Social Costs of Jobless Recovery

SOCIAL COSTS OF JOBLESS RECOVERY

The world’s economy may be recovering from what was the worst economic downturn since 1930s, but all is not well on the employment front. The most critical factor that ensures a sustained recovery is the creation of jobs, and in this area clear evidence emerges from the Global Employment Trends 2011, published by the the Interntional Labour Orgainisation, that despite improvements in key macroeconomic indicators such as global GDP, unemployment remains stubbornly high.
That the labour market continues to be slack does not augur well for sustained economic recovery, given particularly the ILO’s observation that this was also caused by the lag between productivity gains real wage growth. Considering the linkage between wages, consumption and aggregate demand and its importance in keeping an economy on growth trajectory, the world can ill-afford risking jobless recovery. The situation calls for judicious continuation of fiscal stimuli, rather than fiscal consolidation in the developed economies. For the developing world, which has lower unemployment rates, the ILO strikes a note of caution on vulnerable employment. For South Asia, which has the largest number of vulnerable workers, the current phase of better economic performance is also the appropriate time for states to put in place effective   social protection measures for such workers. One of the positives of state-led programmes such as India’s National Rural Employment Gurantee Scheme is their potential to serve as building blocks for a comprehensive social protection framework. A basic social protection floor, including monetary support for the unemployed and the low-paid, will be a critical state intervention to create fairer and better functioning labour markets.