Tuesday, October 21, 2014

ILO: Weak Employment Growth Depressing Consumption

By Linda Eroke
Weak employment growth, stagnant wages and widening inequality are depressing consumption and deterring investment in many countries, the International Labour Organisation (ILO) has said.
The international labour body, in a statement to the International Monetary and Financial Committee of the World Bank, noted that the slow growth of the global economy in recent years showed signs of becoming a persistent low growth trap.
The organisation observed that growth in the global economy is slowing in 2014, adding that even the forecasts of slight improvement in 2015 are beset with uncertainty.

According to the statement, accommodative monetary policy in several countries has pumped liquidity into the global economy but has not stimulated private investment in the real economy despite very low interest rates.
The statement noted that the demand for labour is weak and hiring not keeping pace with the growth of the world’s workforce as the increase in unemployment and the fall in employment participation rates that followed on the global financial crisis persist in many countries.
“Economic growth and the quantity and quality of employment are intertwined. Weakness in labour markets is inhibiting growth which in turn feeds back into a further slowing of employment growth and wages. This dangerous downward spiral risks pushing the world economy in a low growth trap – “secular stagnation” as some economists have dubbed it,” the ILO said.
Furthermore, it noted that despite progress in reducing extreme poverty since 2000, enormous challenges remain in transforming the pattern of global development to meet the goals of economic, social and environmental sustainability.
These trends, it pointed out must be countered by coordinated policies for an equitable and job-rich recovery and growth.
According to the ILO, establishing a new framework for inclusive growth through full and productive employment and decent work is central to a renewed global drive to eradicate extreme poverty and reduce inequality. Re-establishing a positive relationship between growth and jobs, it added is critical to avoid a low growth trap and to achieve strong, sustainable and balanced growth in the medium term.
Speaking further, the ILO emphasised that a major policy effort is required to reverse the slide into persistent low growth. In addition to the economic damage that scenario holds, the ILO pointed out that it also has potentially adverse political consequences, as frustrated aspirations for decent work and rising living standards contribute to political extremism and narrow nationalism.
It explained that the multilateral system in which the IMF plays a key role was built to overcome such tendencies through “the promotion and maintenance of high levels of employment and real income and the development of the productive resources of all members as primary objectives of economic policy”.
“Alongside pro-growth fiscal, financial and monetary policies, countries will need to strengthen demand and supply-side employment and social policies including: promoting well-designed minimum wage setting and collective bargaining mechanisms, strengthening and extending social protection systems, anticipating and responding to changing skill needs by providing good labour market information systems to guide career and training decisions and ensuring the acquisition of good foundation skills as the base for learning new skills throughout working life.

No comments:

Post a Comment