For more than a year now, it has been evident that
the ''recovery'' from the Great Recession, which has
been visible if sputtering in terms of output growth
in the core capitalist countries, has not delivered
anything like the increases in employment that were
expected. A recent report of the ILO (''Short-term
employment and labour market outlook and key challenges
in G20 countries'', ILO and OECD September 2011, page
1) points out: ''With economic activity slowing in
several major economies and regions, earlier improvements
in the labour market are now fading, hiring intentions
are softening and there are greater risks that high
unemployment and under-employment could become entrenched.
This makes for a highly uncertain outlook as to the
timing and strength of a future recovery in employment.
Continued weak growth in employment in many G20 countries,
in turn, will make it impossible in the near term
to close the jobs gap accumulated during the crisis,
which amounts to more than 20 million jobs.''
Even the IMF, notorious for giving relatively short
shrift to employment and seeing it as generally strongly
correlated with output, has woken up to the severity
of the problem in its latest World Economic Outlook
September 2011. As Chart 1 indicates, the collapse
of aggregate employment in the US and the continued
stagnation at low levels in the eurozone do not point
to any real recovery at all in terms of employment.
Now that the global economic horizon has been darkened
once again by very real fears of the next dip, the
concern is that employment conditions will deteriorate
further.
Chart
1 >> Click
to Enlarge
It
is true that the IMF’s analysis of the problem and
possible solutions remains weak, also because it continues
to stress the need to encourage ''a rebalancing from
public to private demand'' in these core capitalist
regions, at a time when this is completely unrealistic
to expect. A major cause of the crisis was the excessive
build-up of private debt (taken by both households
and companies) that could not be sustained. These
private agents now necessarily have to go through
a period of deleveraging. In that period, if aggregate
demand has to grow at all, it must come from the public
sector – but the combination of bond market vigilantes
and fiscal hawks active politically has forced governments
in both these areas to move to premature fiscal retrenchment.
In this analysis, the fact that there was not more
of an employment recovery is a source of surprise.
After all, the G20 countries did at first combine
to provide very large fiscal stimuli in the major
countries, and in the developed world monetary easing
has continued, leaving the world economy awash with
liquidity. The argument seems to be ''we adopted Keynesian
policies, but they have not delivered employment growth''.
This is actually less than the truth. Part of the
problem is that the stimulus measures adopted in most
countries were not weighted in favour of employment
generation: a disproportionate amount went as bailouts
and support to large financial institutions that simply
used the resources to clean up their balance sheets.
In the US, very little of the money went into direct
state spending on activities that directly increase
employment or have high multiplier effects. Social
spending and government employment fell as local governments
were strapped for cash; small businesses have been
starved of bank credit; there has been no systematic
attempt to address the continuing problem of foreclosures
in residential housing markets. And now, even these
half-hearted and slipshod stimulus measures are to
be clawed back with the new focus on fiscal austerity.
In Europe the imbalances in the eurozone are also
being dealt with in a counterproductive manner – forcing
regressive austerity measures on to deficit countries
and sending them into a downward spiral of falling
output and employment in which their fiscal and public
debt measures will only get worse. It is ridiculous
to expect private investment and activity to increase
to fill the slack created by public cuts, in this
context of continuing crisis. So it is not surprise
that employment is not recovering.
The poor performance of employment in the developed
countries has reinforced perceptions that the crisis
has intensified and accelerated structural shifts
in global employment away from the rich countries
to certain emerging markets. Certainly, the data presented
in Chart 2 would appear to support that view. It is
evident that total employment in developed countries
has still not recovered to pre-crisis levels. However,
in developing countries total employment did not fall
after the crisis, and since then has continued to
rise.
The data in Charts 2 to 5 (all from the ILO’s Short
Term Indicators of the Labour Market, September 2011)
should be interpreted with some caution, since they
relate only to (around 54) countries that provide
recent employment data of the required periodicity,
and large countries such as China and India are therefore
excluded. Even so, they provide a quick estimate of
the ongoing trends.
Chart 3 indicates a similar picture for paid employment
(or number of employees): - the slight decline followed
by stagnation at below pre-crisis levels in the developed
world accompanied by continuing increase in such numbers
in the developing world. The level of paid employment
in April 2011 was around one per cent below pre-crisis
levels in the developed countries for which estimates
are available, but 15 per cent higher for developing
countries.
Chart
2 >>
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Chart
3 >>
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to Enlarge
The biggest shift, and the one that has grabbed the
most attention and created disquiet in rich countries,
is the shift of manufacturing employment. This was
a shift that was widely discussed but did not actually
take place in the preceding decades: in fact aggregate
manufacturing employment in the developing world did
not increase despite the widespread perception of
the North ''exporting jobs'' to the South. But the very
recent trends after the global crisis suggest that
the shift may be occurring now.
Chart
4 >>
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to Enlarge
Chart 4 shows that manufacturing employment in developed
countries was more than ten per cent below the pre-crisis
level in April 2010, and has since recovered only
slightly to be still around 9 per cent lower in April
2011. Meanwhile, after a minor blip in early 2009,
manufacturing employment in developing countries continued
to increase, such that in April 2011 it was nearly
9 per cent higher than its level of four years earlier.
Surely this is a clear sign that the much feared (or
much anticipated) shift of manufacturing activity
to the South is finally taking place and that the
location of additional manufacturing employment will
now be concentrated in the South? It turns out that
even this is not so clear, if such employment is further
disaggregated.
Chart 5 shows the indices of paid employment in manufacturing
(that is, the total number of employees rather than
self-employed engaged in manufacturing activity).
This presents quite a different picture: one in which
the level have fallen after the crisis, in both developed
and developing countries! Indeed, in April 2009 the
collapse in paid manufacturing employment was similar
in both regions, at around 8-10 per cent lower than
the April 2007 level. The recovery in developed countries
thereafter was negligible. Such employment recovered
more rapidly and sharply in developing countries,
but in April 2011 the level was still below the pre-crisis
level of paid manufacturing employment even in developing
countries.
Chart
5 >>
Click
to Enlarge
So the only real increase in manufacturing in developing
countries seems to have been in self-employment. What
exactly does this mean? This really points to the proliferation
of petty activities at the bottom of the production
chain, typically in low productivity and low paid work
that usually reflects the absence of other viable income
earning opportunities. The expansion of self-employment
in manufacturing in the developing world, including
in some of the most ''dynamic'' emerging markets, cannot
be seen as a very positive sign of industrial relocation,
especially in a world in which economies of scale are
still rampant. It essentially indicates a growing tendency
to newer forms of organisation of production in which
there is international centralisation of production
but decentralisation of the actual work processes, with
the risks of production borne largely by the self-employed
workers themselves, at the bottom of the production
chain.
Recently released survey data from India (the National
Sample Survey for 2009-10) suggest that even such employment,
low paid and adverse as it is, can also be fragile and
transient and therefore decline. If this is a more widespread
tendency, when more data are eventually available for
all developing countries, we may find that aggregate
manufacturing employment in developing countries has
barely recovered after the crisis.
*
The article was originally published in the Business
Line, October 3, 2011 
