The crisis around jobs is particularly acute this time not just because 205 million people worldwide are officially unemployed, nor because the quality of available jobs are frequently perceived to be declining, especially the routine middle-grade white-collar jobs workers in the developed countries, nor is it just because skilled and talented people who are in short supply earn multiples of the average salary. The problem in today’s post-crisis world is that policymakers and practitioners around the world are no longer sure how to create jobs, and just as and perhaps even more important, how to create good jobs.
It used to be the case that reviving economic growth would do the trick. Historically, unemployment returns to pre-downturn rates with a lag after output growth bounce back to its trend. This time round while key macroeconomic indicators such as real global GDP, private consumption, gross fixed investment, and world trade had all recovered to and even surpassed pre-crisis levels by 2010, unemployment rates have not followed suit. According to the ILO, the global unemployment rate was 6.2 percent in 2010, compared with 6.3 percent in 2009, but still well above the 5.6 percent rate in 2007.
Renowned economists such as Edmund Phelps and Michael Spence have indicated that what we are observing in the U.S. and other rich countries is structural unemployment rather than transitory cyclical unemployment. Globalization and technological innovation, together with consequent outsourcing and offshoring, are bringing about long-term changes in the global economy that are altering the structures of domestic labor markets. Skills that were in demand in the past have been either replaced by technology or moved to developing countries.
And as if things were not bad enough - the job crisis in developed countries has been further exacerbated by the sovereign debt crisis. With interest rates at historic lows, and most of them having reached their “credit limit”, few governments in the West have much capacity for further stimulus either through monetary or fiscal policy. Ironically, developed countries have now to figure out to how create jobs while living within their means, something many developing countries had successfully done for decades.
In the case of developing countries, the situation is different but at the same time similar. For example, a number of countries in the Middle East had experienced high rates of economic growth during the past decade but unemployment rates still average around 10 percent give or take, again indicating a structural phenomenon. Youth unemployment, while disproportionately high in most regions of the world, is especially rampant in the Middle East and North Africa, with rates approaching 25 percent, more than quadruple that of adults. Producing tertiary graduates with industrially relevant skills is also an important issue in MENA.
With it being such a current and critical development issue, job creation became one of the key discussion topics at this year’s World Bank-IMF Annual Meetings. There were several events focusing on jobs, including a Global Development Debate on Job and Opportunities for All. This high-level event brought together emerging countries policymakers and experts who shared their perspectives on this tremendously important question from their respective positions.