Protecting People, Promoting Jobs
Protecting people,
promoting jobs
A survey of country employment and social protection policy responses
to the global economic crisis
An ILO report to the G20 Leaders’ Summit,
Pittsburgh, 24-25 September 2009
INTERNATIONAL LABOUR OFFICE
GENEVA, SEPTEMBER 2009
This Report may also be consulted on the ILO web site (www.ilo.org).
ISBN 978-92-2-122732-8 (Printed version)
ISBN 978-92-2-122733-5 (Web pdf)
First published 2009
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Contents
Table of contents ...........................................................................................................................................
v
Acknowledgements ......................................................................................................................................... vii
Introduction ....................................................................................................................................................
1
Chapter 1: Recent trends in employment and unemployment, with a discussion of the situation of
developing countries ................................................................................................................................
5
1.1 Falling employment and rising unemployment ................................................................................
5
1.2 Women and men are affected differently .........................................................................................
7
1.3 Youth unemployment ......................................................................................................................
7
1.4 Unemployment and discouraged workers ........................................................................................
9
1.5 World crisis but different labour market outcomes ..........................................................................
9
1.6 Timely labour market data ............................................................................................................... 10
1.7 The impact of the crisis in developing countries .............................................................................. 10
Chapter 2: Survey of employment and social protection measures taken by governments to counter
the crisis .................................................................................................................................................... 15
2.1 The ILO survey ................................................................................................................................ 15
2.2 The OECD inventory and assessment ............................................................................................. 18
Information Annex 1: Employment and social policy measures in response to the crisis .................. 25
1. Measures to create and retain employment ............................................................................................ 25
1.1 Infrastructure spending .................................................................................................................... 25
1.2 Direct financial support to enterprises ............................................................................................. 27
1.3 Adjusting labour conditions to fit current demand .......................................................................... 28
2. Assessing the salience of labour market policies ...................................................................................... 29
2.1 The public employment service ....................................................................................................... 29
2.2 Skills and training ............................................................................................................................ 31
2.3 Hiring subsidies ............................................................................................................................... 32
3. Supporting the unemployed and social protection .................................................................................. 33
3.1 Current benefit schemes .................................................................................................................. 34
3.2. Social assistance .............................................................................................................................. 35
4. Social dialogue and rights at work .......................................................................................................... 37
v
PROTECTING PEOPLE, PROMOTING JOBS
Annex 2: List of countries covered in the ILO survey .............................................................................. 41
Annex 3: Inventory tables of measures taken ........................................................................................... 42
Annex 4: Estimating the employment impact of stimulus measures in G20 countries ...................... 46
Annex 5: Fast recovery in employment: The challenge and the options ............................................... 49
vi
Acknowledgements
This report has been prepared by staff of the Inter-
The OECD contribution has been prepared by John
national Labour Office, with contributions from Dun-
Martin, Stefano Scarpetta and Danielle Venn.
can Campbell, Marva Corley-Coulibaly, Philippe Egger,
Valuable comments received on the draft report are
Iyanatul Islam, Bob Kyloh, Nomaan Majid, Moazam
gratefully acknowledged, in particular from Dominique
Mahmoud, Stephen Pursey, Catherine Saget and Valen-
Desruelle (IMF), Ariel Fiszbein (World Bank), Jürgen
tina Stoevska. Staff from the regions, country offices and
Mayer (UNCTAD), Danielle Venn and Stefano Scar-
technical departments contributed with the collection
petta (OECD), and Stephen Richards (United King-
of information, policy reviews and comments.
dom).
vii
Introduction
On 2 April 2009, at the London Summit on Growth,
protection between mid-2008 and 30 June 2009 in re-
Stability and Jobs, the G20 Leaders adopted a Global
sponse to the crisis.
Plan for Recovery and Reform. In paragraph 26 of their
This information was collected by the ILO in close
statement, the G20 Leaders address the employment
collaboration with national authorities. The survey cov-
and social dimensions of the crisis and formulate a spe-
ers the following four broad areas:
cific request to the ILO, as follows:
(i) stimulating labour demand;
“We recognise the human dimension to the crisis.
(ii) supporting jobs, jobseekers and unemployed;
We commit to support those affected by the crisis by
(iii) expanding social protection and food security;
creating employment opportunities and through in-
(iv) applying social dialogue and protecting rights at
come support measures. We will build a fair and fam-
work.
ily-friendly labour market for both women and men.
We therefore welcome the reports of the London Jobs
The survey covers 54 countries, including all G20
Conference and the Rome Social Summit and the key
countries. A more detailed inventory with a brief de-
principles they proposed. We will support employment
scription of the measures taken by each country will be
by stimulating growth, investing in education and train-
made available through the ILO web site.
ing, and through active labour market policies, focusing
This chapter also includes a section produced by
on the most vulnerable. We call upon the ILO, working
the OECD that examines the size and employment
with other relevant organisations, to assess the actions
impact of the fiscal and labour market policy packages
taken and those required for the future.”
in OECD countries, and identifies the main orienta-
The present report responds to the G20 request. It is
tions of the discretionary labour market policy measures
submitted to the G20 Leaders’ Summit in Pittsburgh,
taken by the different countries.
United States, on 24-25 September 2009. It was pre-
Information Annex 1 seeks to illustrate more con-
pared under very tight time constraints. It should be
cretely the range of measures taken by individual coun-
read in conjunction with the companion text submitted
tries to stimulate labour demand, protect jobs and the
to the G20 Leaders.1
unemployed, extend social protection and promote social
The report is organised as follows.
dialogue. It is accompanied by initial comments with ref-
Chapter 1 presents recent employment and unem-
erence to recent knowledge and literature. This is prelim-
ployment data, covering a selection of countries span-
inary and a work in progress. It wil be further developed
ning all regions and income levels. It includes a dis-
on the basis of additional inputs by G20 countries, ILO
cussion of the situation of developing countries in the
constituents and relevant international organizations.
context of the global financial and economic crisis.
This information will be submitted for discussion
Chapter 2 presents a survey of measures taken or
and review to the Governing Body of the International
announced by countries for employment and social
Labour Office, at its forthcoming session of November
2009.
The product of this process will be available to the
1 ILO. 2009. Protecting people, Promoting Jobs: From crisis
response to recovery and sustainable growth. ILO communication to
G20 for any follow-up decided by leaders on these
the G20 Leaders’ Summit in Pittsburgh, 24-25 September 2009.
issues.
1
PROTECTING PEOPLE, PROMOTING JOBS
Annex 2 lists the 54 countries in the ILO sample by
Annex 4 estimates the aggregate employment effect of
region and income category.
the stimulus measures taken by countries. The estimation
provides an order of magnitude of employment saved or
Annex 3 provides an inventory of measures taken
generated by the extraordinary measures taken.
across a sample of 54 countries, including all G20
Annex 5 presents four possible scenarios for recov-
countries, for the 32 measures identified in the ILO
ery in global employment depending on the strength of
survey.
economic recovery and its employment intensity.
2
Chapter 1
Recent trends in employment and unemployment,
with a discussion of the situation of developing
countries
In most countries, sharp employment losses have
countries. The unemployment rates in 31 of 34 coun-
been registered as of the third quarter of 2008. These
tries (including 16 of 17 G20 countries) with quarterly
have continued into the second quarter of 2009, accord-
or monthly data for 2009 are higher compared to a year
ing to the most recent data available. Figure 1.1 depicts
earlier. Only Indonesia, the Philippines and Mauritius
this trend for the G20 countries as well as the G20 and
showed a decrease in the unemployment rate in early
an additional 34 countries.2
2009 compared to a year earlier.
Among the countries with data for the first and the
1.1 Falling employment and rising
second quarter of 2009, the unemployment rate has
unemployment
increased close to 8 percentage points in Spain, more
In the group of G20 countries,3 total employment
than 5 points in Ireland, Latvia and Turkey, 4 points
had been on a rising trend of 1.6 per cent per year since
in the United States, 3 points in the Czech Republic,
early 2002. In the period from March 2008 to March
2.5 points in Canada, 2.2 points in Ukraine, 1.9 points
2009 total employment declined by -0.8 per cent on
in the United Kingdom, 1.5 points in France and 1.4
average.
points in the Russian Federation. In Brazil the latest un-
Unemployment has followed an inverse trend (Fig-
employment rate for July 2009 (8.0 per cent) is actually
ure 1.2). The average unemployment rate showed an
lower than in July 2008.
upward trend in 2008 which continued in the first
A majority of the G20 countries have recorded major
half of 2009. The average unemployment rate for G20
increases in the number of unemployed in the past 12
countries in March 2009 stood at 8.5 per cent, or 1.5
months. From June 2008 to June 2009, total unemploy-
percentage points higher than a year earlier. The total
ment increased by 69 per cent in the United States, 44
number of unemployed, for the sample of countries, in
per cent in Canada, 42 per cent in Australia, 26 per cent
March 2009, was 23.6 per cent higher than in March
in the Republic of Korea and 22 per cent in Ukraine. In
2008.
the year to May 2009 unemployment increased in the
According to the data available for a more limited
Russian Federation by 83 per cent; in the year to April
number of countries, the number of unemployed in
2009 it increased by 55 per cent in Turkey; and in the
May 2009 was 29.6 per cent higher than a year earlier.
United Kingdom it increased by 38 per cent in the year
There are initial signs that the pace of deterioration
to March 2009. The number of unemployed in Brazil
may be moderating. According to data for April-June
shows an upward trend from January 2009.
2009 available for a limited number of countries, the
Job opportunities in urban areas in China also fell
increase in unemployment has slowed down compared
significantly. In the first quarter of 2009, the increase
to the first quarter of 2009.
in total employment in urban areas relative to the same
Table 1.1 displays the latest (as at end July 2009)
period in 2008 was 1.2 million people or 1 per cent, sig-
unemployment rate for 34 countries, including G20
nificantly lower than the 2.6 per cent increase recorded
in the same period in 2007-2008.
2 See Table 1.1 for list of 34 countries.
Employment in manufacturing has been in sharp
3 In the absence of monthly or quarterly data for China, India and
Saudi Arabia, it is assumed that these countries have the same trend as
decline in some countries. A fall of more than 10 per
the average for the countries with data in the group.
cent over the same period of 2008 has been observed,
5
PROTECTInG PEOPLE, PROMOTInG JOBS
6
RECEnT TREndS In EMPLOyMEnT And UnEMPLOyMEnT
among others, in Canada, the United States, Spain, and
losses. The increase in the number of unemployed men in
the United Kingdom.
Brazil in the year to May 2009 was twice that for women.
Table 1.1 also shows for 17 countries the historical
In the United States, the number of unemployed men in
high in the unemployment rate over the last 40 years.4
June 2009 was almost 80 per cent higher than in June
In a majority of these countries (13) the unemployment
2008. Over the same period, the number of unemployed
rate is lower in early 2009 than the historical high. It is
women increased by 57 per cent. Similar patterns are
equal or very close in 3 countries (Japan, Sweden and
observed in Australia, Canada, Chile, Colombia, Mexi-
the United States) and higher in 2009 in one country
co, new Zealand, Republic of Korea, Thailand, Latvia,
(Turkey).
Spain, Sweden, the United Kingdom and Turkey.
In other countries women have been hit first, for
1.2 Women and men are affected differently
example in textile export industries in Asia. data for
The unemployment rate has been increasing for
the most recent months, however, show that the in-
women as well as for men. The unemployment rate
crease in female unemployment is rapidly catching up
for women is, on average, higher than for men. In the
that for men.
first months of 2009 it has risen more slowly than for
men in most of the 29 countries with data. As a result
the gender gap in unemployment rates has temporar-
1.3 Youth unemployment
ily reversed in Turkey, Mexico, Australia, Hungary and
youth (15-24 years) unemployment rates in the first
Germany where the male unemployment rate is now
half of 2009 show a strong increase with respect to 2008
higher than the female one. This may change should the
in those countries that publish such data. For instance,
weakness in the labour market persist.
in the European Union (EU27) the youth unemploy-
depending on the gender composition of occupa-
ment rate in June 2009 reached 19.7 per cent, com-
tions, in some countries men have been hit first by job
pared to 15.4 per cent in July 2008, an increase of over
4 points (Eurostat). Similar sharp increases are observed
4 The unemployment rates are not strictly comparable as defini-
in several other countries, including Japan, norway,
tions and methods vary over such a long period.
Turkey and the United States.
7
PROTECTInG PEOPLE, PROMOTInG JOBS
Table 1.1 Unemployment rate (most recent month of 2009) and change from the corresponding month of 2008
Historical
Change
high of UR
Wage
Latest
Unemployment on year
over last 40
employment
Country
period
Source
rate (%)
(pps)
years (%)
Year
(% of total )
Mauritius
Feb-09
LFS
8.0
-0.2
80.0
South Africa
May-09
LFS
23.6
0.5
84.4
Argentina
Feb-09
LFS
8.6
0.2
75.8
Brazil
May-09
LFS
8.8
0.9
14.1
1981
76.1
Canada
Jun-09
LFS
8.1
2.5
12.0
1983
83.9
Chile
Apr-09
LFS
10.2
2.3
68.7
Colombia
Apr-09
LFS
11.9
0.8
48.9
Mexico
Feb-09
LFS
5.1
1.1
6.2
1995
67.1
Peru
Mar-09
LFS
9.3
0.0
61.5
United States
Jun-09
LFS
9.7
4.0
9.7
1982
93.4
Uruguay
May-09
LFS
8.1
0.9
69.8
Australia
Jun-09
LFS
5.7
1.6
10.6
1993
88.7
China
Dec-08
Est.
4.2
0.2
Japan
May-09
LFS
5.2
1.2
5.4
2002
86.4
Indonesia
Feb-09
LFS
8.1
-0.3
27.7
Korea, Republic of
Jun-09
LFS
3.9
0.8
7.0
1998
69.6
Philippines
Apr-09
LFS
7.5
-0.5
51.9
Thailand
Feb-09
LFS
2.1
0.4
Czech Republic
May-09
Admin.
8.0
3.0
8.9
2000
83.4
records
France
Feb-09
LFS
8.9
1.5
89.1
Germany
Jun-09
Admin.
8.1
0.6
11.1
2005
88.4
records
Hungary
Feb-09
LFS
9.7
1.7
87.2
Ireland
Feb-09
LFS
10.1
5.5
16.9
1986
82.6
Italy
Feb-09
LFS
7.9
0.8
12.0
1987
74.8
Latvia
Mar-09
Admin.
10.7
5.8
88.5
records
Netherlands
Apr-09
Off. Est.
4.6
0.5
86.8
Poland
May-09
Admin.
10.8
0.8
19.9
2000
77.1
records
Romania
May-09
Admin.
5.8
2.0
69.2
records
Russian
Feb-09
LFS
8.5
1.4
12.9
1999
92.7
Federation
Spain
Feb-09
LFS
17.5
7.9
22.9
1995
83.0
Sweden
Apr-09
LFS
8.3
2.3
8.2
1993
89.5
Turkey
Apr-09
LFS
14.9
5.0
10.5
2003
60.2
Ukraine
Mar-09
LFS
9.5
2.4
82.0
United Kingdom
Feb-09
LFS
7.1
1.9
11.8
1984
86.2
Source: ILO Department of Statistics, http://laborsta.ilo.org.
The data shown are those available to the ILO on 20 July 2009. They have been received or drawn from official national
statistical services, publications and web sites. The data are based on national definitions, are not seasonally adjusted, and have
not been adjusted or altered by the ILO.
8
RECEnT TREndS In EMPLOyMEnT And UnEMPLOyMEnT
Table 1.2 Discouraged workers
Country
Period
Discouraged workers Unemployment rate, Expanded
(‘000)
%
Unemployment rate,
%
South Africa
Q2-09
1517
23.6
29.7
Brazil
Mar-09
927
9.0
12.6
Mexico
Q1-09
5656
5.1
15.6
United States
Jun-09
2176
9.7
10.9
Czech Republic
2008
11
4.4
4.6
France
2008
128
7.4
7.8
Germany
2008
255
7.5
8.0
Hungary
2008
138
7.8
10.8
Italy
2008
1810
6.7
13.0
Netherlands
2008
115
2.8
4.0
Poland
2008
488
7.1
9.7
Portugal
2008
24
7.6
8.0
Romania
2008
299
5.8
8.5
Spain
2008
348
11.3
12.7
Turkey
2008
681
9.4
11.9
United Kingdom
2008
74
5.6
5.9
Source: National statistical web sites and Eurostat database. Expanded unemployment rate calculated by dividing the number
of unemployed and discouraged workers by the number of economically active persons and discouraged workers. Definition of
discouraged workers may vary across countries.
1.4 Unemployment and discouraged workers
1.5 World crisis but different labour market
The statistics on employment and unemployment do
outcomes
not fully reflect the extent of the employment prob-
When economic activity declines, the number of
lem. In addition to the rising numbers of unemployed,
jobs available declines and the number of persons look-
many countries are witnessing significant increases in
ing for a job increases. This is what the data depict. A
the number of discouraged workers. This group of the
sharp (moderate) drop in GdP would logically lead to
working age population that is available and willing to
a sharp (moderate) increase in unemployment. This is
work but does not seek employment, if taken into ac-
verified for a number of countries as illustrated in Table
count, would significantly increase the total number of
1.3 in the case of Spain and Brazil respectively. However
unemployed and consequently the unemployment rate.
in a number of countries a sharp drop in GdP (as in
Table 1.2, with data for mostly 2008, gives an indica-
Germany and Mexico for instance) is giving rise to only
tion of the size of the discouraged workers population,
a moderate increase in unemployment. And in some
even before the crisis.
countries with only a moderate decrease in GdP (in
Job losses and unemployment, particularly when
relative terms) unemployment has risen sharply. These
prolonged, entail high personal and social costs, in the
variations can only be explained by differences in coun-
form of loss of skills, loss of confidence, rising health
try situations and labour market policies.
care costs and rising crime. The Commission on the
In fact a sharp recession can be cushioned by a strong
Measurement of Economic Performance and Social
increase in part-time employment (as in Germany), by
Progress chaired by Professors Stiglitz and Sen provides
persons withdrawing from the labour force (as in Japan)
an important reminder of these costs ill recorded in cur-
or by more persons available for work but not actively
rent indicators.5
looking for work (discouraged workers as in Mexico) as
well as by an increase in persons working in the informal
sector (as may be the case in Indonesia with less than 30
5 See www.stiglitz-sen-fitoussi.fr/en/index.htm.
per cent of the labour force in wage employment).
9
PROTECTInG PEOPLE, PROMOTInG JOBS
Table 1.3 Decreases in GDP and increases in unemployment are country specific
Observed increase in unemployment
2009 estimated decrease in GDP
Sharp (>1.6 percentage points)
Moderate (<1.3 percentage points)
Sharp (>4 per cent)
Spain, United Kingdom
Germany, Italy, Japan, Mexico
Moderate (< 3 per cent)
Australia, Canada, United States
Brazil, Indonesia
Source: GDP data for 2009 from IMF, unemployment data from Table 1.1.
Table 1.4 Frequency of labour force surveys
a result of the global crisis. The growth rates for country
groups are given below in Table 1.5.
Number of countries
All country groups in Table 1.5 show negative per
Monthly
19
capita GdP growth in 2008-2009 save two, namely me-
dium-income developing and least developed countries.
Quarterly
46
This is also reflected in the two categories of develop-
Six-monthly
1
ing high manufacturing exporters and high commod-
Annually
78
ity exporters. The largest negative growth in per capita
GdP is recorded for transition CIS countries. Most de-
Irregular over 2004-08
veloping countries are registering strong deceleration in
1 survey
17
growth rates rather than negative growth rates.
2 surveys
6
Table 1.6 below shows the country count of negative
3 surveys
14
growth episodes in GdP per capita for two consecutive
periods, 2007-2008 and 2008-2009. The latter period
Total countries
181
is an estimate.
Source: ILO.
Table 1.6 shows a negative change in GdP per capita
in 2008-2009, in nearly all advanced economies of the
Conversely, the sharp increase in unemployment in
world and the majority of transition economies. In a
Canada and the United States, with a more moderate con-
majority of “core” developing countries,7 we find that
traction in economic activity (GdP contraction of -2.3
negative growth countries are comparatively fewer.
and -2.6 per cent estimated for 2009 respectively relative
There is a significant minority - 29 out of 92 - amongst
to -6 per cent or more in Germany and Japan), can be
the least developed and medium-income developing
explained by more reactive employment relationships.
countries (with around 17 per cent of the developing
country population) that are forecast to register negative
1.6 Timely labour market data
growth in 2008-2009.
Comprehensive and timely data of trends in the labour
In 81 out of 123 developing countries (with around
market is essential for informed public debate and policy
83 per cent of the population of developing countries)
purposes. yet serious deficiencies prevail in this area. Of
the IMF forecasts positive growth in 2008-2009. How-
181 countries, 65 countries (36 per cent) produce monthly
ever, there is a near universal deceleration in growth in
or quarterly labour force surveys, whereas 116 countries
these economies. Twenty-four countries with a popula-
produce annual surveys and some only irregularly.
tion of around 52 per cent of the developing world have
per capita GdP growth rates that are still in excess of
1.7 The impact of the crisis in developing
3 per cent for 2008-2009. The remaining (57) positive
countries
Most developing countries6 will experience growth
of exports); they are included in medium-income developing countries.
contractions in 2008-2009 compared to 2007-2008 as
Medium developing and least developed are referred to as “core” devel-
oping countries.
7 Medium-income and least developed countries are referred to
6 Least developed economies defined as per United nations classifi-
as “core” developing countries constituting over 75 per cent of coun-
cation (http://unstats.un.org/). From the remaining developing econo-
tries in the developing world and over 93 per cent of its population.
mies, not included are high-income developing countries (GdP per
For details on classification, see Ghose, Majid and Ernst (2008): The
capita >$10,000 in 2003) and oil exporters (oil exports >50 per cent
Global Employment Challenge, ILO.
10
RECEnT TREndS In EMPLOyMEnT And UnEMPLOyMEnT
Table 1.5 Change in GDP per capita (Country group aggregates)
2007-2008
2008-2009
Industrialized
2.3
-3.3
Transition-CIS
7.7
-4.2
Transition-CEE
6.5
-1.8
Developing-petrol exporters
5.1
0.4
Developing-high income
3.4
-4.7
Developing-medium income
7.4
2.4
Developing-LDC
6.7
2.1
All countries
4.1
-1.7
Developing high manufacturing exporters
7.4
2.4
Developing high commodity exporters
6.3
2.4
Calculations based on data from IMF (2009). World Economic Outlook April, 2009.
Note: A high manufacturing exporter is defined as a country whose manufacturing exports constitute over 50 per cent of its
merchandising exports. A high commodity exporter is defined as a country whose commodity exports constitute greater than 30
per cent of its merchandising exports. High commodity and high manufacturing exporters are not exclusive of the 123 developing
countries.
growth developing economies are expected to have per
These changes would adversely affect the achievement
capita growth of less than 3 per cent.
of poverty-related MdGs, although it is not clear how
global poverty rates will be affected.8 In its mid-2009
Actual data on poverty rates pre-date the crisis. Based
update on the world economic situation, the United
on historical relationships between growth and poverty,
it is likely that in those countries with decelerating
8 Chen and Ravallion (2009). The impact of the global financial
growth, the rates of decline in poverty will also decline.
crisis on the world’s poorest. These authors show that global poverty
For negative growth economies, poverty rates may well
rates will continue to fall from 42 to 39 per cent for $2 poverty and
increase.
from 21 to 18 per cent for $1.25 poverty.
Table 1.6 Frequency of countries with negative growth rates in GDP per capita (PPP)
Year-on-year growth
2007-2008
2008-2009
Industrialized
1/23
22/23
Transition-CIS
0/12
6/12
Transition-CEE
2/13
11/13
Developing-oil exporters
1/17
5/17
Developing-high income
1/14
8/14
Developing-medium income
0/44
19/44
Developing-LDC
1/48
10/48
All developing countries
3/123
42/123
Developing-high manufacturing exporters
0/27
11/27
Developing-high commodity exporters
1/20
6/20
Calculations based on data from IMF (2009).
11
PROTECTInG PEOPLE, PROMOTInG JOBS
nations states: “the crisis poses a significant threat to the
rate of growth of employment. Both trends will increase
world economic and social development, including the
unemployment, but also increase the already bloated
fulfilment of the Millennium development Goals and
informal economy with higher underemployment and
other internationally agreed development goals.”9
lower productivity. declines in remittances will lower
the consumption of receiving households, which may
The United nations estimates that between 73 and
be close to the poverty line. Where poor households are
103 million more people will remain in or fall into pov-
directly integrated into the export economy as labourers
erty compared to a no-crisis trend. This is equivalent
or as producers, declining commodity export prices will
to a 1.3 per cent increase in the poverty incidence in
affect their living standards more directly.
the developing world. The World Bank estimates that
half of developing countries could experience a rise in
In Latin America and the Caribbean unemployment
extreme poverty in 2009.10
increased on average to 8.5 per cent in the first quarter
of 2009 compared to 7.9 per cent in the first quarter of
In its Least developed Countries Report 2009,
2008, equivalent to over one million unemployed.
UnCTAd argues that “the impact of the global eco-
nomic crisis is likely to be so severe in least developed
Recent official data in Indonesia and Thailand cor-
countries that ‘business as usual’ is no longer possible.
roborate the expansion of informal employment.12 In
This will necessitate a rethinking of the development
Indonesia, the number of wage employees expanded by
paradigm.”11
1.4 per cent between February 2008 and February 2009,
while the number of casual workers not in agriculture
The economic crisis has sent shocks to developing
increased by around 7.3 per cent during the period. In
countries and transition economies through significant
Thailand, first quarter 2009 figures indicate that the
declines in exports, capital inflows and remittances.
number of wage employees grew by 104,000 or by 0.6
Widening current account deficits and depreciating ex-
per cent, solely as a result of expansion in government
change rates are also observed. All of these channels,
employment. On the other hand, the number of own-
separately and together, affect the working and living
account and contributing family workers combined in-
conditions of people.
creased by 566,000 compared to the previous year, or
declining exports often mean the loss of modern sec-
by 3.2 per cent. This suggests a significant increase in
tor jobs, i.e. “good” jobs relative to informal economy
poor quality informal work.
workers. declines in capital inflows will affect the future
The full impact of the crisis on people in developing
countries, particularly lower-income ones, is yet to be
9 United nations. 2009. World Economic Situation and Pros-
fully assessed.
pects 2009, new york.
10 World Bank. Global Monitoring Report 2009.
12 Huynh, P., Kapsos, S., Beom Kim K., Sziraczki, G. 2009. Im-
11 UnCTAd. The Least developed Countries Report 2009,
pacts of Current Global Economic Crisis on Asia’s Labour Market,
United nations, Geneva.
ILO, Bangkok.
12
Chapter 2
Survey of employment and social protection
measures taken by countries to counter the crisis
This chapter has two main sections. Section 1
spending unemployment could have been that much
presents the main findings of the ILO survey of meas-
higher in these countries. Further details of this estimate
ures taken by countries to counter the crisis across four
are found in Annex 4.
broad areas:
(i) stimulating labour demand;
2.1 The ILO survey
(ii) supporting jobs, jobseekers and unemployed;
The information for the survey was collected by the
(iii) expanding social protection and food security;
ILO from official sources for 54 countries.13 The sample
(iv) applying social dialogue and protecting rights at
includes all G20 countries and provides a regional, as
work.
well as an income category, balance.
Across these four headings, 32 specific measures are
The survey covers new measures for employment and
identified, forming the basis of the survey carried out.
social protection announced or taken by countries be-
The 32 measures surveyed reflect the conclusions
tween mid-2008 and 30 July 3009. It therefore does
reached by the London Jobs Conference (24 March
not include measures in place before June 2008. In ad-
2009), the expanded G8 Rome Social Summit (29-31
dition, information is limited to measures taken or an-
March 2009), and the Global Jobs Pact adopted by the
nounced by national or federal governments, excluding
International Labour Conference in June 2009.
initiatives taken by decentralised entities.
Section 2 has been prepared by the OECD. It com-
Annex 3 provides an inventory of measures taken by
plements the previous analysis by examining the size
each country across the 32 items identified in the ILO
of fiscal and labour market policy packages for OECD
survey.
countries and assessing their impact on employment.
Overview of measures taken
The section draws extensively from the analysis of the
jobs crisis contained in the 2009 edition of the OECD
In the period between mid-2008 and 30 June 2009,
Employment Outlook.
countries have taken measures to:
Stimulate employment generation by:
Employment impact of the measures taken
(i) investing public resources for infrastructure of
The ILO has estimated the scale of the difference
all types;
the policy responses are making. Although unemploy-
(ii) providing additional support through credit fa-
ment and other indicators of labour market distress
cilities, tax reductions and technical guidance to
have increased significantly over the last 12 months,
small enterprises in particular;
they would have increased even more had these meas-
(iii) granting subsidies and reductions in social security
ures not been taken. The ILO estimates, on the basis
contributions to enterprises to lower the cost of re-
of IMF calculations, that discretionary fiscal expansion,
taining workers in jobs and facilitating new hires;
together with automatic stabilisers, will have created or
(iv) retaining workers in jobs through working time
saved in 2009 between 7 and 11 million jobs in the
reductions, partial unemployment benefits, la-
G20 countries. The jobs created or saved are equivalent
bour cost reductions and training schemes.
to between 29 and 43 per cent of total unemployment
in G20 countries in the first half of 2009. Without such
13 See list in Annex 2.
15
PROtECtInG PEOPLE, PROMOtInG JOBS
Provide income support to workers and families
On average each country (at national or federal level)
through:
has taken just over ten new measures (over the period
(i) extension of unemployment benefits;
indicated) across the 32 measures identified in the ILO
survey. For each of the four broad areas identified above,
(ii) extension of and adjustments in health benefits
each country has taken on average close to four new
and old-age retirement benefits;
measures to stimulate labour demand, between two and
(iii) expansion of cash transfer programmes and so-
three measures to support jobseekers and unemployed,
cial assistance programmes.
between two and three measures to expand social pro-
Support unemployed and jobseekers through:
tection and one measure to stimulate social dialogue
(i) strengthening of public employment services;
and rights at work.
(ii) expansion of training programmes and facili-
table 2.1 illustrates the frequency of measures taken
ties.
by each country, across the 32 measures identified in
Stimulate social dialogue and consultations with
the ILO inventory.
business and labour on measures to counter the crisis
There are some clear patterns in the composition of
through:
the measures taken by countries depending on their
(i) national and sectoral consultations between
income category. Lower-income countries have taken,
business and labour and with governments;
on average, a slightly lower number of measures and
(ii) national and sectoral agreements between busi-
higher-income countries a slightly higher number of
ness, labour and with governments;
measures. All countries have given high priority to
(iii) enterprise consultations and agreements.
new or additional investments in infrastructure with
Table 2.1 Frequency of measures taken across sample countries
1. Stimulating labour demand
( %)
2. Supporting jobseekers, jobs and unemployed ( %)
Additional fiscal spending on infrastructure
87.0
Additional training measures
63.0
with employment criteria
33.3
Increased capacity of public employment
46.3
services
with green criteria
29.6
New measures for migrant workers
27.8
Public employment
24.1
Working time reductions
27.8
New or expanded targeted employment
51.9
Partial unemployment with training and part-time 27.8
programmes
work
Access to credit for SMEs
74.1
Wage reductions
14.8
Access to public tenders for SMEs
9.3
Extension of unemployment benefits
31.5
Subsidies and tax reductions for SMEs
77.8
Additional social assistance and protection
33.3
measures
3. Expanding social protection and food security
4. Social dialogue and rights at work
Social security tax reductions
29.6
Consultations on crisis responses
59.3
Additional cash transfers
53.7
Agreements at national level
35.2
Increased access to health benefits
37.0
Agreements at sectoral levels
11.1
Changes in old-age pensions
44.4
Additional measures to fight labour trafficking
3.7
Changes to minimum wages
33.3
Additional measures to fight child labour
3.7
New protection measures for migrant workers
14.8
Changes in labour legislation
22.2
Introduction of food subsidies
16.7
Increased capacity of labour administration/
13.0
inspection
New support for agriculture
22.2
Source: ILO survey.
16
SURVEY OF EMPLOYMEnt AnD SOCIAL PROtECtIOn MEASURES
Table 2.2 Average number of measures taken by category and country income group
Country sample by
Stimulating
Supporting jobs, Expanding social Social dialogue
Total
income group
labour demand
jobseekers and
protection and
and rights at
unemployed
food security
work
Low income (10)
2.9
1.2
2.3
0.8
7.2
Lower middle income (10) 3.8
2.3
3.2
1.4
10.7
Upper middle income
3.9
2.9
2.5
1.6
10.9
(17)
High income (17)
4.4
3.7
2.3
1.8
12.2
Average
3.8
2.5
2.6
1.4
10.3
Source: ILO survey.
the aim of generating employment. However, middle
ing and middle-income countries 0.7 per cent of GDP.
and lower-income countries have also invested signifi-
table 2.3 provides, for a selection of countries, an in-
cantly in the expansion of social protection, whereas
dication of the range of spending on infrastructure.
advanced countries have invested more in labour mar-
ket policies. table 2.2 illustrates the variations in the
Timing of measures
composition of measures taken.
The start dates of implementation are reported for
The number of measures taken is no indication per
half of the measures surveyed by the ILO. The large
se of effectiveness. More interventions are not necessar-
majority of the measures announced are taking effect in
ily better. A more reduced, but well integrated, package
2009, with a small proportion (5 per cent) announced
of measures may be preferable to a plethora of small,
for 2010. A clear spike in announcement of measures
poorly financed and/or designed interventions. Only
is noted in January 2009 and in April 2009. The Lon-
more detailed analysis of the impact of the measures
don Summit took place on 2 April 2009. Some 15 per
taken would allow such an assessment.
cent of the measures are limited in time, mostly tax cuts
for enterprises, social assistance measures for the unem-
Size and composition of fiscal packages
ployed and social protection rights granted to migrant
workers.
The IMF reports that the average size of discretionary
fiscal measures in 2009 is 1.9 per cent of GDP in ad-
Additional spending for vulnerable groups 15
vanced G20 countries, with approximately 30 per cent
Countries across all income groups have aimed to
expended on infrastructure, and 2.2 per cent of GDP in
increase spending for more vulnerable social groups.
emerging and developing G20 countries, with approxi-
Across the ILO survey sample the following measures
mately 50 per cent expended on infrastructure.14
can be highlighted.
For low-income countries the ILO estimates that
• 29 per cent of countries extended the scope of
countries are investing on average approximately 1 per
unemployment benefits to new categories, includ-
cent of their GDP on increased infrastructure spend-
ing workers with short contributory history and
14
15
Horton, Mark; Manmohan Kumar; Paolo Mauro. 2009. The
The United nations report, Global Impact and Vulnerability
State of Public Finances: A cross-country fiscal monitor, IMF Staff
Alert System (GIVAS), to which the ILO has contributed, reviews the
Position note, July.
impact of the crisis on vulnerable people.
Table 2.3 2009 spending on infrastructure, as percentage of GDP
Bangladesh
0.1
Egypt
0.8
Peru
2.2
Cambodia
0.2
Jordan
2.2
Romania
1.0
Chile
0.4
Kenya
1.5
Tanzania (United Rep. of)
1.6
Colombia
0.2
Malaysia
0.6
Uruguay
1.6
Costa Rica
0.8
Pakistan
0.2
Viet Nam
1.7
Source: IMF country reports; ILO survey.
17
PROtECtInG PEOPLE, PROMOtInG JOBS
workers with reduced hours. A total of 10 per cent
incentives for employers to hire youth, such as
increased the level or the duration of unemploy-
lower social security contributions.
ment benefits, sometimes only for some groups of
table 2.4 illustrates the targeting of measures taken
jobseekers, such as older workers. In addition, 13
by countries.
per cent of countries whose unemployment ben-
efit systems remained unchanged introduced new
support for specific categories of unemployed, tax
2.2 The OECD inventory and assessment
reductions, and maintenance of social security
This second section examines the size of fiscal and
rights.
labour market policy packages for OECD countries,
• 23 per cent of countries granted new social pro-
showing that the relative importance of discretionary
tection measures to migrant workers such as
measures and automatic stabilisers varies considerably
education, credit, work permit facilities, labour
across countries.
market information and targeted employment
This section draws extensively from the country
programmes.
response to an OECD/European Commission ques-
• 25 per cent of countries from all development lev-
tionnaire aimed at reviewing the discretionary policies
els provided additional support to the elderly.
introduced by member countries during the crisis and
• 6 per cent of countries, from the low-income and
from the analysis of the employment impact of the fiscal
lower-middle-income categories, took measures to
packages conducted by the OECD Secretariat.
strengthen maternity protection.
•
Quantifying the policy response to the crisis
17 per cent of higher-income countries imple-
mented policies to increase women’s employ-
The inventory in the previous section shows that many
ment, including upon return from maternity and
countries are taking measures to alleviate the labour mar-
parental leave, established quotas for women in
ket impact of the crisis. This section presents data on
employment programmes targeted at the poor, or
the size of fiscal and labour market policy packages im-
facilitated the combination of professional and
plemented in response to the crisis in OECD countries.
family responsibilities.
The results show that the scale and composition of policy
• 55 per cent of countries increased their support to
packages, along with the relative importance of discre-
low-income households. In upper-middle-income
tionary measures and automatic stabilisers, vary signifi-
and high-income countries this additional sup-
cantly across countries. This occurs even though the types
port was targeted at low-income households with
of policy measures undertaken are often quite similar, at
children in two-thirds of the cases. In low-income
least when comparing across developed countries. Esti-
countries and lower-middle-income countries,
mates are presented for the employment impact of these
additional transfers to the poor were targeted at
packages drawing on recent OECD work on this topic.
the most vulnerable of the poor, such as disabled
people, destitute women, deprived castes, wid-
Fiscal stimulus packages and automatic
ows and returning migrants. A total of 4 per cent
stabilisers
implemented Make-Work-Pay measures, which
There are substantial differences across countries in
increased incentives for low-paid workers to par-
the size of fiscal packages introduced in response to the
ticipate in the labour market by providing income
crisis, their split between different revenue and spending
tax credits.
measures and timing (Figure 2.1). Differences in the size
• 48 per cent of countries targeted employment
of discretionary fiscal stimuli reflect a combination of fac-
programmes at the poor. In half of the cases,
tors, including the severity of the downturn, the strength
these programmes were implemented in deprived
of automatic stabilisers and constraints on governments’
or least developed areas, while the others targeted
ability to issue debt. Among the OECD countries that
the poor and vulnerable groups of workers (low-
have enacted stimulus packages, there is a lot of varia-
skilled, long-term unemployed).
tion in the relative importance of revenue measures (i.e.
• Additional measures to promote the employability
tax cuts) versus spending increases. Reductions in per-
of youth were taken in 33 per cent of countries.
sonal income taxes account for the largest part of the tax
The higher the level of development, the higher the
measures. However, reductions in employer social secu-
probability of having measures targeted at youth. A
rity contributions are also quite common, albeit relatively
total of 19 per cent of countries implemented new
small in most cases. A significant part of the spending
training for youth, 10 per cent introduced employ-
measures reflects infrastructure and other public invest-
ment programmes for youth, 6 per cent introduced
ment programmes, including measures already planned
18
SURVEY OF EMPLOYMEnt AnD SOCIAL PROtECtIOn MEASURES
Table 2.4 Selected examples of targeting of measures
Low income
Lower middle income Upper middle
High income
income
Increased support
Kenya (mentally
India (widows, disabled), Argentina, Brazil,
Czech Republic, France,
to low-income
challenged),
China (returning
Colombia, Costa Rica, Germany, Hungary, Italy,
households
Bangladesh (destitute
migrants), Philippines
Peru, Honduras,
United Kingdom, Korea (Rep.
women and others),
(CCT*, very poor)
South Africa,
of), United States, Australia,
Nepal (children, elderly,
Malaysia, Chile,
Saudi Arabia, Spain
deprived castes),
Romania,
Viet Nam
Russian Fed.
Increased targeting Cambodia (small
Philippines, Pakistan,
Uruguay (long-
France, Netherlands (low-
of employment
projects in rural areas),
India,
term and older
skilled, low-paid), Romania
programmes at the Viet Nam (infrastructure South Africa
unemployed), Peru
(poor regions), Russian
poor
in poorest districts)
(low-income youth),
Federation (single-industry
Serbia (regions),
cities), Spain (unemployed),
Turkey (poor regions), Chile (high-unemployment
China (regions with
regions), Dominican Rep. (low-
low credit availability), income households), United
Mexico (poor regions) States (credit for rural and
distressed neighbourhoods),
Saudi Arabia (less developed
regions), Korea (Rep. of). (low-
income, poor regions), Japan
and Australia (disabled),
Hungary (depressed areas)
Increasing coverage Tanzania (United Rep.
China
Romania, Russian
Spain, United States, Korea
or level of old-
of), Kenya, Bangladesh,
Federation, Dominican (Rep. of)
age pension and
Nepal
Rep., South Africa,
support to the
Chile
elderly
Increasing coverage Viet Nam
Ukraine
Poland, Romania,
France, Germany, Hungary,
of unemployment
Uruguay, Chile, China Italy, Netherlands, Canada,
benefits/assistance
Japan
Increasing level/
Russian Federation,
Czech Republic, Canada,
duration of un-
Brazil
United States
employment
benefits
Measures to protect Bangladesh, Nepal,
India (Kerala), Jordan,
Brazil
Bahrain, Netherlands,
migrant workers
Viet Nam
Egypt, Philippines,
Barbados, Japan
Pakistan
Strengthening
Bangladesh
India, Jordan
maternity protection
Family-friendly
India, South Africa,
Chile, Russian
Korea (Rep. of), Japan,
policies/promoting
Jordan
Federation
Netherlands, Hungary
employment of
women
Expanded training
Kenya (reallocation of
Philippines (expansion
Turkey (employment
Japan (PES), Korea (Rep. of)
and employment
resources for youth)
of employment
incentives, training),
(employment incentives),
measures for youth
programmes), Jordan
South Africa (public
France (training), Germany
(infrastructure targeting
works), Argentina
(training), United Kingdom
youth, training)
(training), Colombia
(training), United States
(training), Dominican (employment incentives),
Rep. (training),
Netherlands (training and
Peru (employment
employment programmes)
programmes), Russian
Federation (training)
*CCT: conditional cash transfers.
19
PROtECtInG PEOPLE, PROMOtInG JOBS
which have been brought forward. Income transfers to
downturn is expected to be larger than that provided
low-income households have also been expanded in a
by discretionary fiscal measures.16 The countries which
number of countries. For most countries, the bulk of
have enacted the largest fiscal stimulus packages (e.g.
the stimulus is due to be spent during 2009, although
the Republic of Korea, the United States) also tend to
a significant number of countries have spread measures
be characterised by relatively weak automatic stabilisers,
out over a number of years. This means that stimulus
suggesting that the two forms of fiscal stimulus are to a
packages should continue to support aggregate demand
considerable extent substitutes.
in these countries well into 2010.
Estimating the jobs impact of fiscal stimulus
In addition to discretionary measures, most devel-
measures
oped countries have so-called “automatic stabilisers”
in their tax and benefit systems, which automatically
The effectiveness of fiscal policy in boosting eco-
support aggregate demand when economic conditions
nomic activity and employment is particularly hard to
worsen. These automatic stabilisers include unemploy-
gauge in the current context. nevertheless, the OECD
ment benefits and other social protection measures
has made an attempt to estimate the impact of fiscal
which smooth household income by offsetting lost earn-
stimulus on employment. This is done by comparing
ings due to unemployment or reduced working hours.
the latest OECD employment projections, which take
Figure 2.2 shows that the relative size of automatic sta-
account of the expansionary impact of fiscal stimulus
bilisers varies across the countries for which data are
measures and can be taken as a baseline, with coun-
available. Automatic stabilisers tend to be strongest in
terfactual projections that do not. These counterfactual
northern European and other countries where public so-
16
cial spending, particularly on unemployment and other
OECD Economic Outlook, no. 85, OECD Publishing, Paris,
2009. Australia and the United States are the only OECD countries
social protection benefits, is relatively generous and tax
where the discretionary fiscal stimulus is expected to be larger than
revenue more cyclical. In most OECD countries, the
that provided by automatic stabilisers. For more details see Interim
stimulus provided by automatic stabilisers in the current
Economic Outlook, OECD Publishing, Paris, 2009.
20
SURVEY OF EMPLOYMEnt AnD SOCIAL PROtECtIOn MEASURES
projections were constructed using information on the
both the relatively large size of the fiscal packages in
fiscal packages shown in Figure 2.1 and employment
these countries and their relatively large fiscal employ-
multipliers, which show the impact of an increase in
ment multipliers.18
fiscal stimulus on employment. Three scenarios are pre-
sented to test the sensitivity of the estimates to alterna-
Scale and composition of discretionary active
tive assumptions about multiplier effects.17
labour market measures
Even though many countries moved quickly to enact
turning from the overall fiscal packages to active la-
large fiscal stimulus packages, these packages have gen-
bour market programmes (ALMPs) specifically targeted
erally not had a strong effect in cushioning the initial
at helping the unemployed back into work, Figure 2.3
decline in employment caused by the crisis, although
shows that the policy response to the crisis has varied
Australia is a notable exception. By contrast, the pro-
considerably across countries. However, in most cases,
jected impacts of the discretionary fiscal stimulus pack-
the additional funds for ALMPs are limited.19 Greece,
ages cumulate through 2010 and are likely to represent
Japan, Poland, Portugal, Spain and Sweden are excep-
an important support for labour demand in the later
tions, where recent discretionary increases correspond
stages of the recession and the early recovery period. The
to annual increases in ALMP spending of between 0.15
average employment effect in 2010 for the 19 OECD
per cent and 0.45 per cent of GDP. Juxtaposing 2007
countries examined corresponds to somewhere in the
expenditure from the OECD Labour Market Policy
range of 0.8-1.4 per cent. In total this represents be-
Database with spending increases reveals that Japan,
tween 3.2 and 5.5 million jobs. The jobs impact of the
Mexico, Poland and Portugal are dramatically scaling
fiscal stimulus measures is estimated to be particularly
18 The estimated employment effects of the stimulus packages are
strong in Australia (1.4-1.9 per cent), Japan (1.3-2 per
based on information available as of June 2009. The data reflect the
cent) and the United States (1-1.8 per cent), owing to
impact of fiscal packages on fiscal balances and may not reflect all of
the measures introduced to boost activity. In particular, recapitalisa-
17
tion operations in the financial sector and increases in public enter-
For more details see OECD Employment Outlook, OECD Pub-
prise investment are not included.
lishing, Paris, 2009. Further analysis suggests that cuts to employer
19
social security contributions may well have a significant additional
As shown in the first section of this chapter, many countries
employment impact due to the relative price effect associated with a
have implemented a range of other labour market measures, such as
reduction in unit labour costs. If so, the estimates in Figure 2.3 may
working time reduction schemes or passive measures such as unem-
understate the jobs impact of fiscal stimulus packages which include
ployment benefits, in addition to the active measures discussed in
significant cuts in employer social security contributions.
this section.
21
PROtECtInG PEOPLE, PROMOtInG JOBS
up national funding for ALMPs, albeit from relatively
ance, notably by offering earlier personalised assistance
low baselines (except in Portugal).
or career counselling for jobseekers. Some training
programmes are targeted at vulnerable jobseekers (e.g.
table 2.5 shows the types of ALMPs implemented
youth, older workers, low-skilled or migrant workers),
in OECD countries in response to the crisis. Almost all
but most places are available for all unemployed per-
countries have expanded places in training programmes
sons. Fewer countries have expanded work-experience
for the unemployed or workers on reduced hours and
programmes and where these have been expanded they
increased resources devoted to job-search assistance. In
tend to be targeted at disadvantaged groups, notably
many cases, this involves increasing public employment
youth. A handful of additional programmes have been
service staffing levels, but in some countries, private
established to encourage jobseekers to take up jobs or
employment agencies have been given a greater role in
establish small businesses, either through direct incen-
helping to place jobseekers, allowing job-search assist-
tive payments to workers, subsidies to employers, low-
ance capacity to be expanded quickly. Many countries
interest loans, reduced social contributions or in-kind
have also stepped up the intensity of job-search assist-
assistance with training, child care or travel costs.
22
SURVEY OF EMPLOYMEnt AnD SOCIAL PROtECtIOn MEASURES
Table 2.5 Discretionary changes in ALMPs in response to the crisis
Job subsidies Reductions
Job-search
Job-finding
Work-
Training
and
in non-wage
assistance and and
experience
programmes
recruitment
labour costs
matching
business start- programmes
incentives
for hiring
up incentives
unemployed
Australia
X
X
X
Austria
X
X
Belgium
X
Canada
X
X
X
X
Czech
X
Republic
Denmark
X
Finland
X
X
X
France
X
X
X
X
X
Germany
X
X
Greece
X
X
X
Hungary
X
X
Ireland
X
X
X
Italy
X
X
Japan
X
X
X
X
X
Korea, Rep. of
X
X
X
X
X
Mexico
X
X
X
X
X
Netherlands
X
X
New Zealand
X
X
X
Norway
X
X
X
Poland
X
X
X
X
Portugal
X
X
X
X
X
Slovakia
X
X
X
Spain
X
X
X
X
X
Sweden
X
X
X
X
Switzerland
X
Turkey
X
X
United
X
X
X
X
X
Kingdom
United States
X
X
X
X
Note: Refers only to federal or national government initiatives targeted at the unemployed, inactive or vulnerable workers. In
Denmark and Switzerland, active labour market expenditure increases automatically when the unemployment rate increases (or is
expected to increase) and is not shown in the table.
Source: Responses to OECD/European Commission questionnaire.
23
Information annex 1
Employment and social policy measures
in response to the crisis
This information annex seeks to illustrate more
economy – even if initially directed toward an ailing sec-
concretely the range of measures taken by individual
tor in particular, such as construction.20 An additional
countries to stimulate labour demand, protect jobs and
spillover effect of infrastructure spending, constituting
the unemployed, extend social protection and promote
a multiplier over time, is that it lays the foundation for
social dialogue. It is accompanied by initial comments
future growth and achievement of long-term develop-
with reference to recent knowledge and literature.
ment objectives.
This is preliminary and a work in progress. It will be
One assessment of the impact of infrastructure
further developed on the basis of additional inputs by
spending on employment concludes that US$1 billion
G20 countries, ILO constituents and relevant interna-
spent on large projects generates employment in the
tional organizations.
area of 28,000, both directly and indirectly in roughly
This information will be submitted for discussion
equal proportions, in advanced economies.21 Infrastruc-
and review to the Governing Body of the International
ture expenditure in developing countries has a substan-
Labour Office, at its forthcoming session in November
tially greater employment impact: $1 billion spent in
2009.
Latin America can yield upward of 200,000 direct jobs;
The product of this process will be available to the
spending the same on labour-intensive rural projects
G20 for any follow-up decided by leaders on these
can yield up to 500,000 direct jobs, suggesting that
issues.
the choice of production technology, whether labour-
based or equipment-based, can significantly influence
the employment component of the expenditure.22 In its
1. Measures to create and retain employment
direct and indirect employment effects, especially over
the longer term, infrastructure spending in developing
Measures to create and retain employment endeav-
countries is a superior choice. In its longer-term multi-
our to keep people attached to the labour market and,
plier effect, moreover, the effect is likely to be greater.
in so doing, to support aggregate demand. Measures be-
ing undertaken include the following.
While some large projects may engage large firms
with high capital intensity, maximizing the employ-
1.1 Infrastructure spending
ment component of infrastructure spending is a viable
option for smaller, local infrastructure projects, By com-
Crisis-related rationale:
bining the benefits of both backward and forward link-
With weak demand in private-sector markets,
ages (such as procuring local materials and hiring local
the government serves as employer of last
resort in an effort to sustain both jobs and
20 The multiplier effects are presumed to be around 1.5; see J. Bivens,
aggregate demand.
J. Irons and E. Pollack, 2009. Tools for Assessing the Labor Market Im-
pacts of Infrastructure Investment. EPI Working Paper, April 7.
Infrastructure spending has the largest multiplier ef-
21 Levine, L. 2008. Job Loss and Infrastructure Job Creation During
fects, larger still in developing countries, and is the most
the Recession. Congressional Research Office. See also ILO. 2002. The
direct way of increasing employment and of boosting or
Labour-Based Technology Source Book, sixth edition, ILO-ASIST,
stabilizing aggregate demand. The large multiplier ef-
Harare.
22
fects simply mean that direct effects of infrastructure
Tuck, L., Schwartz, J. and Andrea, L. 2009. Crisis in LAC:
Infrastructure Investment and Potential for Employment Generation.
spending spill over positively to other sectors of the
World Bank LCR Crisis Briefs.
25
PROTECTING PEOPLE, PROMOTING JOBS
Box 1. Countries with employment criteria in their infrastructure spending
Country
Employment criteria
Argentina
Infrastructure spending of $68 billion will be allocated using a combination of large enter-
prises and SMEs; local infrastructure will be built using labour-intensive techniques.
Australia
The Government announced the largest single infrastructure project in Australia’s history—a
$43 billion broadband network which is expected to create 25,000 jobs per year (for up to
eight years). In addition a $650 million Jobs fund for infrastructure development will target
communities affected by the global downturn.
France
France’s crisis-related infrastructure measures are expected to create between 80,000 and
110,000 jobs.
Hungary
As part of the Pathway to Work programme, the maintenance of local infrastructure (schools,
public places, child care and health care organizations) will be achieved through local public
works, which tripled its funding from 2008.
Indonesia
The Economic Stimulus Package (ESP) of $7.3 bil ion includes an al ocation for local resource
based investments of $1.2 billion in main and local infrastructure. The ILO is currently helping
to improve labour-intensiveness. It is estimated that about one million jobs could be created if
50 per cent of the infrastructure were implemented using employment-intensive approaches.
Ireland
Reprioritization of capital expenditure to support labour-intensive activities where possible.
Saudi Arabia
The four cities infrastructure project is expected to draw almost SR 300 billion in investment
and create more than one million jobs. These economic zones are located in less developed
regions and specifically selected to ensure that development and employment opportunities
are spread equitably across the Kingdom.
South Africa
The R787 billion project for infrastructure development includes a provision that wherever
possible labour-intensive approaches will be used for road maintenance.
Ukraine
Temporary reassignment of workers from the most affected industries (i.e. metallurgy, con-
struction) to others (for example, repairs) to avoid lay-offs. Dismissed workers can otherwise
be employed in the preparation of EuroCup 2012. In this case they will be paid guaranteed
minimum wages out of the unemployment fund
United Kingdom The Government is “making it a requirement that successful contractors have apprentices as
an identified proportion of their workforce”. It estimates that this could lead to an extra 7,000
new apprentices in construction over the next three years.
Paraguay
The counter-cyclical public works programme has been strengthened through more efficient
resource allocation, the decentralization of programmes and the expansion of activities. More
than 20,000 jobs are expected to be created during the crisis.1
South Africa
In addition to transportation and irrigation projects, the public works programme will give
more attention to home-based care and community health. The programme targets poor
heads of households and is expected to benefit women, who tend to be less represented in
traditional public works schemes. It is expected to create 4.5 million job opportunities of 100
days, including skill acquisition opportunities.
Mexico
The country’s temporary works programme has been expanded to provide employment op-
portunities to an estimated 250,000 workers in 2009 for a period of between four and six
months at a salary of twice the minimum wage. The cost is $160 million.
Peru
Expansion of targeted works programme to provide four months of employment for 16,000
workers at a cost of $13 million.
Uruguay
Expansion of public works programme for up to eight months targeted at the long-term un-
employed; basic wage provided and access to social security benefits.
1 Reinecke, Gerhard. 2009. Public investment as anti-cyclical policy tool to face the crisis: Paraguay’s example. ILO. Chile.
Note: The EU Social Fund, the EU Regional Fund and the European Investment Bank are co-funding EU Member States’ crisis actions.
labour), they can have a strong immediate impact on
cal spending on infrastructure, often with even more
the local economy and underpin future development.
specific targets for disadvantaged groups (Box 1).
As such, these projects become a tool for local devel-
Infrastructure spending in the crisis period is often in
opment.23 One-third of the 54 countries assessed have
the form of “public works programmes”, where the gov-
included a specific employment component in their fis-
ernment is the employer of last resort. The two overlap
but are not synonyms, as public works can relate to any
23 Murphy, L. Rapid Assessment of Poverty Impacts (RAPI): Elab-
government-funded activity to strengthen or maintain
oration of a Rapid Survey Method of Assessing the Poverty Reduction
Impacts of Pilot Employment-Intensive Projects. Geneva. ILO.
the link to the labour market for those who risk being
26
INFORMATION ANNEX 1
severed from it. Elder care, community service, or other
Improving access to credit
service activities have often been publicly funded and
Crisis-related rationale:
constitute public works targeted toward the disadvan-
A defining characteristic of this period has
taged. Noteworthy is India’s National Rural Employ-
been the dramatic contraction in credit supply
ment Guarantee, a programme that existed prior to the
available to firms and consumers.
crisis, but that with it has become an important auto-
matic stabilizer, with a majority share of poor women
Firms are not only faced with fal ing sales, but also with
employed – and employed in “green jobs”.
limited access to financing and high borrowing costs. In
developing countries where banks were not directly ex-
Chile provides a good illustration linking fiscal re-
posed to the crisis, trade credits have dried up, risk pre-
sponsibility, the title of a new law adopted in 2006,
miums have soared, and SMEs are considered riskier than
with socially responsible employment policy. The law
large firms because of the volatility of their survival rates.
determines that should unemployment exceed 10 per
Keeping SMEs afloat during turbulent times is a strategy
cent, or the average over the previous five years, then a
for preserving and creating jobs, and several countries
contingency fund is automatically activated to finance
have targeted the small-firm sector for particular assist-
emergency employment measures.
ance. Public banks have played a key role in sustaining
and increasing the availability of credit in several coun-
1.2 Direct financial support to enterprises
tries. For instance, in Brazil, between September 2008
Crisis-related rationale:
and April 2009, public banks increased credit outlays by
Otherwise viable businesses, particularly SMEs,
close to 20 per cent against 2.5 per cent in private institu-
have not only faced troughs in demand but
tions. Box 3 provides some examples.
are starved of credit.
Stimulating demand through public spending
Box 3
SMEs form the bulk of employment in most econo-
mies and targeting them for assistance makes sense in
• Argentina: New credit facilities provide low-inter-
instances of sharp falls in demand having little to do
est loans of up to $300,000 for SME investment.
with the businesses themselves. Public procurement op-
• Brazil: The credit resources of the national de-
portunities are well within the grasp of many SMEs, al-
velopment bank (BNDES) were increased by
85 per cent in 2009.
though they may be disadvantaged by tender procedures
•
that favour larger firms (or to which larger firms can
China: 9 billion RMB were made available for
loans to micro enterprises, collateral require-
more readily respond). Several countries have tailored
ments for SMEs were eased and interest rates
procurement bids to smaller firms in this period. A few
for loans were subsidized.
examples are shown in Box 2.
• The European Commission has introduced a
new micro-finance facility of an initial budget
of € 100 million to support small businesses
and entrepreneurs.
Box 2
• France: Public guarantee schemes have been
• Hungary: Support for SMEs has increased from
extended to cover up to 90 per cent of the risks
50 to 70 per cent of projects, tender evalu-
related to a loan as compared with 50 to 60 per
ation time has been reduced and the rate of
cent on average previously.
advanced payment has increased.
• India: Increased credit facilities for labour-in-
• Mexico: The stimulus package, requires at
tensive export firms and increased guarantees
least 20 per cent of government purchases to
for small enterprises.
be made from small and medium-sized com-
• Italy: Increased guarantees and €8 million for
panies.1
increased credit to SMEs; additional credit
• Peru: $50 million increase in public purchases
available for firms exporting outside the EU.
from SMEs.
• Japan: 10 trillion yen allocated to the Credit
• South Africa: The Government has introduced
Guarantee Association to ease credit con-
an objective of ensuring preferential procure-
straints on SMEs and an additional 4 trillion
ment for SMEs.
for safety net loans.
• United Kingdom: Launch of a campaign urging
• Serbia: CSD 3.1 billion made available in start-
small businesses to register with the Govern-
up credits for entrepreneurs and SMEs.
ment’s online procurement portal.2
• United Republic of Tanzania: An additional
1 “Stimulus plan to curb impact of crisis”, IPS News Agency.
TZS 29 billion injected for credit guarantees
18.03.09. 2 Supply2.gov.uk.
for export firms and SMEs.
27
PROTECTING PEOPLE, PROMOTING JOBS
but this is an impact that is presumably made up for
Box 4
in employment preserved (and taxes paid). Exemptions
are in general also a temporary measure in the cycli-
• Argentina: Reduced social security contribu-
tions for enterprises in economic difficulties,
cal downturn. An advantage of cutting business taxes is
conditional on maintaining employment.
that they reduce business costs without affecting work-
• Egypt: As part of its stimulus package, the Gov-
ers’ wages and thus aggregate demand.
ernment proposed tax rebates for loss-making
Tax policy has also been used to prop up lagging
small businesses.
sectors, with major-expenditure durables leading the
• France: Reduced taxes for new investment
list. Box 4 highlights country examples to stimulate
until January 2010 at cost of €1 billion; also
demand and preserve jobs through the lever of tax ad-
exemption of social security contributions for
low-paid workers in SMEs for up to one year.
justments.
• India: Lower tax rates for exporters and lower
export duties.
1.3 Adjusting labour conditions to fit current
•
demand
Republic of Korea: Tax rate for smaller busi-
nesses reduced by 2 per cent to 11 per cent
Two mechanisms to adjust labour conditions to fit
in 2009 and a further 1 per cent the following
depressed demand are being used by governments and
year; the rate for larger businesses reduced 3
per cent to 22 per cent and then further to 20
enterprises, often in agreement with trade unions. These
per cent.
are wage and working-time adjustments. Wage freezes
• United States: Reduction in capital gains tax
have been used as a means of cost stabilization in return
for small businesses.
for employment maintenance.26 In some countries that
had recourse to wage freezes in 2009, real wage increases
had been particularly rapid in preceding years. While, at
Reducing taxes
the macro level, depressed wages can result in a damp-
ening of aggregate demand, the alternative of lay-offs
Crisis-related rationale:
would have the same, perhaps even worse, effect. This is
Tax reductions represent an increase in real
particularly true in settings where income replacement
income to both consumers and businesses,
mechanisms are weak or non-existent. Box 5 reports on
and lower business costs.
some country experiences.
Tax reductions take as many forms as there are taxes,
Minimum wages constitute a wage floor, guarding
and represent a large share of overall stimulus packages:
against wage deflation and excessive declines in aggre-
56 per cent of the net effect of stimulus packages in
gate demand. As such, they can be considered an auto-
OECD countries consists of tax-related measures.24 One
reason for this is the rapidity with which this stimulus
26
measure can be implemented. Speed of impact and im-
“More firms freeze annual pay rises”, Virgin Media, web site,
20.02.09. The article is based on figures of the Industrial Relations
pact, however, are not the same. Taxes affect aggregate
Services.
demand indirectly through propensity to spend or invest,
and have been shown to have lower multiplier effects and
to be less effective in stimulating aggregate demand and
Box 5
creating jobs than public spending.25 This is particularly
true with regard to personal income tax reductions: peo-
• China: Local governments have frozen wage
ple save rather than spend in times of adversity.
increases in 2009.
• Ireland: Previously tripartite agreed wage in-
Nonetheless, some tax reductions, particularly those
creases in the private and public sector will be
applied to businesses (but also to consumption, such
postponed.
as VAT) can have larger employment effects than sug-
• Republic of Korea: Freezing of wages in finan-
gested by aggregate multipliers. Many countries have
cial institutions and a maximum 30 per cent
lowered business costs through reductions in social se-
cut in salaries of university graduates in order
curity contributions or other payroll taxes. The penalty,
to share jobs.
of course, is a shortfall in fiscal receipts to government,
• Latvia: Wage reductions of 15 per cent for
state institutions and public services for 2009;
teachers’ wages reduced by half from Septem-
24 OECD 2009, Economic Outlook Interim Report, March.
ber 2009 and health-care workers’ wages re-
25 Congressional Budget Office, 2002 Economic Stimulus: Evalu-
duced by 20 per cent.
ating Proposed Changes in Tax Policy. Washington DC: CBO, Janu-
•
ary; Elmendorf D. and J. Furman 2008. If, When, How: A primer on
Serbia: Salary freezes and cuts for above-aver-
fiscal stimulus. The Hamilton Project, Brookings Institution, Wash-
age salaries in the public sector.
ington DC, January.
28
INFORMATION ANNEX 1
matic stabilizer, and are also associated with reductions
in poverty levels. They are, moreover, targeted at those
Box 6
with the greatest propensity to consume. The effect on
• Germany: The Kurzarbeit programme, which is
aggregate demand of minimum wages has been noted
expected to cost €5 billion during 2009-10, has
since the Great Depression, when the United States
extended the maximum benefit period from six
adopted a minimum wage as “an essential part of eco-
to 24 months for companies that sign on in
nomic recovery”. Depending on the relative level of the
2009. The Federal Employment Agency covers
minimum wage, as compared to the median wage for
up to 67 per cent of wage losses for workers
whose hours have been reduced, while also
instance, adverse employment effects can occur, par-
reimbursing employers 50 per cent of social
ticularly for some categories of workers, such as youth.
security contributions (and 100 per cent if re-
Minimum wages can be combined with other direct
duced working hours are used for training).
anti-poverty measures into a highly effective package,
• Japan: The Employment Adjustment Subsidy
as illustrated in Brazil.
is payable directly to employers and has been
increased from one-third of employee adjust-
Work-sharing, the reduction of working hours to
ment costs to two-thirds for large enterprises,
spread reduced workloads more evenly among workers,
and from two-thirds to nine-tenths for SMEs -
has attracted interest in the context of the crisis. The
to a maximum of $80 per day (if training is pro-
most sophisticated systems are those in which strong
vided the amount can be increased by another
company-level negotiations are backed by government
$63 per day for a maximum of three years).
The subsidy is financed from the employer’s
subsidies and access to training.27
contribution to unemployment insurance.
Businesses benefit from lower labour costs, while
• Poland: A work-sharing programme supported
workers receive a portion of their lost salary from unem-
by workers’ and employers’ organizations was
ployment or social security schemes. The combination is
added in July 2009, financed from the Guar-
general y more than unemployment benefits alone and is
anteed Employee Benefits Fund. It also estab-
lishes training support, with up to 90 per cent
thus a means of stabilizing aggregate demand while low-
of the costs to be paid from Unemployment
ering enterprise costs. Germany’s Kurzarbeit programme
Benefits/Labour Fund (the rest financed by
has been heralded in particular. It is the largest in the
employer training funds).
world, covering 1.3 mil ion workers as of March 2009,
• Turkey: The Government has extended the
and has been credited with increasing consumption by
length of time that workers can benefit from
0.3 per cent per month and preventing unemployment
the reduced hours fund from three to six
months and increased the benefit level by 50
from rising an additional percentage point.28 The Euro-
per cent.
pean Social Fund supports EU Member State schemes to
retain persons in employment through short-time work
and training. Box 6 gives examples of what some coun-
tries have done to encourage this.
then work-sharing measures are to be recommended,
particularly in the context of a financial crisis with as-
Work-sharing arrangements subsidized from the fis-
sociated lags of labour market recovery.
cal purse, of course, are not within the reach of many
lower-income countries. In 2008, Argentina, for exam-
ple, quickly reactivated the Programa de Recuperación
2. Assessing the salience of labour market
Activa, designed during the 2002 crisis. A monthly
policies
wage supplement is provided to employees for up to 12
The crisis in the world of work is mediated through
months, with an agreement not to dismiss workers.
existing labour market policies and institutions. They
Work-sharing has been shown to be a cost-effective
have a clear role to play, and labour market outcomes
employment retention measure, with retention in the
are mediated through them anyway. Three such policies
labour market being an overarching concern. There are
are considered here: public employment services, skills
downside concerns as well. Subsidizing jobs that might
and training programmes, and hiring subsidies.
otherwise disappear is one of them. Settings in which
dismissal is easier and more cost-effective at the micro
2.1 The public employment service
level frustrate work-sharing measures. But if the social
Crisis-related rationale:
gains of retention in the labour market are paramount,
Labour market information is all the more
precious to those who lose their jobs and
27 Eurofound. 2009. Tackling the recession: Employment-related
are looking for another. This is the central
public initiatives in the EU Member States and Norway.
28
function of the labour market intermediation
Broyer, S.; Costa, B. 2009. How do you explain the resilience of
the German job market? Natixis Special Report, 30 June, No. 194.
of public employment services – job matching,
29
PROTECTING PEOPLE, PROMOTING JOBS
associated training needs and targeting
always coexisted, even in recessions. Demand on public
of particular labour market subgroups.
employment services, which cater to both the demand
The premise in a crisis is that demand
and supply sides of the labour market, has built up on
for public employment services will outstrip
the supply side – the job losers, and new entrants to the
supply, that the capacity of public
labour market. Young persons looking for their first job
employment services requires strengthening,
face a particularly difficult labour market situation – the
and that in the midst of job loss, there remain
pros and cons of what can be done to assist them are de-
job vacancies.
scribed in Box 7 below. One effect of the current crisis
has been closer collaboration between public and pri-
Amid widespread job loss and job scarcity, public em-
vate providers of employment services, as has been the
ployment services have a crucial intermediation role to
case in the Netherlands, Belgium and France, through,
play, if only because vacancies and labour surplus have
inter alia, an exchange of trained staff.
Box 7. Youth employment programmes: Advantages and disadvantages
Type of programme
Advantages
Disadvantages
Labour market training
Works better with broader techni-
May produce temporary rather
cal and employability skills that than sustainable solutions and
are in demand and includes work if not well targeted, may benefit
experience as well as employment those who are already “better off”.
services.
Training alone may not be suf-
ficient to increase youth employ-
ment prospects.
Employment services (career
Can help young people make re-
May create unrealistic expecta-
guidance, job search and labour
alistic choices and match their tions, if not linked to the labour
market information)
aspirations with employment and market, and often cover only urban
training opportunities; can improve areas and the formal economy.
information on job prospects, as
well as the efficiency, effectiveness
and relevance of initiatives. They
can also increase targeted/tailor-
made design and implementation.
Employment-intensive public
Help young people gain labour Low capacity for labour market in-
works and community services
market attachment and, at the tegration; young workers may be-
same time, improve physical and come trapped in a spiral of tem-
social infrastructure, especially if porary public works programmes;
combined with development and often gender-biased; displacement
sectoral strategies. They can in-
of private sector companies.
crease employability, if combined
with training.
Employment subsidies
Can create employment, if target-
High deadweight losses and sub-
ed to specific needs (e.g. to com-
stitution effects (if not targeted);
pensate for initial lower productiv-
employment may last only as long
ity and training) and to groups of as the subsidy.
disadvantaged young people.
Entrepreneurship promotion
Can have high employment po-
May create displacement effects
tential and may meet young peo-
and may have a high failure rate,
ple’s aspirations (e.g. for flexibility, which limits its capacity to create
independence); more effective if sustainable employment. They are
combined with financial and other often difficult for disadvantaged
services, including mentoring.
youth, owing to their lack of net-
works, experience, know-how and
collateral.
Source: Rosas, G., Rossignotti, G., “Starting the new millennium right: Decent employment for young people”, International Labour Review,
Vol. 144 (2005), No. 2, Geneva.
30
INFORMATION ANNEX 1
Several studies of youth employment programmes
disasters, etc. The procedure is to establish temporary
have shown that while some programmes are success-
employment agencies, often mobile and often designed
ful, others fail to enhance participants’ chances of gain-
for casual labourers. The principle might well be appro-
ing a job. Several youth employment programmes in
priate to economic crises in some other locations.
Latin America (as in Chile, the Dominican Republic
The intermediary and informational role that pub-
and Uruguay, for instance) underscore the role of in-
lic employment services play is vital to labour market
tegrated interventions providing a package of training,
functioning. In the context of economic downturns,
income support and employment services targeted at
the effectiveness of employment services faces particu-
low-income and low-skilled youth.
lar challenges.31
Labour market information is the chief function of
the public employment services, yet other sources also
provide labour market information. Indeed, during the
2.2 Skills and training
Asian financial crisis, registrations in the Republic of
Crisis-related rationale:
Korea’s public employment services increased tenfold,
At the micro level, this is the opportunity
although only 5.8 per cent of those registered found
for some enterprises to invest in skills in
employment through the public employment services,
anticipation of recovery, and to reduce obsolete
the remainder finding it through other means.29 In the
skills, sometimes with government support
present crisis, lessons from previous crises have appar-
for employment retention. For economies that
ently been learned. These relate for the most part to
view the current passage as a change
staffing and capacity, and examples are illustrated in
in economic structure, investment in the skills
Box 8.
required for the future is an appropriate
In countries with little public employment service
macro-level response.
capacity, “emergency public employment services”30
Idle demand but retained employment creates the
might be worthwhile. This measure has been used to
opportunity for skill development, as many enterprises
deal with crises of a different order – military, natural
and countries have realized.
Box 9 shows how some countries are addressing skill
29 Betcherman, G.; Islam, R. 2001. East Asian Labor Markets and
development needs. Box 10 shows how some coun-
the Economic Crisis. ILO and World Bank.
30
tries are using the interruption of the business cycle
Guidelines for the Establishment of Emergency Employment Services.
to address the longer-term concerns of environmental
sustainability. A shortage of skills for “green jobs” is a
constraint for conversion to a sustainable economy, and
many countries are using the crisis as an opportunity for
Box 8
more sustainable patterns of growth.
• Australia: A$42 billion were invested in em-
The recovery from the crisis will look different to the
ployment services, covering a wide range of
global economy that brought us here – in other words,
services, including the reshaping of the public
substantial economic transformation will be an integral
employment services and directing job services
towards various population segments.
part of the recovery. To the extent that the opportunity
for economic restructuring exists, supply constraints
• Canada: Increased staff and longer public em-
ployment service opening hours.
need to be met with appropriate investment in skills.
• Dominican Republic: The country has opened
Some studies have called into question the value of
seven new public employment service regional
training on the grounds of cost-effectiveness, minimal
offices.
effect on employment outcomes during recessionary pe-
• Germany: €2 billion injected to increase the
riods, and the high amount of deadweight loss.32
staff of federal employment agencies by 5,000
persons.
Other studies suggest that skills training is more ef-
• Mexico: $138 million has been allocated to
fective when well targeted towards disadvantaged and
the national unemployment service to extend
displaced workers, and tailored best to fit local labour
hours and improve services.
• Cambodia: Strengthening public employment
31 de Koning, J. 2001. Aggregate Impact Analysis of labour mar-
services through nine new regional job centres.
ket policy: A literature review, International Journal of Manpower,
• Spain: The public employment services have
Vol. 22, No. 8, pp. 707-734.
hired 1,415 staff in employment offices and
32 Friedlander, D., D. Greenberg and P. Robins. 1997. Evaluating
1,500 staff members to assist with job search.
government training programmes for the economically disadvantaged.
Journal of Economic Literature 35(4).
31
PROTECTING PEOPLE, PROMOTING JOBS
market needs, with the implication that local labour
Box 9
market needs diagnoses precede training strategies.
• Ireland: €128 million was re-allocated to pro-
Targeting appears important: evaluations show that
vide additional training slots for some 25,000
initiatives aimed at adult women are particularly suc-
participants; training programmes were added
cessful.33
in sustainable energy and green technology.
For working women and men in the informal econ-
• Hungary: A HUF 10 billion programme was in-
omy beyond the reach of formal training institutions,
stituted to provide training, along with an extra
HUF 20 billion for training targeted at those
there are nonetheless strategies for improving productiv-
who lost their jobs during the crisis.
ity and raising incomes. Apprenticeship training in the
• Indonesia: 300 billion rupiah allocated for
informal economy is a widespread practice and a strong
training the unemployed; the goal is to increase
means by which to increase the income-generating po-
trainees by 5,000.
tential of poor people. Apprenticeships in this context
• Malaysia: In cooperation with industry, training
can be structured learning experiences that are transmis-
programmes have been increased by 10,000
sible and replicable, contributing to the creation of a
participants, while on-the-job training has been
foundation of occupational standards. Such approaches
provided for 1,000 unemployed graduates.
require more attention.34
• Saudi Arabia: Funding has been increased by
close to 17 per cent for education and training
to support the unemployed.
2.3 Hiring subsidies
Crisis-related rationale:
Box 10
They reduce the cost of labour and thus
stimulate labour demand. They are often
• United States: The Green Jobs Act enacted prior
to the crisis in 2007 envisions the creation of
targeted to labour-market disadvantaged
3 million new jobs. It supports on-the-job ap-
groups. They are paid out of the fiscal purse.
prenticeship and training programmes to meet
Under certain conditions, they can raise hires,
increasing demand for skil ed workers in energy
although displacement of workers is a risk.
efficiency and renewable energy instal ations.
They can be temporary and ought to be.
• Spain: The Government’s green jobs objectives
consist of two components. The first involves
An important stimulus to employment can come
raising employment rates, which is an €8 bil-
from subsidizing the recruitment of newly hired and
lion investment fund aimed at increasing lo-
disadvantaged jobseekers. This is of particular impor-
cal investments in the environment, pollution
tance to displaced workers and young workers, who face
prevention, energy efficiency, road safety and
urban mobility. The second component is the
unusual barriers to their entry to the labour market in
€3 billion special fund for the stimulation of the
the present conjuncture. Subsidies of this nature can
economy and employment,1 aimed at investing
be considered as an important counter-cyclical tool in
in strategic sectors to improve infrastructure,
the face of the crisis affecting labour demand. How-
technology and energy efficiency. This has al-
ever, at a time when jobs are scarce, substitution and
ready resulted in 76,180 new jobs.2
deadweight costs exist. Hiring subsidies can be effective
• Republic of Korea: The fiscal stimulus plans to
during a strong recovery, to encourage the employment
create 8.5 mil ion new jobs through 2017, most
in green infrastructure - there is an al ocation of
of vulnerable workers and raise their labour market at-
$6 bil ion for energy conservation and $7 bil ion
tachment.
for clean transportation. The plan also includes
Box 11 shows examples of what some countries have
a target of 23,000 jobs in 2009 for low-income
earners and the unemployed.
done in this regard. In general, hiring subsidies are more
effective when they are well targeted to specific catego-
• China: 210 billion yuan will be directly allocat-
ed to energy conservation, emission reduction
ries of workers. Effectiveness can be further enhanced
and environmental protection. Policy measures
through reasonable duration of programmes and as part
include a prioritization of eco-friendly products
of an integrated package of services supporting job ac-
in public purchases and tenders; assessments
based on the environmental soundness of
growth; carbon emissions reduction targets in
33 Martin, J.P. 2000. What works among active labour market
national development programmes; and setting
policies: Evidence from OECD countries’ experiences. OECD Eco-
targets to reduce energy intensity, chemical
nomic Studies No. 30, 2000/1, pp. 79-113.
oxygen demand and sulfur dioxide emissions.
34 Nubler, I.; Hofmann, C.; Greiner, C. 2009. Understanding
informal apprenticeship: Findings from empirical research in the
1 http://www.meh.es/ 2 http://welcome.plane.gob.es/figures/
United Republic of Tanzania, ILO Employment Working Paper No.
32, Geneva.
32
INFORMATION ANNEX 1
cess for vulnerable groups. Some experience suggests
Box 11
that the overall employment effect of targeted wage sub-
sidies is positive, albeit modest.35
• Chile: Employment subsidy for hiring young
workers (aged 18 to 24 years).
• France: A €3,000 subsidy given to enterprises
3. Supporting the unemployed and social
that hire an intern on a permanent contract.
protection
• Japan: Firms hiring persons with disabilities for
Crisis-related rationale:
the first time will receive 1 million yen, with
Massive job losses, coupled with existing
graduated subsidies based on number hired
underemployment and poverty, entail the risk
and when.
of a social crisis fomented by the economic
• Republic of Korea: Subsidies given to SMEs for
one. Social protection programmes play
new hires, interns, and for converting irregular
to regular jobs.
a major role in stabilizing aggregate demand.
Their absence, globally, is widespread.
• Romania: Tax reductions for SMEs hiring job-
seekers.
Unemployment insurance schemes are the branch of
• Slovakia: Subsidies for new jobs and reduction
social security that bears the brunt of income replace-
of employment taxes for employers that might
otherwise retrench workers.
35 See Gupta, Nabanita Datta; Larsen, Mona. 2008. Evaluating
Employment Effects of Wage Subsidies for the Disabled, the Dan-
• United Kingdom: Companies will receive
ish Flexjobs Scheme, which provides a useful review of the literature.
£2,500 for hiring workers who have been un-
The experience in Germany is reviewed in Jaenichen, Ursula; Stephan,
employed for more than six months.
Gesine. 2007. The Effectiveness of Targeted Wage Subsidies for Hard-
to-place Workers, IAB discussion paper, No. 16.
Figure 1. Percentage of total unemployment with unemployment benefits
(contributory and non-contributory), weighted by labour force
Total
Western Europe
North America
Latin America
CIS
Central and
Eastern Europe
Asia
Arab States
Africa
0
20
40
60
80
100
Unemployment receiving unemployment benefits – contributory (%)
Unemployment receiving unemployment benefits – non-contributory (%)
Source: ILO estimates.
33
PROTECTING PEOPLE, PROMOTING JOBS
ment for employees who have lost their jobs. Extended
in downturns, unemployment insurance is an automatic
Box 12
stabilizer of proven worth in the present crisis. Unem-
• Brazil: Two months’ extension in the benefit pay-
ployment benefits are in place in only 56 of 167 coun-
ment duration of unemployment insurance for
tries for which information is available. Coverage and
formal-sector workers in the most crisis-ridden
benefits vary greatly across countries.
sectors. This wil reach around 103,000 workers,
Evidence from the United States suggests that trans-
or 20 per cent of the schemes’ beneficiaries.
fer schemes, such as food support and extension of
• Chile: Unemployment insurance has been ex-
panded to cover workers with fixed-term em-
unemployment benefits, can be consequential stimulus
ployment or service contracts for up to two
measures in a downturn.36
months of benefits at replacement rates of 35
In previous economic crises, as in Latin America
per cent of income. The objective is to cover
and Asia, most countries did not have social security
25,000 additional workers per month.
systems. Consequently, unemployment and poverty
• Czech Republic: The duration and amount of
unemployment benefits have been increased
soared. On the contrary, countries that had unemploy-
(by one month). Expenditure on unemploy-
ment insurance schemes prior to the crisis, such as the
ment benefits for January to April 2009 has al-
Republic of Korea and Argentina, were able to scale up
most doubled with respect to the same period
their mechanisms in response to the crisis, as the chan-
last year.
nel for doing so was already in place.37
• France: Unemployment benefits have been ex-
tended to those who have worked four months
within the last 28 months, with a duration equiv-
3.1 Current benefit schemes
alent to the duration of work, up to 24 months
(36 months for workers over 50 years of age).
In the current crisis, many countries have extended
unemployment schemes and/or expanded coverage.
• Romania: Unemployment benefits have been
extended from six to nine months.
Germany, the Netherlands and France have expanded
• United States: Extended unemployment ben-
the application, eligibility and coverage of partial un-
efits for up to 33 weeks and the amount in-
employment benefits. Partial unemployment benefits
creased by $25 per week; 25 million workers
allow workers to stay in their employment relationship,
will benefit.
but at reduced working hours (work sharing). It aims
to prevent the loss of skills and the discouragement
of workers, which may occur when they become fully
and/or employment to various targeted groups of the
unemployed. Examples of extension and expansion are
population. These are usually too small to help in the
shown in Box 12.
current crisis beyond targeted groups, but there is evi-
In many middle-income countries in Asia and Latin
dence that the capacities of benefit delivery and admin-
America self-employment and informal employment
istration are gaining ground. The decisive and missing
shares are high. Unemployment schemes are not acces-
factor in many cases is sustainable funding, which has
sible to such workers. In addition, the crisis has pushed
to come through joint long-term commitments of the
more workers into the informal economy and non-
governments, supported temporarily, where necessary,
standard forms of work, further limiting coverage.
by the donor community.38
In several low-income economies, schemes have been
Unemployment insurance systems are critical in
introduced relatively recently (Viet Nam and Bangla-
providing income support during downturns and in
desh) and coverage is limited to certain categories of
enhancing job search. However, they are criticized for
formal employment workers.
providing limited economic stimulus and prolonging
job search.39 Such views suggest unemployment benefits
Several low-income countries have various small-scale
provide a disincentive to job search and an incentive to
pilot income support schemes providing cash benefits
remain unemployed. The exact terms of the right bal-
ance between hiring and firing flexibility and security of
36 Each additional dollar spent increases GDP by 1.6 for unem-
income of workers remain elusive, save in a few coun-
ployment insurance and 1.73 for food stamps. Bivens, J., J. Irons and
tries with well-established social protection systems.
E Pollack, 2009. Tools for Assessing the Labor Market Impacts of
Infrastructure Investment. EPI Working Paper, April 7.
38
37
Economic Policy Research Institute: Low-income country pre-
Kang, Soon-Hie et al.: Korea (Rep. of): Labor Market Out-
paredness for social protection responses to the global crisis. Draft
comes and Policy Responses after the Crisis, in: Betcherman, Gor-
Paper. 5 March 2009.
don; Islam, Rizwanul (ed.) op. cit.; see also Prasad, Naren; Gerecke,
39
Megan. 2009. Employment-oriented crisis responses: Lessons from
Kyung Won Lee, James R. Schmidt and George E. Rejda, “Un-
Argentina and the Republic of Korea, International Institute of La-
employment Insurance and State Economic Activity,” International
bour Studies, Geneva.
Economic Journal, Vol. 13, No. 3 (Autumn 1999), pp. 77-95.
34
INFORMATION ANNEX 1
3.2. Social assistance
Unconditional transfers
Box 13
Where access to health care and health insurance is
• Bangladesh: Increase in old-age pension by 20
linked to employment, workers (and their families) who
per cent.
lose their jobs and source of income simultaneously lose
• Brazil: Social assistance extension, raising of
affordable health services. Measures that protect the un-
old-age pension in line with minimum wage.
employed from losing access to health care, other social
• Chile: Extension of social pensions to another 5
per cent of the poor elderly, and a raise in the
services or other social benefits (like pensions, maternity
benefit level.
and family benefits) are crucial – but often forgotten –
• China: Gradual extension of old-age pensions
elements of the design of any scheme providing protec-
to the rural population; lower health insurance
tion to those affected by job losses.
premiums encouraged.
A number of countries, like Chile and Mexico, used
• France: 6.9 per cent increase in old-age pen-
lessons learned previously. Today, they are much better
sions; extension in health coverage.
prepared to cope with the consequences of the crisis.
• India: Expansion of pension and health cov-
Only a few countries have announced cuts and freezes
erage.
in social spending, normally as a way of limiting public
• Kenya: Cash transfers to the elderly.
sector debt. Most have sought to expand coverage or
• Pakistan: Health coverage and social safety net
increase benefit levels of pensions, health schemes and
extended.
family benefits. Examples are given in Box 13.
• Russian Federation: Pensions adjusted to infla-
tion forecast.
Conditional cash transfers
• United Republic of Tanzania: Increased mini-
mum pension benefit levels.
Several countries have expanded conditional cash
• United Kingdom: Child benefits increased.
transfers (CCT) that provide direct cash payments to
• United States: Extended health insurance cov-
recipients in exchange for an obligation to partake in
erage.
specific services. Conditions range from enrolling and
maintaining children in school to receiving medical
check-ups on a timely basis. Compared to uncondition-
1990s. Programmes in both Mexico and Brazil were
al cash transfers, CCTs influence household behaviour
later integrated into the larger well-known programmes
by tying supplemental income to choices that improve
of Oportunidades and Bolsa Familia. Evaluations find
their human capabilities in the long run. The premise is
that between the mid-1990s and the mid-2000s, these
that “affordability not availability is what constrains the
programmes were responsible for a 21 per cent reduc-
utilization of services”, and this is expected to be further
tion in income inequality in Brazil and Mexico, and
accentuated by the global crisis.40
constituted 50 and 25 per cent of incomes of the poor-
CCT programmes have gained in popularity since
est households, respectively. The Mexican programme
their success during the Latin American crisis of the
(with a focus on education) increased secondary school
enrolment by 11.1 percentage points, while simultane-
40
ously reducing the labour force participation of boys by
UNDP India, 2009. Conditional cash transfer schemes for al-
leviating human poverty: Relevance for India. April.
between 15 and 25 per cent (UNDP, 2009). In addition
Table 1. Coverage and investment of selected CCT programmes
Country (programme), year
Coverage
Investments in CCT
% of total
% of extremely
% of GDP
% of social
population
poor1
spending
Brasil (Bolsa Familia), 2006
22.7
>100.0
0.43
2.0
Mexico (Oportunidades), 2006
23.8
>100.0
0.44
4.3
Guatemala (MFP), 2008
13.6
46.7
0.06
0.8
Honduras (PRAF), 2006
6.8
14.9
0.02
0.2
Nicaragua (RPS), 2006
2.5
7.8
0.04
0.4
1 Does not consider exclusion or inclusion errors.
Source: Cecchini, 2009.
35
PROTECTING PEOPLE, PROMOTING JOBS
such programmes have been relatively cost effective, ac-
have posed challenges for the proper functioning of pro-
counting for 0.4 per cent of GDP in 2006 in both Bra-
grammes (Cecchini, 2009).
zil and Mexico.41
As programmes targeted at low-income households,
A number of countries have either bolstered or intro-
CCTs cannot replace a universal basic social protection
duced new CCT programmes during the current crisis,
system. They can, however, contribute to expanding the
as shown in Box 14.42
coverage of existing systems.
Spending on social protection
Box 14
Spending on social protection varies quite signifi-
• Barbados: A CCT programme is being devel-
cantly among countries. Public social protection spend-
oped jointly with the World Bank and the Inter-
ing tends to rise with economic development. Never-
American Development Bank to expand health
theless, there are wide variations between countries, as
care in the countries poorest areas.
Table 2 illustrates for the G20 countries.
• Belize: A CCT programme is being designed
with assistance from the World Bank.
• Colombia: Familias en Acción, a programme
Table 2. Public social protection spending as a per-
focusing on strengthening nutrition and educa-
centage of GDP
tion for children, is expanding to an additional
1.5 million families.
Indonesia (2004)
1.4
• Costa Rica: The Government has increased
India (2005)
1.5
coverage of CCT from 132,000 to 150,000
families.
China (2007)
2.9
• Honduras: The CCT programme Asignación
Familiar doubled in size from $20 to $40 mil-
Korea, Rep. of (2005)
6.9
lion, conditional on the health and education of
Mexico (2005)
7.0
children and expectant mothers.
• Mexico: The World Bank approved a $1.5 bil-
South Africa (2004)
8.8
lion loan to expand the Oportunidades pro-
Argentina (2004)
10.8
gramme, which is conditional on health and
nutrition for all members of the household.
Russian Federation (2006)
12.3
• Paraguay: The country has expanded the Teke-
Turkey (2005)
13.7
pora programme to benefit 120,000 extremely
poor families, increasing the total coverage to
United States (2005)
15.9
600,000 people (which is half of those living in
extreme poverty).
Canada (2005)
16.5
• Peru: Expanded coverage of CCT programme.
Australia (2005)
17.1
• Philippines: A CCT programme conditional on
education and health was introduced in 2008;
Brazil (2007)
18.6
additional resources to expand the programme
Japan (2005)
18.6
were provided in December 2008.
• Uruguay: The CCT programme expanded to
United Kingdom (2005)
21.3
cover all children (500,000) from low-income
households conditional on school attendance.
Italy (2005)
25.0
Germany (2005)
26.7
One of the criticisms of CCT programmes is the fo-
France (2005)
29.2
cus on demand constraints, ignoring problems of supply
capacity. CCTs were initially started in middle-income
Sources: ADB, CEPAL, IMF, OECD, ILO.
countries with adequate infrastructure and limited sup-
ply constraints. In low-income countries, weaker insti-
The crisis has highlighted the importance of auto-
tutional and statistical capacity and banking coverage
matic stabilizers in advanced countries as well as the
much smaller stabilisers in emerging countries, com-
pensated by larger fiscal stimulus. Gradual expansion
41 Cecchini, S. 2009. Do CCT programmes work in low-income
countries? One Pager No. 90, July, International Policy Centre for
of social protection coverage is a widely shared objec-
Inclusive Growth, Brasilia.
tive, the urgency of which is underscored by this cri-
42 Some of the information here is obtained from ECLAC, 2009,
sis. Social protection systems have a key role to play in
“The reactions of Governments of the Americas to the International
Crisis: An overview of policy measures up to 31 May 2009.” United
reducing global imbalances. The ILO and the WHO,
Nations, Chile.
within the United Nations High-Level Committee on
36
INFORMATION ANNEX 1
Programmes, are jointly developing the notion of a “so-
Box 15 provides selected examples from the ILO
cial protection floor” consisting of an essential body of
inventory of tripartite national consultations and agree-
rights, transfers and services that all countries should
ments.
progressively establish, according to their means and
Countries that have utilised social dialogue more
available external support. This should be a central ob-
extensively have been those with well-established insti-
jective of national development policies as advocated in
tutions and experience with consultations and negotia-
the Global Jobs Pact.
tions. Several of these are European countries (including
The OECD Development Assistance Committee re-
Belgium, the Czech Republic, Ireland and the Neth-
cently noted: “Social protection directly reduces poverty
erlands). In the Netherlands the social partners agreed
and helps make growth more pro-poor. It stimulates
on the need to maintain purchasing power and asked
the involvement of poor women and men in economic
the Government to postpone planned increases in val-
growth, protects the poorest and most vulnerable in a
ue-added tax. Spain was another country that moved
downturn and contributes to social cohesion and stabil-
rapidly to initiate social dialogue when the severe down-
ity. It helps build human capital, manage risks, promote
turn in the construction sector became apparent in the
investment and entrepreneurship and improve partici-
summer of 2008 and the parties formulated an impor-
pation in labour markets. Social protection programmes
tant agreement covering increased liquidity for compa-
can be affordable, including for the poorest countries,
nies, financial protection for housing construction and
and represent good value for money.”43
reforms to the vocational training system.
South Africa has a highly respected institution for
4. Social dialogue and rights at work
dialogue and negotiation over economic and social is-
sues. This forum (NEDLAC) has been utilised exten-
The forms and role of social dialogue vary from
sively, along with a Presidential initiative, to formulate
country to country depending on the magnitude and
a comprehensive national response to the crisis based on
composition of formal economic activity, labour leg-
the following principles: protection of the most vulner-
islation, levels and coverage of collective bargaining;
able groups of workers; economic growth to increase
the strength and legitimacy of the social partners; and
employment and guarantee the quality of jobs; high
the degree to which international labour standards and
investment in infrastructure; and a timely, targeted and
workers’ rights are respected. The crisis has not changed
tailored review of interventions.
this. Nevertheless, the crisis has spurred governments
and social partners in many countries to engage in con-
Countries as diverse as France, India, the Republic of
sultations and dialogue. This is borne out by the inven-
Korea and the Russian Federation also have formal con-
tory carried out by the ILO.
sultation mechanisms that have been extensively used in
the current recession. A wider range of countries have
In 32 countries, national consultations and dialogue
established informal or ad hoc mechanisms for consul-
between government, business and labour have taken
tations with the social partners and civil society.
place between mid-2008 and 31 July 2009. This is
equivalent to 59 per cent of the sample of countries
Among those countries that have reached national-
surveyed by the ILO. In 19 countries (35 per cent of
level agreements, one example is Japan, where a tripar-
countries) these consultations have led to the signing of
tite agreement was reached in March 2009 that provid-
a national agreement. This data is in line with an earlier
ed guidance and commitments on: the maintenance of
survey carried out by the ILO, which also pointed to
employment through work sharing and reduced work-
an increase in the practice of social dialogue, in all its
ing time; the expansion and strengthening of the social
forms, across a large and varied number of countries.44
safety net; support for vocational training and employ-
ment creation; and a special focus on expanding sectors
These initiatives are in line with the Global Jobs Pact
of the economy like medical services, care work, and the
adopted by the International Labour Conference in June
environment. An interesting example in Nigeria is the
2009, which states that: “especially in times of height-
“Abuja Declaration on Meeting the Employment Chal-
ened social tension, strengthened respect for, and use
lenges of the Global Economic and Financial Crisis”
of, mechanisms of social dialogue, including collective
adopted in April 2009.
bargaining, where appropriate at all levels, is vital.”
A much broader range of countries have engaged the
social partners in dialogue and have concluded national
43 OECD Development Assistance Committee. 2009. Making
agreements covering specific labour market measures,
Economic Growth More Pro-Poor: The Role of Employment and Social
such as extending the duration of unemployment ben-
Protection, Policy Statement, DAC High-Level Meeting, 27-28 May.
44
efits or the provision of partial unemployment benefits
Ludek Rychly. 2009. “Social dialogue in times of crisis: Finding
better solutions”, ILO, Working Paper, May.
to workers forced to accept a reduction in working time.
37
PROTECTING PEOPLE, PROMOTING JOBS
Box 15
Brazil
The tripartite-plus Economic and Social Development Council plays an important role in
monitoring the crisis, in addition to ad hoc meetings between President Lula and the social
partners.
Chile
A national tripartite agreement was signed in 2009 for training and employment protec-
tion, unemployment benefits and measures for women workers.
Dominican Republic In early 2009 a series of tripartite consultations were held, leading to agreements on
the protection and promotion of employment and the protection of workers’ rights in the
context of the crisis.
France
Series of ad hoc tripartite meetings, a Social Dialogue Summit with the President, use of
the National Labour Council, and a newly created tripartite commission on follow-up to
the crisis.
Germany
Series of ad hoc meetings and consultations at the national and regional levels, often
tripartite, a job summit, and a council of economic experts.
Indonesia
Industrial relations forum; national tripartite consultative body.
Ireland
National consultative bodies and ad hoc informal meetings, transitional agreement to im-
plement the joint medium-term plan “Towards 2016”, but talks on the economic recovery
programme stalled in February 2009.
Japan
National tripartite agreement signed in March 2009 on retaining jobs, social protection
and vocational training.
Republic of
Economic and social development commission; emergency meeting of labour, manage-
Korea
ment, civic groups and the Government (tripartite plus); series of formal and informal
meetings; adoption of tripartite-plus document called “The agreement by labour, manage-
ment, civic groups and the Government to overcome the economic crisis”.
Mexico
National tripartite agreement on labour productivity signed in May 2009.
Netherlands
National consultative bodies; informal meetings; social and economic council (tripartite
body); no agreement on wage moderation.
South Africa
The Presidential economic joint working group (tripartite), NEDLAC, in partnership with
the Presidency, established the framework for “South Africa’s Response to the Interna-
tional Economic Crisis” to be implemented and monitored through action plans and five
task teams.
Spain
Ad hoc meetings; series of informal consultations; social dialogue monitoring commission;
tripartite “Declaration of principles for the promotion of the economy, employment, com-
petitiveness and social progress” (29 July 2008).
The best-known example of the latter has been in Ger-
proven to be the most efficient in finding responses to
many with the Kurzarbeit scheme referred to previously.
the crisis. Previous experience also confirms that this
In Chile, in May 2009 a national tripartite agreement
type of structure works better then large advisory or
was concluded which covered a range of temporary
consultative councils with heavy structures and proce-
measures to protect employment and promote training.
dures. Second, centralised negotiations work best where
the agenda is reasonably comprehensive and there is
In some cases dialogue has failed to bridge differ-
scope for trade-offs and compromises. A narrow focus,
ent views. For instance, in both Spain and Ireland there
such as on labour cost reductions, is unlikely to lead
are disagreements over proposals designed to cut labour
to a successful negotiation. Third, centralised negotia-
costs or introduce measures to raise labour market flex-
tions often include measures designed to protect and
ibility.
improve the situation of the most vulnerable workers,
From the experience to date a few general conclu-
often unorganised, or on temporary or atypical employ-
sions can be drawn. First, it has been tripartite institu-
ment contracts, and migrant workers.
tions with a mandate for negotiations (rather than just
consultations) and which are composed of senior politi-
Experience from past crises suggests that pressures
cal figures, such as members of the Cabinet and high-
can build for labour market reforms that promise great-
level representatives of the social partners, that have
er flexibility and reduced labour costs. In slack labour
38
INFORMATION ANNEX 1
markets and an environment where labour costs com-
the enterprise level, but also at industry level. Conces-
petition is intensified the incentive to attempt to avoid
sion bargaining first emerged in organised workplaces
labour laws, ignore obligations in collective agreements
in the United States that were adversely affected by the
and infringe workers’ rights is heightened.
economic downturn and stagflation of the 1980s. Simi-
lar practices became prominent in a range of European
The concern for preventing a downward spiral in
and other industrialised countries in the 1990s when
labour conditions is noted in the Global Jobs Pact. Al-
economic growth was subdued and labour markets de-
ready in November 2008, the Officers of the ILO Gov-
teriorated. In the last 18 months reliance on such prac-
erning Body issued a statement on the global economic
tices has increased dramatically across a broad range of
crisis which warned that social progress should not be
countries as management and trade unions have strived
undermined by the crisis.45
to limit job cuts and reduce costs in credit-starved com-
It is encouraging to note that to date there are not
panies.
many examples of countries that have weakened their
labour legislation in response to the current recession.
Concession bargaining can take many forms, and at
A few countries, including the Republic of Korea and
its best can lead to a widening of the collective bargain-
Argentina, have indicated that they have strengthened
ing agenda and increased cooperation between manage-
their labour administration and labour inspection sys-
ment and workers. Some bargaining is set on defensive
tems in response to such pressures. Another example is
or reactive strategies with a narrow focus on reducing
the Fair Work Act recently adopted in Australia.
labour costs through wage cuts or wage moderation be-
China has taken steps to improve the legislative
low what had previously been agreed, with a view to
framework for labour relations. In the first half of 2008
saving jobs in the short term. Other proactive strategies
the Government of China adopted several new laws in
aim to reduce unit labour costs through productivity-
an attempt to mitigate the non-payment of wages and
enhancing improvements in work organisation or other
a range of other labour abuses. These legal reforms in-
process or product innovations. The latter often include
cluded the enactment of the Labour Contract Law, the
a focus on training, the transfer of workers into more
Employment Promotion Law, and the Labour Dispute
productive units, multi-skilling, investment in new
Mediation and Arbitration Law.46 The strengthening
products or technology, and functional flexibility.
of labour institutions in China is an important part
The introduction of more coordinated collective bar-
of its agenda to achieve greater income equality, boost
gaining that provides greater scope to take into account
domestic demand and sustain high levels of economic
the public interest and broad economic developments is
growth.
highly desirable in the present circumstances. However,
The current crisis has seen a wave of “concession
even if a move to coordinated collective bargaining is
bargaining” where the parties to a collective agreement
not feasible in the short term, a greater degree of social
freely renegotiate the terms of an agreement with a
dialogue on appropriate measures to counter the crisis
view to saving jobs. Bargaining of this nature normally
and its effects on workers and families is desirable. By
takes place between trade unions and management at
involving employers’ organisations and trade unions in
dialogue about the current economic outlook and the
45 Statement of the Officers of the ILO Governing Body, No-
policy options available, governments can maximise
vember 2008.
46
their chances of securing support for maintaining ex-
Dr Fang Lee Cook: “The enactment of three new labour laws
in China: Unintended consequences and the emergence of new actors
pansionary, yet non-inflationary, macroeconomic poli-
in employment relations”, June 2009.
cies until economic recovery is well established.
39
Annex 2
List of countries covered in the ILO survey 47
Low income
Lower middle
Upper middle
High income
income
income
Sub-Saharan Africa
Kenya, Mali, Senegal, Nigeria
South Africa
Tanzania (United
Rep. of), Rwanda,
Uganda
Americas
Honduras
Argentina, Brazil,
Canada, Caribbean*
Chile, Colombia,
(Bahamas, Barbados,
Costa Rica,
Trinidad and Tobago,
Dominican Republic, Jamaica), United
Mexico, Peru,
States
Uruguay
Arab States
Egypt, Jordan
Bahrain, Saudi Arabia
Asia Pacific
Bangladesh,
China, India,
Malaysia
Australia, Japan,
Cambodia, Nepal,
Indonesia, Pakistan,
Korea (Rep. of)
Viet Nam
Philippines
Europe (East and
Ukraine
Latvia, Poland,
Czech Republic,
West)
Romania, Russian
France, Germany,
Federation, Serbia,
Hungary, Ireland,
Turkey
Italy, Netherlands,
Spain, United
Kingdom
Total
10 countries
10 countries
17 countries
17 countries
* The ILO survey covered four countries of the Caribbean computed as one entity and classified as high income. Jamaica is
classified as an upper-middle-income country.
47 The country income classification adopts the World Bank classification based on gross national income (GNI) per capita. Regional clas-
sification follows ILO groupings.
41
protecting people, promoting jobs
AnneX 3
Annex 3 inventory tables of measures taken
1. Stimulating labour demand
2. Supporting jobseekers, jobs and the unemployed
Countries
Fiscal spending on infrastructure
Public
Targeted employment
New support to small enterprises
Helping the unemployed to find a job
Employment retention measures
Measures to protect
employment programmes
and micro-entrepreneurs
the unemployed
Additional
Employment Green
Introduction Recent
Access
Access
Subsidies
Additional
Increased
New measures
Work-time
Partial
Wage
Extension of
Additional social
spending
criteria
criteria
of new
expansion
to credit
to public
Tax
training
capacity of
for migrant
reductions
unemployment, reductions
unemployment
assistance/
programmes of existing
tenders
reductions
measures
public
workers
(daily, weekly,
training
benefits
protection
programmes
employment
monthly,
measures
measures
services
annually, unpaid to promote
leave)
part-time work
AFRICA
Egypt
x
x
x
Kenya
x
x
x
Mali
x
x
x
x
Nigeria
x
x
x
x
x
Rwanda
x
Senegal
x
x
x
South Africa
x
x
x
x
x
x
x
Tanzania (United
x
x
Rep. of)
Uganda
x
AMERICAS
Argentina
x
x
x
x
x
x
x
Brazil
x
x
x
x
x
Canada
x
x
x
x
x
x
x
x
Caribbean
x
x
x
x
Chile
x
x
x
x
x
x
x
x
Colombia
x
x
x
x
Costa Rica
x
x
x
x
x
x
Dominican Republic
x
x
x
x
x
x
Honduras
x
x
x
Mexico
x
x
x
x
x
x
x
Peru
x
x
x
x
x
x
x
United States
x
x
x
x
x
x
x
x
x
x
x
Uruguay
x
x
x
x
x
x
x
ARAB STATES
Bahrain
x
Jordan
x
x
x
x
x
x
x
Saudi Arabia
x
x
x
x
x
ASIA PACIFIC
Australia
x
x
x
x
x
x
x
x
x
Bangladesh
x
x
x
x
Cambodia
x
x
x
x
x
China
x
x
x
x
x
x
x
x
x
x
India
x
x
x
x
x
x
Indonesia
x
x
x
x
x
Japan
x
x
x
x
x
x
x
x
x
x
x
Korea, Rep. of
x
x
x
x
x
x
x
x
x
x
x
x
x
Malaysia
x
x
x
x
x
x
x
x
x
Nepal
x
x
x
x
x
Pakistan
x
x
x
x
x
x
x
Philippines
x
x
x
x
x
x
x
x
x
x
x
Viet Nam
x
x
x
x
x
x
x
x
EUROPE
Czech Republic
x
x
x
x
x
x
France
x
x
x
x
x
x
x
x
x
x
Germany
x
x
x
x
x
x
x
Hungary
x
x
x
x
x
x
x
x
x
x
x
Ireland
x
x
x
x
x
x
x
x
x
Italy
x
x
x
x
x
x
x
x
Latvia
x
x
x
x
x
x
x
Netherlands
x
x
x
x
x
x
x
x
Poland
x
x
x
x
Romania
x
x
x
x
x
x
x
Russian Federation
x
x
x
x
x
x
x
x
x
Serbia
x
x
x
x
x
x
x
x
x
x
Spain
x
x
x
x
x
x
x
x
Turkey
x
x
x
x
x
x
42
Ukraine
x
x
x
x
x
x
x
x
x
United Kingdom
x
x
x
x
x
x
x
x
x
43
protecting people, promoting jobs
AnneX 3
3. Expanding social protection and food security
4. Social dialogue and rights at work
Countries
Social protection
Food security
Social dialogue
Rights at work
Tax reduction Additional
Increased
Changes Changes to New measures Introduction of New support
Consultation on
Agreements at
Agreements at the Additional
Additional
Other changes
Increased
cash transfers access to
in old-age minimum
for migrant
food subsidies to agriculture
crisis responses
the national level
sector level
measures taken
measures taken
in labour legislation capacity of labour
health benefits pension
wage
workers
to fight labour
to fight child labour
administration/
trafficking
labour inspection
AFRICA
Egypt
x
x
x
x
x
Kenya
x
x
x
x
Mali
x
Nigeria
x
x
x
Rwanda
x
x
Senegal
x
x
x
x
South Africa
x
x
x
x
x
Tanzania (United
x
x
x
x
Rep. of)
Uganda
x
AMERICAS
Argentina
x
x
x
x
x
Brazil
x
x
x
x
x
x
Canada
Caribbean
x
x
x
x
Chile
x
x
x
Colombia
x
Costa Rica
x
x
x
x
x
Dominican Republic
x
x
x
Honduras
x
x
x
x
x
Mexico
x
x
Peru
x
x
United States
x
x
x
x
Uruguay
x
x
x
ARAB STATES
Bahrain
x
x
Jordan
x
x
x
x
x
x
x
x
x
x
x
Saudi Arabia
x
x
ASIA PACIFIC
Australia
x
x
x
x
Bangladesh
x
x
x
x
Cambodia
x
x
China
x
x
x
x
x
x
India
x
x
x
x
x
x
x
Indonesia
x
Japan
x
x
x
x
Korea, Rep of
x
x
x
x
x
x
x
Malaysia
x
x
x
Nepal
x
x
x
Pakistan
x
x
x
x
Philippines
x
x
x
Viet Nam
x
x
x
x
x
x
EUROPE
Czech Republic
x
x
x
x
x
France
x
x
x
x
x
Germany
x
x
x
x
x
x
Hungary
x
x
x
x
x
Ireland
x
x
x
Italy
x
x
x
Latvia
x
x
x
x
x
Netherlands
x
x
x
x
x
Poland
x
x
x
Romania
x
x
x
x
x
x
x
Russian Federation
x
x
x
x
x
x
x
Serbia
x
x
x
Spain
x
x
x
x
x
Turkey
x
x
x
x
44
Ukraine
x
x
x
x
United Kingdom
45
x
x
x
x
x
Annex 4
estimating the employment impact of stimulus
measures in G20 countries
Are the crisis response measures taken by G20
Assessing the rise in the number of unemployed
countries to support employment in proportion to the
persons in the G20 countries
observed downfall in employment and the increase in
The cumulated net increase in the number of unem-
unemployment? Both the ImF and the OecD have
ployed for the G20 countries in early 2009 is estimated
estimated the additional economic growth that could be
at 25.2 million. This number is derived from the un-
expected from the additional fiscal spending decided by
employment rates in the first and second quarters of
governments. This annex seeks to estimate the addition-
al employment to be expected from the fiscal stimuli
2009 (as per data availability) with those prevailing at
decided by governments in G20 countries48 based on
the turning point, upwards, of the unemployment rate
ImF calculations.49
in 2008 in each of the G20 countries.
While the observed relationships between growth
and employment are subject to substantial variation
The potential impact of the announced discre-
over time and across countries, the ILO has estimated
tionary fiscal stimulus on employment
the aggregate effect on employment of the additional
The size of the discretionary fiscal stimulus for the
fiscal spending decided by governments in response to
G20 countries, for 2009 and 2010, is given in table 1.
the crisis. In assessing the projected impact of stimula-
The aggregate discretionary stimulus for the G20 coun-
tion measures on employment, account is taken of both
tries amounts to 1.4 per cent of GDp for 2009 and 1.3
additional discretionary fiscal spending and of automat-
per cent for 2010. table 1 shows that this discretion-
ic spending (or automatic stabilisers).
ary stimulus is estimated to enhance GDp growth by a
The purpose of the estimation is to provide an order
weighted average ranging between 0.4 per cent and 1.3
of magnitude of the expected impact on employment
per cent in 2009, and by a lower range of between 0.1
of the measures taken by governments to respond to
per cent and 0.3 per cent in 2010. This discretionary
the crisis.50
stimulus multiplier is seen to be just less than 1 for
2009, but drops significantly for 2010.
The ILO has estimated the potential impact of the
discretionary stimulus on employment, based on the
48 The group of G20 countries used here is composed as follows:
ImF projected impact on GDp growth. There are two
Argentina, Australia, Brazil, canada, china, France, Germany, India,
important qualifications to this exercise, which apply
Indonesia, Italy, japan, Republic of Korea, mexico, Russian Federa-
equally for the stimulus multipliers estimated by the
tion, saudi Arabia, south Africa, spain, turkey, United Kingdom,
United states.
ImF and for the employment multipliers estimated
49 ImF. 2009. Note to Group of twenty Deputies, 31 january-1
by the ILO. The main assumption is that the stimulus
February, at http://www.imf.org/external/np/g20/pdf/020509.pdf.
amount will be spent fully. A second qualification is that
50 This order of magnitude recognizes a number of caveats in the
the full amount may not be spent in the fiscal year for
single-equation methodology used here, namely, projecting a short-
term employment effect based on a historical employment to GDp re-
which the stimulus has been budgeted and announced.
lationship, ignoring here cross-country differences in labour markets,
The exercise assumes that the potential impact of the
the composition of fiscal packages which may have different employ-
ment effects, and ignoring the interactions between employment and
stimulus applies to the full expenditure of this amount,
monetary policy.
over the total time taken.
46
ANNeX 4
The ILO has estimated long-term employment elas-
In aggregate, over 2009 and 2010, the discretionary
ticities with respect to GDp growth for all the G20
stimulus has the potential to generate employment in a
countries over 1997-2007. This ten-year period has
band range of 2.3 to 6.6 million.
been chosen because it spans several crises, including
The employment generated by the discretionary
recovery of GDp growth and employment from the
stimulus is equivalent to between 9 and 26 per cent of
Asian crisis of 1997-98 and the global synchronised re-
the increase in unemployment in the first half of 2009
cession in 2000-01. These employment elasticities with
(relative to 2008).
respect to GDp growth reflecting periods of crisis and
recovery make them more suited to estimating recovery
The projected impact of automatic stabilisers on
in employment through the stimulus package and the
employment
automatic stabilisers. The elasticities have been estimat-
to this potential employment impact of the discre-
ed in log linear form to dampen the effect of outliers
tionary fiscal stimulus undertaken by the G20 countries
stemming from black swan events.
must be added the potential impact of the non-discre-
The ImF’s estimated impact of the discretionary
tionary automatic stabilisers at work as a result of the
stimulus on GDp growth, multiplied by the ILO’s em-
drop in GDp growth.
ployment elasticities for GDp growth, gives a potential
The potential impact of non-discretionary automatic
impact of the stimulus on employment growth. It is
stabilisers on employment has been estimated using
important to note that these estimates are not precise
the same method as for the discretionary stimulus. The
projections, but orders of magnitude. They are meant
ImF has estimated the size of the automatic stabilis-
to indicate the approximate impact of the stimulus in
ers for 2009 for the G20 countries. since the stabiliser
creating jobs, relative to the size of the unemployment
is estimated as a fiscal balance which is deteriorating
generated by the crisis.
with GDp growth, its sign is negative, while its impact
on GDp growth is immediately positive. so the ImF’s
table 1 translates the projected increase in employ-
projected impact of the stabilisers ranges between 2 per
ment growth as a result of the discretionary stimulus into
cent of GDp for the United Kingdom, the Republic of
an increase in the number of persons employed, over
Korea, France, spain and Germany, 1.5 per cent for the
2009 and 2010. The table shows that the discretionary
United states, and 0.25 per cent to 0.5 per cent for the
stimulus has the potential to increase employment in a
emerging economies like Brazil, china, India, Indonesia
band range of 2.0 to 5.7 million over 2009. Over 2010,
and south Africa. The weighted average of these stabilis-
the increase in employment is expected to drop, but still
ers across the G20 countries is estimated at 1.2 per cent,
generate between 0.3 and 0.9 million jobs.
as indicated in table 2.
Table 1. Discretionary fiscal stimulus impact on employment
Size of stimulus1
Stimulus
Employment
Discretionary fiscal stimulus impact on employment3
(% of GDP)
impact on
level2
Total
GDP growth1
(million)
(PPP weighted
(%)
average)
Change in
Employment
Change in
Employment
Change in
employment
level
employment
level
employment
(million)
(million)
(million)
(million)
(million)
2008
2009
2010
2009
2010
2008
2009
2009
2010
2010
2009 +
2010
G20
0.5
1.4
1.3
0.4 –
0.1 –
2026.12
2.030 –
2028.15 -
0.316 -
2028.46 -
2.346 -
countries
1.3
0.3
5.704
2031.82
0.899
2032.72
6.603
Increase
0.100 –
0.02 - 0.04
(%)
0.282
1 IMF, 2009.
2 Computed from: Instituto Nacional de Estadística y Censos; Encuesta Permanente de Hogares, 2009; Organisation for Economic
Co-operation and Development (OECD), 2009; Ministry of Labour and Social Security, National Bureau of Statistics, China, 2009;
Economist Intelligence Unit (EIU), 2009; Economist Intelligence Unit and Central Bureau of Statistics (EIU and CBS), 2009; Saudi
Arabian Monetary Agency (SAMA), 2009.
3 Computed by ILO, 2009, based on employment elasticities for 1997-2007.
47
pROtectING peOpLe, pROmOtING jOBs
table 2 then estimates the potential impact of these
in unemployment estimated in G20 countries in the
automatic stabilisers on employment growth, and the
first half of 2009.
increase in the number of people employed over 2009,
The order of magnitude estimated here is significant.
for each G20 country. The aggregated increase in em-
Automatic stabilisers will continue to work beyond
ployment for all the G20 countries is estimated to gen-
2009, while GDp growth is projected to remain weak.
erate 5.2 million jobs in 2009.
The discretionary fiscal stimulus is likely to start taper-
ing off in 2010 and thereafter.
The combined impact on employment of discre-
While providing a significant boost to employment
tionary fiscal spending and automatic stabilisers
generation at a time when jobs are hard to find, the fiscal
The combined potential impact of the two macro
measures wil need to be relayed by market-led economic
stimuli, the discretionary fiscal stimulus adopted by the
growth as quickly as possible in order to generate the jobs
G20 countries and the automatic stabilisers at work in
required for al the persons looking for one. This raises
these countries, is estimated to generate between 7.2
the related issue of the employment content of economic
and 10.9 million jobs in 2009. This is equivalent to
growth and the quality of the employment generated.
between 29 and 43 per cent of the 25 million increase
Table 2. Impact of automatic stabilizers on employment
Size of automatic stabilizers,
Employment level2
Impact of automatic stabilizers on
2008-091
(million)
employment3
(% of GDP)
Total
Change in
Employment level
(PPP weighted average)
employment
(million)
(million)
2009
2008
2009
2009
G20 countries
-1.2
2026.12
5.17
2031.28
Increase (%)
0.25
1 IMF, 2009.
2 Computed from: Instituto Nacional de Estadística y Censos, Encuesta Permanente de Hogares, 2009; Organisation for Economic
Co-operation and Development (OECD), 2009; Ministry of Labour and Social Security, National Bureau of Statistics, China, 2009;
Economist Intelligence Unit (EIU), 2009; Economist Intelligence Unit and Central Bureau of Statistics (EIU and CBS), 2009;
Saudi Arabian Monetary Agency (SAMA), 2009.
3 Computed by ILO, 2009, based on employment elasticities for 1997-2007.
48
Annex 5
Fast recovery in employment:
The challenge and the options
In 2008 the crisis ended the long-term decline in
four bottom lines depict possible trajectories or sce-
global unemployment. The gap between employment
narios, each illustrating different assumptions about the
generation and labour force supply, growing at approxi-
pace of output recovery and the ratio of employment
mately 45 million per year, is widening again.
growth51 to output growth.
to gauge the scale of the employment challenge, the
If growth picks up rapidly and the job content of
following figure illustrates four possible trajectories for
growth is high the accumulating jobs shortfall can be
global employment growth for the period up to 2015,
pulled back within three to four years. This is the as-
the horizon set for the millennium Development Goals.
The top line is the growth in the world’s economically
51 The figure refers to total employment growth, irrespective of
active population, reaching 3.5 billion in 2015. The
the quality or income levels associated with employment.
49
pROtectING peOpLe, pROmOtING jOBs
sumption in the best-case scenario 1, with strong re-
acterized by a weak economic recovery (world economic
covery (above 4 per cent world economic growth as
growth between 2 and 4 per cent to 2014) and a relatively
of 2011) and strong employment content of growth
low employment to growth elasticity (of 0.4 per cent).
(elasticity of 0.6 per cent).52 This scenario shows that
scenarios 2 and 3 present intermediate trajectories.
in 2012 global unemployment would be lower than in
scenario 2 retains the fast economic recovery assump-
2007. Under such conditions, the shortfall, the distance
tion of scenario 1 but with a slightly weaker employ-
between the labour supply line and employment, will
ment elasticity of 0.5 per cent. scenario 3 assumes a
have been reduced.
weak recovery with the same employment elasticity (0.5
However, if recovery is weak and its job content also
per cent) as scenario 2.
weak, the employment shortfall (the gap between labour
The figure illustrates one major conclusion. strong
supply and employment) wil remain wide wel after
employment growth and strong economic growth are
2015. This is reflected in the worst-case scenario 4, char-
both essential. policies should remain focused on both
objectives in order to reduce the lag in the recovery of
global employment. subsuming one (employment) un-
52 An employment elasticity coefficient (here 0.4, 0.5 and 0.6 per
cent) is the increase in employment expected from a 1 per cent in-
der the other (economic growth) is likely to yield so-
crease in economic growth.
cially and economically inadequate results.
50
