The 136-page report, which understandably adopts a pro-labor viewpoint, is divided into four chapters: (1) The Global Jobs Crisis: Patterns and Medium-Term Scenarios; (2) Making Finance Work for the Real Economy: Challenges for Policy; (3) Rebalancing Globalization: The Role of Labor Provisions in Existing International Trade Arrangements and Development Finance Policies; and (4) Green Policies and Jobs: A Double Dividend? It frequently references last June’s ILO Summit on the Global Jobs Crisis and the Global Jobs Pact issued after the summit. It urges governments to avoid premature withdrawal of stimulus measures despite the fiscal pressures now facing them.
The report stresses that since the onset of the global crisis, over 20 million jobs have disappeared. Moreover, as many as 5 million jobs might be at risk, jobs that are owed to precarious government policies that have enabled short or part-time work. There is also the risk that globally close to 43 million job losers as well as new entrants could drop out of the labor market or become structurally unemployed. In developing countries, higher levels of informal employment could persist well beyond the crisis. In developed countries, the long-term unemployment rates could remain much higher than the pre-crisis levels even after the crisis. What is of great concern, due to their potentially explosive social and political consequences, are the wide gaps in the state-provided social safety nets for the unemployed and the underemployed who need income and other support.
The report argues that the jobs crisis largely reflects the perverse effects of excessive “financialization,” i.e., the increasingly important role of financial markets, to the detriment of the real economy. The financial sector’s share of total corporate profits rose from 25 percent in the early1980s to 42 percent preceding the crisis; its profits as a share of total wages and salaries jumped from 24 percent to 40 percent during 1990-2005. To attract the brightest top business school graduates, it offered rapidly rising real compensation as real wages in the real economy stagnated in the last 15 years.
Furthermore, enticed by the prospects of quick high returns in financial investments, pressured to pay more dividends and lured by lucrative leveraged buyouts, non-financial firms invested a decreasing proportion of profits in physical capacity. According to the report, costly government bailouts of the financial sector, especially in developed countries, coupled with the huge fiscal stimulus packages to combat the great recession, have created gaping budget deficits and heavy public debt burdens. It urges government structural actions to ensure that the financial sector supports the sustainable development of the real economy.
The report focuses, in considering how globalization can be made fairer in the wake of the global crisis, on two crucial issues with social dimensions: labor provisions in international trade arrangements and the policies of development finance institutions. It notes approvingly the rising incidence of labor-friendly measures in both during the last 25 years, assigning much credit for them to the ILO’s efforts. In its last chapter, the report turns to the controversial topic of climate change. It advocates strong action to arrest climate change, based on a 50 percent reduction in global CO2 by 2050. Although it acknowledges that moving from a high to low-carbon economy would be costly and painful, it argues that green policies would also generate many new jobs, mitigating the job losses in fossil-fuel dependent sectors and firms. These policies, through carbon taxes or cap-and-trade systems, could raise substantial public revenues. Specifically, it proposes a tax on CO2 emissions to finance cuts in labor taxes that would increase employment by 0.5 percent by 2014, equivalent to over 14.3 million net new jobs globally.
The report’s findings about the Turkish jobs crisis are presented under five headings: (1) What has happened in the world of work? (2) What are the near-term implications for employment? (3) How has the government mitigated the crisis impact? (4) More still could be done to strengthen social protection, and (5) Green policies, not only for a sustainable future, but also for jobs. The Turkish jobs crisis entailed severe employment losses, over 2 million jobs during August 2008-February 2009, despite the recent modest gains, 40,000 between August 2008 and August 2009.
The unemployment rate rose sharply from 10.2 percent in August 2008 to 13.4 percent in August 2009. (According to the most recent Turkish Statistics Institute [TurkStat] data released on Dec. 15, the rate stayed at 13.4 percent in September.) As for the near-term implications for employment, the expansion of the informal sector and the lower female and youth labor force participation rates are of concern.
The Turkish government has mitigated the impact of the crisis by strengthening social protection, providing credit to small and medium-sized enterprises (SMEs), boosting domestic demand, and decreasing working hours while increasing part-time employment in state-supported firms and providing incentives for hiring. But the government can still do more, argues the report.
It can further strengthen social protection since there are wide gaps in unemployment insurance coverage and other benefits, such as old age and widows’ pensions, work injury and disability benefits, especially in the expanding informal sector. The schism in the Turkish labor market is not only between those who are employed and unemployed but also between those who are protected by social safety nets and those who are not. The latter problem could become worse as the jobs crisis continues, requiring the government to do even more in protecting those most vulnerable.
Like other countries, Turkey could benefit from green policies for a sustainable future by moving from a high to a low-carbon economy, for example, in encouraging electronic cars. There is significant potential for the creation of new jobs as new markets open through eco-innovation with investments in energy-efficient production methods. But as we learned again from the outcome of the UN Copenhagen Climate Change Conference 2009 (see my last two columns), green policies face tough obstacles both nationally and globally, the report’s enthusiastic support for them notwithstanding.
