According to the World of Work report 2013 “Repairing the economic and social fabric”, income inequalities rose between 2010 and 2011 in 14 of the 26 advanced economies surveyed, including France, Denmark, Spain and the United States. Inequality levels in seven of the remaining 12 countries were still higher than before the start of the crisis.
Economic inequalities are also on the rise, as small firms lag behind their larger counterparts in terms of profits and productive investment. While most large enterprises have regained access to capital markets, start-ups and small enterprises are disproportionately affected by bank credit conditions. This is a problem for job recovery now and affects economic prospects over the longer term.
“These figures present a positive development in many parts of the developing world, but paint a disturbing picture in many high income countries, despite the economic recovery. The situation in some European countries in particular is beginning to strain their economic and social fabric. We need a global recovery focussed on jobs and productive investment, combined with better social protection for the poorest and most vulnerable groups. And we need to pay serious attention to closing the inequality gap that is widening in so many parts of the world,” said ILO Director-General, Guy Ryder.
A shrinking middle-income group
The report shows that middle-income groups in many advanced economies are shrinking, fuelled in part, by long-term unemployment, weakening job quality and workers dropping out of the labour market altogether.
By contrast, the report provides evidence that pay of chief executive officers in many of those countries has once again soared, following a short pause in the immediate aftermath of the global crisis.
“The shrinking size of middle-income groups in advanced economies is a matter of concern, not only for the inclusiveness of those societies but also for economic reasons. Long-term investment decisions by enterprises also depend on the proximity of large and stable middle-income groups which are in a position to consume,” said Raymond Torres, Director of the International Institute for Labour Studies, the research arm of the ILO.
Labor Force Indicators
Employment rates (the proportion of people of working age who have a job) exceed pre-crisis levels in 30 per cent of the countries analysed. In 37 per cent of the countries, employment rates have increased in recent years, but not enough to return to the pre-crisis situation, while in the remaining 33 per cent of countries, employment rates have continued to decline. Based on current trends, employment rates across emerging and developing economies will return to pre-crisis levels in 2015; while employment rates in advanced economies will only return to the pre- crisis situation after 2017.
At the global level, the number of unemployed people will continue to increase unless policies change course. Global unemployment is expected to approach 208 million in 2015, compared with slightly over 200 million at the time of publication.
Globally, unemployment has increased
Unemployment rates remain stubbornly high. In 2012, the global unemployment rate reached 5.9 per cent, 0.5 percentage points above the 5.4 per cent rate before the crisis. Moreover, global unemployment started to rise again in late 2011, increasing by more than 3 million people over the course of 2012 to 195.4 million unemployed. The unemployment rate is projected to increase to 6 per cent this year and, by 2014, around 205 million people will be unemployed. The number of jobseekers will continue to swell and is expected to reach 214 million by 2018.
Quality of jobs
Figure 1.5 illustrates that the change in labour market performance is nega- tively related to the change in job quality performance between 2007 and 2011 in both advanced and emerging and developing economies. Indeed, many countries with a good labour market performance during the crisis have negative values for the job quality indicator. For example, some advanced countries with an improved labour market performance during the crisis, such as Germany, Israel and Luxembourg, observed deterioration in job quality. Average hourly wages decreased by 2.5 per cent in Israel; in Germany spending on social benefits decreased by a full percentage point between 2007 and 2011. Especially dramatic is the situation of countries such as Greece, where the worsening of the labour market during the crisis has been accompanied by weakening in the quality of employment. Between 2007 and 2011, Greece experienced an increase in the incidence of temporary employment (by 0.7 percentage points) accompanied by a sharp fall in average hourly wages (by 8.9 per cent). In Ireland and Spain, where the labour market performance deteriorated, the improvement in job quality in the index was mainly due to the loss of temporary jobs, as noted in the World of Work 2012 Report. In Spain, 1.3 million construction jobs, mostly temporary, were lost, and the rate of temporary employment fell from 34.4 per cent in 2007 to 25.5 per cent in 2011.
In a number of emerging and developing economies, such as India, Mexico and the Bolivarian Republic of Venezuela, the labour market situation did not improve and job quality worsened between 2007 and 2011; while in others the labour market performance improved while job quality deteriorated, notably in Colombia and Pakistan.