Inequality as driver of rising global poverty

UNEMPLOYMENT has undoubtedly become one of the most formidable challenges confronting modern societies. The emergence of capitalism, sophistication in consumption, urbanisation, access to education and improved quality of health care in most parts of the world has translated to longer lifespan and increased continue search for education also help to explain the rise in the number of people seeking employment – whether decent or not.

   Worryingly, is the fact that the shrinking employment opportunities are not helped by continued social inequality boosted by slow growth of the global economy.

  This is the gloomy picture that is aptly painted in World Employment and Social Outlook – Trends 2015 (WESO) of the International Labour Organization (ILO), which was released last week.

   Indeed, the report noted that sluggish jobs recovery and social instability are the result of greater inequality.

   The report warned that unemployment would continue to rise in the coming years, as the global economy has entered a new period combining slower growth, widening inequalities and turbulence. It stated that by 2019, more than 212 million people would be out of work, up from the current 201 million.

   In his reaction to the findings of the report, the Director General of the ILO, Guy Ryder said: “More than 61 million jobs have been lost since the start of the global crisis in 2008 and our projections show that unemployment will continue to rise until the end of the decade. This means the jobs crisis is far from over so there is no place for complacency. ”

   WESO named South Asia and Sub-Saharan Africa as the regions that are worst hit in terms of unemployment and inequality. The two regions accounted for three quarters of the world’s vulnerable employment.

    The employment situation has not improved much in Sub-Saharan Africa, despite better economic growth performance. And in the Arab region and parts of Latin America and the Caribbean the employment outlook has deteriorated.

    The steep decline in oil and gas prices, if sustained, may improve the employment outlook somewhat in many advanced economies and several Asian countries according to some forecasts. By contrast, it will hit labour markets hard in major oil and gas producing countries, notably in Latin America, Africa and the Arab region.

    Young workers aged 15-24 are particularly hit by the crisis, with a global youth unemployment rate of almost 13 per cent in 2014 and a further increase expected in coming years. By contrast, older workers have fared relatively well since the start of the global financial crisis in 2008.

    On the flip side, WESO noted that the middle classes in developing countries are on the rise saying the middle class now make up more than 34 per cent of total employment in developing countries of the world. The biggest progress has been in emerging and low-income countries.

   Again, Ryder added: “The good news is that the number of workers in vulnerable jobs and working poverty has fallen around the globe. However, it is still not acceptable that almost half of the world’s workers lack access to basic necessities and decent work. The situation is even worse for women.”

    The report maintained that income inequality; unemployment, social unrest, growing and persistent inequality and uncertain prospects for enterprise investment have made it difficult for countries to rebound from the crisis.

    “If low wages lead people to consume less, and investment remains subdued, this obviously has a negative impact on growth. Income inequality in some advanced economies now approach levels observed among emerging economies. By contrast, the emerging economies made some progress in reducing their high levels of inequality,” Ryder said.

    The report said income inequality would continue to widen, with the richest 10 per cent earning 30 to 40 per cent of total income while the poorest 10 per cent will earn between 2 and 7 per cent of total income.

    It warned that these trends have undermined trust in governments and kept the risk of social unrest high. It further stated that social unrest is particularly acute in countries and regions where youth unemployment is high or rising rapidly.

    In line with the global unemployment rate, social unrest shot up since the beginning of the crisis in 2008, and has now reached levels almost 10 per cent higher than before the crisis.

    While the report posited that challenges are indeed ahead, it pointe out that structural factors shaping the world of work, such as a declining labour supply – due in part to an aging population in many parts of the world – have subdued global economic growth.

   Other factors include major shifts in demand for skills. At the global level, the share of both low-skilled, non-routine jobs, such as security personnel and some personal care workers, and high-skilled non-routine cognitive jobs, such as lawyers and software engineers, has increased. By contrast, routine middle-skilled jobs – like bookkeepers and clerical workers – are declining.

    “The trends we see are worrying but we can improve the overall economic picture if we tackle underlying weaknesses, in particular the continued lack of aggregate demand, stagnation in the Eurozone, uncertain prospects for productive investment, especially among small enterprises, and mounting inequality,” Ryder further commented.

    Examining influential sectors that hold strategic key to global economy recovery, the report pointed to accelerating job growth in private sector services over the next five years and an increasing demand for higher-skilled workers.

    These and related industries will employ more than a third of the global workforce over the next five years.

Public services in health care, education and administration will continue to be a major source of employment. While increasing at a slower pace, they will still represent 15 per cent of total employment.

    In contrast, the report said that industrial employment is expected to stabilize globally at slightly below 22 per cent.

Raymond Torres, who is Head, ILO Research Department, said: “Service sector employment will remain the most dynamic with respect to job creation in the next five years.”

   This is because the pace of job creation in the construction sector will decline in comparison to the period 2010-2013, although it is expected to remain above 2 per cent per year on average.

   Employment levels in manufacturing, meanwhile, will remain largely unchanged over the next 5 years and will account for only 12 per cent of all jobs in 2019.

Torres added: “Service sector employment will remain the most dynamic with respect to job creation in the next five years.”

    The report highlighted that the shift of employment to services and the decline in manufacturing means a significant change in the skills demanded by the labour market.

    “There will be a hollowing out of jobs needing medium levels of skill for routine tasks that can be automated,” Torres explained.

Individuals who once occupied these jobs will need to acquire new skills or instead face the prospect of competing for jobs at the lower end of the skill spectrum.

   There is also growing demand for jobs that require face-to-face interaction, such as in health and personal services. This signals the emergence of a large care economy.

   The global trends show significant regional variations, with medium-skilled jobs disappearing in advanced economies at a faster pace than is the case in emerging and developing countries.

   This polarization between higher and lower-skilled jobs is having a direct impact on labour incomes. The increase in jobs at both the lower and upper ends of the skills ladder, at the expense of those in the middle, has and will continue to contribute to widening income inequality.

    The report also emphasized that employment shifts also affect consumption and poverty levels. The number of routine jobs, such as machine operator or assembler has decreased in many countries, raising concerns over the role of manufacturing in helping workers to escape poverty.

   Without manufacturing jobs, opportunities for rural workers to improve their employment situation will be scarce. Higher-skilled occupations are not accessible to those who lack formal education and have not opportunities for training.

   “These trends highlight the role of policies to help enterprises and workers seize the opportunities associated with new technology, while at the same time breaking barriers for moving up the economic and social ladder, especially for women,” Torres submitted.