Warning of social unrest during jobless recovery

Economics Editor,Sean O'Grady
Saturday 02 October 2010 00:01 BST

Britain faces mounting social unrest as unemployment, especially among the young, is set to remain stubbornly high, according to a stark warning from the International Labour Organisation. It adds to concerns that a “jobless recovery” could leave many idle for years.

In its latest review of prospects for the world economy, the ILO says that, globally, employment levels will not recover to pre-crisis levels before 2015, two years later than previously estimated. The ILO says that the austerity policies being undertaken by governments around the world threaten to generate a long “labour market recession”. The organsiation cautions that 22 million new jobs will need to be created – 14 million in rich countries and 8 million in developing nations.

“There has been too much focus on how much further we are going into debt, when the question is how much more we should invest to get the real economy going,” the director general of the ILO, Juan Somavia, told Reuters. He added that stimulus withdrawal was “going too soon, too fast” to underpin a “fragile” global economic recovery from the financial crisis.

“Fairness must be the compass guiding us out of the crisis. People can understand and accept difficult choices, if they perceive that all share in the burden of pain. Governments should not have to choose between the demands of financial markets and the needs of their citizens. Financial and social stability must come together. Otherwise, not only the global economy but also social cohesion will be at risk.”

Since the crisis started in 2007, some 30 to 35 million jobs have been lost worldwide. The ILO forecasts that global unemployment will hit 213 million this year, or 6.5 per cent. Overall, British unemployment compares relatively well, with a rate of 7.8 per cent, but youth unemployment, at 915,000 or 19.2 per cent, is higher than most comparable European economies and above its early 1990s peaks.

After the peak of new unemployment, in 1990, it took 11 years for British youth unemployment to subside, and the potential human waste implied by current high levels of unemployment among the under-25s is highlighted by the ILO: “The longer the labour market recession, the greater the difficulties for jobseekers to obtain new employment,” the ILO report said.

“In the 35 countries for which data exists, nearly 40 per cent of jobseekers have been without work for more than one year and therefore run significant risks of demoralisation, loss of self-esteem and mental health problems. Importantly, young people are disproportionately hit by unemployment.”

While not in the “high risk” category for social unrest, a group which includes Mexico and Peru, the UK is bracketed with Spain, South Africa and Russia as being at “medium risk” of strikes and protests over austerity measures: “Besides the documented cases of social unrest, there is a real danger that the situation could worsen in the coming months.”

Thousands demonstrated across Europe on Wednesday, with Spain witnessing its first general strike in nine years. Yet governments are also under renewed market pressures to cut their borrowing and implement austerity packages, highlighted by the latest downgrade for Spain’s credit rating and the dramatic news that Ireland’s borrowing will approach a third of GDP this year, to fund a €50bn (£43bn) bank bailout package. The IMF offered a warm endorsement of the British government’s plans and its Global Financial Stability Report recommended similar actions across the world.

Many countries that experienced positive employment growth at the end of 2009 are now seeing a weakening of the jobs recovery. By the end of 2009, more than four million jobseekers had stopped looking for work in the countries for which information is available.

The ILO concludes: “The coexistence of private-debt-led growth in certain developed countries with export-led growth in large emerging economies has proved to be the Achilles heel of the world economy. Recovery will be fragile as long as labour incomes continue to grow less than justified by productivity developments and the financial system remains dysfunctional.”

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