Ever
since the global financial and economic crisis broke,
the International Labour Organisation (ILO) has been
regularly tracking its impact on the level and quality
of employment. In January 2009, the ILO (International
Labour Office 2009) indicated that, under alternate
scenarios, global unemployment could increase by between
18 million or 51 million people worldwide from 2007
to 2009. By June 2009 the range for 2009 had shifted
upwards, to an increase of between 29 million and
59 million unemployed over the period from 2007 to
2009.
The most recent estimates put out by the ILO suggest
that this range was broadly indicative, though the
outcome appears to be closer to its lower bound. In
its January 2010 update, the ILO estimates global
unemployment at 212 million in 2009, or around 34
million above its 2007 level, with most of the increase
having occurred during 2009. In sum, the impact of
the fiscal stimuli delivered by many governments does
not seem to be as yet adequate to stall, let alone
reverse the employment decline resulting from the
crisis. This increase in unemployment was unevenly
distributed, with Developed Economies and the European
Union, Central and South-Eastern Europe and CIS countries,
and Latin America and the Caribbean accounting for
more than two-thirds of the increase in the number
of unemployed during 2009. In other words, South-East
Asia and the Pacific, East Asia and South Asia were
much less affected.
It needs to be noted, however, that in most countries
unemployment figures do not tell the whole story.
With social protection inadequate or lacking altogether,
those in the working age groups need to take on some
form of employment or starve. Hence, recorded unemployment
rates tend to be low. Thus, what is more telling is
to look at a combination of the trends in aggregate
employment and more importantly in the quality of
that employment. According to the ILO, in 2009, employment
growth became negative in two regions (Developed Economies
and the European Union and Central and South-Eastern
Europe and CIS countries) while employment growth
in Latin America and the Caribbean dropped to near
zero. In all regions except South-East Asia and the
Pacific and the Middle East, employment growth declined
below the average annual growth in the first half
of the decade.
This is surprising, since it is to be expected that
countries that are more dependent on foreign trade
and investment flows, such as those in South-East
Asia, would have been more affected by the crisis.
The region experienced the sharpest reductions in
economic growth because of the crisis. Economic growth
in the region as a whole is expected to fall to 0.5
per cent in 2009, down from 4.4 per cent in 2008 and
from an average annual rate of more than 6 per cent
prior to the crisis. The countries that have experienced
the sharpest declines in growth in 2009 are Cambodia
(where growth fell to -2.7 per cent from 6.7 per cent
in 2008 and more than 10 per cent in the years leading
up to the crisis), Malaysia (-3.6 per cent growth
in 2009), Thailand (-3.5 per cent growth in 2009),
Singapore (-3.3 per cent) and Fiji (-2.5 per cent).
According to the ILO, the presence of a major economy
like Indonesia, which has a large domestic market
and is less dependent on trade has buffered the region
and unemployment in the ILO scenarios is projected
to increase by a moderate 1.2 million (with an upper
bound of 2 million and a lower bound of 0.5 per cent).
Overall, the presence of countries where growth is
largely based on the domestic market is seen as positive
from the point of view of the intensity of the downturn
and its effects on employment. In South Asia, the
fact that growth in the larger economies like India
and Pakistan is based more on the domestic market
than exports has blunted the impact of the crisis
on growth and employment.
That having been said there are four features of labour
market trends in the Asia-Pacific region that need
to be noted. First, there are many small disadvantaged
countries, including the small landlocked and island
economies in the region that have no domestic market
to speak of and therefore are perforce (and not just
by strategy), heavily dependent on exports. Second,
three decades of liberalisation have meant that all
regions and countries in the Asia-Pacific have increased
their dependence on exports, even if to differing
degrees. Third, in almost all countries there are
at least a few sectors (whether they be primary products,
manufacturing or informational technology services)
in each country where export dependence is high. And,
fourth there are routes other than an export slowdown
– domestic demand decline, reduced credit access,
etc. – through which the global downturn transmits
itself to developing countries, affecting employment
even in sectors and industries dependent on domestic
markets.
Chart
1 >> Click
to Enlarge
However,
underlying the better performance of this region in
terms of aggregate employment are certain disconcerting
trends. This comes through from an examination of
countries in South-East Asia and the Pacific for which
more recent data is available from labour force surveys.
Given the fact that unemployment is the exception
for individuals in countries without adequate or any
social protection, the impact of the reduction in
growth is felt more in terms of deterioration in the
quality of employment rather than a decline in its
volume. The ILO defines workers in vulnerable employment
as consisting of own-account workers and contributing
family workers, who are less likely to have formal
work arrangements, and are therefore more likely to
lack elements associated with decent employment such
as adequate social security and recourse to effective
social dialogue mechanisms. As a result, vulnerable
employment is often characterized by inadequate earnings,
low productivity and difficult conditions of work
that undermine workers' fundamental rights.
In some countries in South-East Asia, the impact of
crisis has been an increase in vulnerable employment
rather than in recorded unemployment. With job losses
in the export sector the proportion of workers in
vulnerable employment in export dependent countries
has tended to increase. According to the ILO: ''Both
the proportion and the number of workers in vulnerable
employment in South-East Asia and the Pacific have
risen since 2008, with the middle scenario providing
a projected increase of almost 5 million. This trend
is to be expected, as many workers who have lost their
job in export-oriented manufacturing cannot afford
to join the ranks of the unemployed and instead will
take up employment in the informal sector, perhaps
working in agricultural activities or in informal
services, such as street vending.''
Consider, for example, a country like Thailand, for
which employment figures under different status categories
are available from the National Statistical Office
till as recently as September 2009. The figures show
that if we take average quarterly figures for the
first three quarters of 2007, 2008 and 2009, the increase
in overall employment fell from around 797,000 between
2007 and 2008 to 686,000 between 2008 and 2009. But
this was accompanied by significant changes in the
pattern of employment. The number of private employees,
which grew by 260,000 between 2007 and 2008, declined
by 45,000 between 2008 and 2009 because of the impact
of the crisis on the country's export industries.
Over the same periods the increase in the number of
own-account workers rose from 116,000 to 444,000 and
those in vulnerable employment as per the ILO's definition
rose from 504,000 to 604,000. Unable to obtain employment
in the export industries that had hitherto sustained
them, workers were seeking any form of employment
in order to survive.
Chart
2 >> Click
to Enlarge
However, the experience differs across countries.
In South Korea, average monthly employment, which
rose by 144,833 between 2007 and 2008, fell by 71,750
between 2008 and 2009. What is remarkable was the
sharp rise in the number of jobs lost in the self-employed
(from 79,000 to 259,000), unpaid family worker (12,400
to 60,000) and daily worker (57,000 to 158,000) categories.
That is, there was a huge decline in vulnerable employment.
On the other hand, the absolute increase in the monthly
average number of regular employees remained more
or less constant in the 380,000 range. One explanation
for this very different experience could be that the
government's efforts at a stimulus kept regular jobs
rising, but the impact of the crisis damaged sectors
relying on self-employed or irregularly employed workers
for their survival.
Finally, there are specific groups that have been
affected particularly adversely. Besides marginalised
or disadvantaged sections, the impact of the crisis
was significant in the case of women and youth. Women
were affected not merely because of the all-prevalent
gender discrimination, but also because in many countries
there has been some degree of feminisation of export
employment, especially in the case of low value added,
labour intensive processing. And with unemployment
and underemployment on the rise, new entrants into
the labour market among the youth are bound to find
it difficult to find themselves decent work.
These trends in Asia are of significance because at
the time when the crisis was just beginning to unfold,
optimists pointed to Asia as the shock absorber that
would buffer the global downturn. A decoupled Asia,
it was argued, would through its own growth and the
demands that it would make on the world's output ensure
that the financial crisis that was largely a phenomenon
restricted to the developed countries would not have
as damaging an effect on global growth as the pessimists,
then in a minority, were predicting. That prognosis
has turned out to be only partially, and in some cases
marginally, correct.
What is more the recovery has been accompanied by
a return of inflation to commodity markets, with increases
in food and oil prices. This is seen as making the
current recovery driven by large-scale public spending
a source of danger inasmuch as it can once again trigger
commodity price buoyancy. And even as the world hesitantly
looks forward to recovery the fear that commodity
price inflation would threaten the process of adjustment
is on the increase.
This fear has created a situation where there is uncertainty
about the continued use of the most obvious tool for
combating a recession, viz. substantially increased
government spending to stimulate demand in the domestic
market. Since the adoption of programmes of economic
liberalisation (which included customs duty reductions,
indirect tax rationalisation and direct tax concessions),
countries have been faced with a reduction in their
sources of revenue and in the volume of taxes they
garner from traditional sources of revenue. Hence,
enhanced expenditures are often financed with larger
deficits, which go contrary to the tenets of fiscal
reform. On the grounds that such deficit-financed
spending would trigger inflation, especially in the
case of food items, it has been argued that governments,
especially governments in developing countries should
desist from relying excessively on deficit-financed
government stimuli to combat recessions and rising
unemployment. This could stall the incipient recovery
in output and employment in these countries.
