alon) $ th measures to "ac l tate the trans t on to "ormal employment and to e1pand $ell0cra"ted soc al protect on and m n mum $a)es $ould help to "urther that o#(ect &e% Such pol c es $ould not only #oost )ro$th no$' #ut $ould also consol date the emer)ence o" a lar)e and )ro$ n) m ddle0 ncome )roup /$h ch s essent al "or ensur n) )enu nely autonomous econom c )ro$th *+hapter 2-% I" $ell0cra"ted' they $ ll also help tac!le under0unemployment' $h ch s st ll per&as &e n most o" the de&elop n) countr es% The report "ocuses part cular attent on on the role o" care"ully des )ned m n mum $a)es *+hapter :-% A#out hal" o" the ,8, countr es "or $h ch data are a&a la#le do not ha&e a comprehens &e system o" m n mum $a)es% And' n those countr es $here m n mum $a)e le) slat on does e1 st' stron)er act on s o"ten needed to mpro&e compl ance% 9ell0des )ned systems o" m n mum $a)es can pro& de an e""ect &e ncome "loor "or #oth "ormal and n"ormal $or!ers% They can also pro& de an ncent &e to unloc! lo$0 product & ty traps and' com# ned $ th soc al protect on "loors' can contr #ute to enhanc n) the capa# l t es o" lo$0 ncome $omen and men% <et' at a t me $hen h r n) rema ns $ea!' the le&el at $h ch the m n mum $a)e s set re.u res care"ul coord nat on n order to ma!e t #oth # nd n) and cons stent $ th the creat on o" "ormal (o#s% Too lo$ a le&el reduces the rele&ance o" m n mum $a)es= too h )h a le&el runs the r s! o" " rms re"us n) to comply% Importantly' the report h )hl )hts the po nt that re)ular updates and the en)a)ement o" $or!ers> and employers> or)an ?at ons n m n mum $a)e sett n) are cruc al to le&era) n) the #ene" ts o" m n mum $a)es and ensur n) that they pa&e the $ay "or decent $or! opportun t es% ...and finding the right balance between employment and macroeconomic goals in advanced economies. In ad&anced econom es' the challen)e s to st mulate (o# creat on $h le address n) macroeconom c m#alances% The t$o )oals are connected% Gro$ n) lon)0term unemployment and ch ld po&erty enta l s )n " cant soc al and econom c costs' compl cat n) the ach e&ement o" macroeconom c )oals% L !e$ se' t )ht cred t cond t ons and the $ea! demand prospects assoc ated $ th h )h unemployment ad&ersely a""ect product &e n&estment' espec ally amon) small enterpr ses' $h ch typ cally account "or a cons dera#le share o" employment *+hapter @-% Th s' n turn' reduces )ro$th potent al as $ell as the a# l ty o" )o&ernments to repay the r de#ts% A #etter #alance #et$een employment and other macroeconom c o#(ect &es $ ll there"ore #e necessary to ach e&e a last n) and nclus &e reco&ery% F rst' th s means

9orld o" 9or! Report 23,:; Repa r n) the econom c and soc al "a#r c

ensur n) an ade.uate pace o" " scal consol dat on measures' $here they are necessary' and more attent on to the employment and soc al mpact o" d ""erent macroeconom c pol c es *+hapter 8-% On the e1pend ture s de' ma nta n n) and re n"orc n) la#our mar!et and soc al pol c es are o" cr t cal mportance% On the re&enue s de' a $ den n) o" the ta1 #ase /not to $e )h d sproport onately on la#our and product &e n&estment00 and )reater emphas s on address n) ta1 e&as on $ould help to secure add t onal " nanc n)% +erta n countr es that $ere s )n " cantly a""ected #y the " nanc al cr s s 0 nota#ly the Un ted States and' more recently' 7apan 0 ha&e mo&ed n th s d rect on% The e1per ence o" Nord c econom es n the ,AA3s s also an mportant case n po nt% Second' mo& n) .u c!ly $ th yet0unresol&ed ne"" c enc es n the " nanc al system $ould #e nstrumental n support n) the ach e&ement o" #oth employment and macroeconom c o#(ect &es% A !ey #arr er to product &e n&estment can #e "ound n the "a lure o" " nanc al systems to play the r role n d str #ut n) cred t' $h ch s espec ally pro#lemat c $ th respect to small " rms% +hapter @ llustrates the l n!s #et$een cred t pro#lems' n&estment and decent $or!% It also h )hl )hts pol cy and re)ulatory measures to mpro&e " nanc al "unct on n) n a manner $h ch s more employment0"r endly% Thus' o" the :3 countr es $ th a&a la#le n"ormat on' only ,3 ha&e put n place pro& s ons "or a system c r s! re)ulator% Progress towards reducing economic and social inequalities would pave the way for a lasting recovery. Econom c and soc al ne.ual t es rema n h )h or are r s n) n most re) ons% Th s s tuat on s a""ect n) lon)0term reco&ery prospects% From the econom c po nt o" & e$' nd cators sho$ that pro" ta# l ty and stoc! mar!ets ha&e reco&ered n a ma(or ty o" countr es% Unspent cash n the accounts o" lar)e enterpr ses has reached USD 8 tr ll on n ad&anced econom es and USD ,%@ tr ll on n emer) n) and de&elop n) countr es' n #oth cases e1ceed n) pre0cr s s le&els% E1ecut &e pay s also on the r se' "ollo$ n) a pause n the mmed ate a"termath o" the cr s s% There"ore' the !ey ssue s ho$ to translate pro" ts nto product &e n&estment' espec ally n ad&anced econom es% Bu#l c n&estment n t at &es that cro$d n pr &ate n&estment' ta1 measures and stepp n) up " nanc al re"orms $ould help% But ensur n) that la#our ncomes )ro$ n l ne $ th product & ty )a ns $ould also s )n " cantly contr #ute to #oost n) product &e n&estment% The )ap #et$een small and lar)e enterpr ses s $ den n)% The pos t on o" small " rms has deter orated & s0C0& s that o" the r lar)er counterparts% Susta na#le small " rms depend hea& ly on #an! cred t and cannot )rasp the #ene" ts o" )lo#al ?at on to the same e1tent as lar)er ones% Th s s an ssue $h ch $ ll re.u re more attent on n pol cy ma! n)%

Summary

The soc al "a#r c has #een a""ected #y )ro$ n) or pers stent ncome )aps #et$een r ch and poor% Bro)ress has #een made n many emer) n) and de&elop n) countr es #ut more e""orts are needed to consol date the )a ns% 6ean$h le' ncome ne.ual t es are $ den n) n ad&anced econom es' +entral and Eastern Europe and n a num#er o" Ara# countr es% Almost e&ery$here' youn) people and $omen " nd t d "" cult to o#ta n (o#s that match the r s! lls and asp rat ons% It s cruc al to ensure that the spectacular ad&ances n educat onal atta nment n recent years are matched #y commensurate decent $or! opportun t es "or youn) people% Th s s a ma(or )lo#al challen)e "or the years to come% 6ean$h le' the r s! o" soc al unrest s on the r se n most re) ons% Accord n) to the Glo#al 7o#s Bact adopted #y the ILO n 233A' the )lo#al cr s s called "or #oth short0term reco&ery measures and lon)er0term re"orms to repa r the underly n) m#alances that had led to the cr s s% Four years on' a lesson learned "rom e1per ence s that short0term reco&ery measures are all the more e""ect &e $hen mplemented as part o" a comprehens &e re"orm pac!a)e alon) those l nes% Thus' se&eral Lat n Amer can and As an countr es ha&e success"ully mana)ed to #oost )ro$th and tac!le econom c and soc al ne.ual t es% 6o& n) n the d rect on o" such re#alanc n) re.u res o&ercom n) certa n #arr ers' nota#ly d str #ut onal ssues' entrenched #el e"s that )o&ernment nter&ent on $ ll ne)at &ely a""ect compet t &eness and econom c )ro$th' and nsu"" c ent pol cy coord nat on' $h ch s espec ally mportant n areas l !e ta1at on and at t mes o" $ea! )lo#al a))re)ate demand% Th s s a comple1 endea&our' #ut purs n) t $ ll #e re$arded $ th a rene$ed econom c and soc al "a#r c%

9orld o" 9or! Report 23,:; Repa r n) the econom c and soc al "a#r c