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Report Says Global Jobs Crisis Will Worsen if Stimulus Funds Cut

  • Lisa Schlein

ILO report says more than 40-million people could drop out of the labor market

A new report warns the global jobs crisis will worsen if nations phase out their stimulus packages too soon. The International labor Organization's World of Work Report says more than 40-million people could drop out of the labor market unless adequate measures are adopted to create new employment.

Economically, things are looking up. The world is showing encouraging signs of a recovery, with the International Monetary Fund predicting more than three-percent economic growth for 2010.

But as far as jobs go, the crisis is far from over and according to the International Labor Organization could get even worse. In 51 countries surveyed, the ILO finds at least 20-million jobs have been lost, since October 2008, when the financial crisis started.

The lead author of the ILO report, Raymond Torres, warns about five million workers are at risk of losing jobs if governments withdraw their support or the economic rebound is not strong enough.

Unless action is taken, he says almost 43 million people would drop out of the labor market altogether. "This is what happened in earlier crises. For example, in the early '90s in the European Union, long-term unemployment increased by over eight percentage points. And, this is a situation where the recession was much milder compared to the present crisis. In developing countries, of course, there is a risk of prolonged informality. People shifting from formal, good jobs to informal, precarious jobs," he said.

Torres says there is a significant risk of negative, long-lasting social and economic consequences when people shift to long-term joblessness or drop out of the labor market entirely. He says it is crucial for those people who have already lost their jobs to maintain them in the labor market. "When there are very few jobs being created, the activation policy has to change. This, in particular, requires sometimes subsidized jobs for people who risk dropping out of the labor market - vulnerable groups, some young people for example. Sometimes it requires training for people whose skills become obsolete. In all of the cases, it is very important that public employment services have enough staff to keep in touch with job seekers," he said.

The report shows a continuation of fiscal stimulus measures, if well focused on jobs, would raise employment by seven percent compared to an early exit situation. It says tackling the jobs crisis now would support economic growth and budgets in the long-term.

Torres says some countries, notably, Australia, Brazil, Germany, Jordan and South Korea have protected jobs by focusing on employment, social protection and skills. He says these measures have been relatively cost-effective and supportive of employment.

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