Growth and Crisis
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Jobs, or more precisely, the lack of jobs is now a Global Issue

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.  
 

Comments

Submitted by Gerald Kapp on
Good arguments Chen. I like to add the following thoughts: After decades of productivity increase beyond 3% per year and salary taxation (= punishing those who create the jobs instead of higher machine & energy taxes) in developed countries, e.g. some 3% of farmers are enough to produce all the food needed. This is the same for many sectors. Increasing export and consumption are both coming to obvious ends. Other low income countries take over the export and the ever increasing consumption meets environmental and saturation limits. In the productive sector the number of jobs is consequently decreasing, as new areas (e.g. energy saving technologies) cannot be found rapidly enough to offset the general trend. Excessive jobs in other sectors (administration, jurisdiction, and military) are becoming counter-productive (start paralyzing society) and in culture, education, research, health care, social work they are much needed but it is hard to channel the finance to it. In fact people do not need jobs; they need an income to actively participate in society life. In some European countries there are thoughts (coming partly from business people) to pay a basic income to all citizens and to raise taxes mainly from value added taxes (instead of salary taxation). This, beyond other effects, would make products from industrialized countries competitive, as labor is then cheaper (salary minus basic income) and there is no value added tax on exports.

Submitted by Anonymous on
Africans should manufacture their goods and products in Africa by Africans instead of constantly importing everything which leaves the masses dependent on foreign manufacturing instead of African manufacturing

Submitted by Gerald Kapp on
This is very true, and for all countries - including the USA, where almost all smaller products are today imported from mostly China. It shows that without a certain regulative (full cost accounting) many countries cannot build up their own industries, because the initial product quality, patents and economies of scale are against this. E.g. Germany could not have build-up its industries in the 19. century against the dominating British producers without the initial protection with import taxes. The additonal costs for the importing country (unemployment costs, pollution cost from long transports, empeded development costs, etc.) need to be added to the cheap import prices. This is fair to protect the weaker partner until it becomes strong enough to compete successfully. Free trade only makes sense between equal parties.

Submitted by Bamidele on
The West has always seen Africa as raw materials warehouse; and rightly so. The continent is so endowed with enough for the whole world.. oil, gems, arable lands for farming, all sorts of convertible materials & human resources for us to productively engage in their exploration, conversion, marketing & research. I see no reason any able bodied Nigerian, or African for that matter should be unemployed if our Govt stop paying lip service to providing employment & vigorously pursue policies that will provide incentives to people, educated or otherwise, to engage in exploration & commercial utilization of these resources generously provided by God, especially, where they have comparative advantage. One more thing the world don't seem to have paid attention to over the years: natural habitats of any geographical location of the world are naturally endowed to profitably manage the resources around them.

Great article, Derek! For those of you interested in the challenges of creating good jobs in a globalized world, check out this video that summarizes the outcomes of a recent high level academic workshop on Globalization and Labour Market Outcomes sponsored jointly by ILO, World Bank, CESifo, and EFIGE. Speakers include Elhanan Helpman (Harvard), David Autor (MIT), and Margaret McMillan (Tufts and IFPRI) http://www.ilo.org/globalization-labourmarkets

By maintaining the global economic and familial class system, we humans will continuously live in turmoil, with the majority of our populations never getting to truly live. By insisting on living and seeking our sustenance playing the game of currency acquisition we limit our brilliance and tie up our populations from achieving and innovating and creating rich in diverse experiences for all our senses, healthy communities.

The author, Derek Chen's claim that many developing countries have been successfully creating jobs for decades while living within their means is simply not true. The problem of joblessness is a problem developing countries have adapted to. I'm a Kenyan and in our country we have the largest slam in Africa -Kibera and the way I see it, slams are an example of adaptation. We live on a lot less than many in the developed world could possibly imagine and part of our adaptation to this situation is resignation to the situation and survival. To say that we have successfully created jobs for decades whle living within our means is simply inaccurate.

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