Sharan Burrow, General Secretary, International Trade Union Confederation (ITUC)
At the Pittsburgh G20 Summit in September 2009, world leaders made the following statement: “We commit to implementing recovery plans that support decent work, help preserve employment, and prioritise job growth”.
But just a few months later, with unemployment still substantially higher than before the crisis, many of them abandoned the stimulus policies needed to maintain and increase employment. The shift toward austerity is now a significant drag on the job market in most OECD countries. This article describes the measures that governments need to implement in order to get back on track, by prioritising decent work through public investment, social protection and respect for workers' rights.
The first step to solving the jobs crisis is acknowledging its gravity. Despite a modest recovery in economic output, unemployment rates remain well above pre-crisis levels. Furthermore, these official measures do not include workers who have dropped out of the labour force altogether or have been unable to enter it at all.
Not only are more workers unemployed, but many are unemployed for longer periods of time. Many jobless workers are exhausting whatever unemployment benefits they may receive and falling into poverty. The longer a worker is unemployed, the more his or her skills can deteriorate or become outdated; the risk is that cyclical unemployment from the recession will become long-term structural unemployment. But policymakers must not be allowed to claim that some such increase in the “natural rate of unemployment” could excuse their inaction. The appropriate response is a determined effort to get people back to work, or at least into training programmes with income support, before structural unemployment sets in.
A strong job market is essential to the majority of people who derive their income from employment. It is also a necessary, if not sufficient, condition for meeting other major economic challenges. Sustainable economic growth requires consumer spending to be financed by employment income rather than consumer credit. In that regard a strong job market is not some eventual, positive side-effect of economic recovery, but the engine of economic recovery.
Furthermore, additional employment income, and hence tax revenue, is the ultimate key to reducing government deficits. Conversely, attempts to reduce deficits by slashing spending- with corollary negative effects on employment-threaten to drag the global economy back into recession. The combined impact of reduced tax receipts, together with higher transfers through unemployment benefits, would lead, paradoxically, to yet higher deficits. Consequently, premature efforts to end fiscal stimulus by cutting deficits rather than through economic growth would actually end up worsening national debt situations.
Rather than prioritising targets to reduce budget deficits, limit inflation or increase exports, therefore, OECD governments should make creating jobs and reducing unemployment equally explicit or, if anything, more important public policy goals.
Output and employment can recover only given sufficient demand. With consumer spending, business investment and international trade still depressed, government expenditure remains an indispensible source of demand. Stimulus programmes must therefore be continued, but should be evaluated and revised to ensure that they support the largest amount of employment.
Public investments can and should also address longer-term challenges. Climate action and investment in green jobs can lay the basis for further high value-added investments by both public and private sectors in building the infrastructure for a low-carbon economy.
In addition to physical infrastructure, governments should invest in social infrastructure by providing quality public services. Expenditure on education and training, for example, contributes to aggregate demand and directly creates jobs. However, it can also engage and assist those workers who remain jobless. Periods of high unemployment can be considered the best time for workers to participate in formal education and training programmes outside the workplace.
A common argument heard in Europe is that European countries do not need fiscal stimulus because they already have relatively strong social programmes that serve as “automatic stabilisers”. But programmes to stabilise the economy's routine ups and downs do not negate the need for additional stimulus to recover from the worst recession since the Great Depression. Stimulus and automatic stabilisers should not be viewed as substitutes; both are needed.
The government's own employees are an important segment of the job market. Cutting back public sector jobs and salaries will weaken consumer demand, and hence the wider economy. It would also set a lower standard for labour negotiations in the private sector, which stands to further undermine demand and growth.
The crisis has underscored the importance of social safety nets to protect citizens from economic circumstances beyond their control. Continuing high unemployment should prompt improvements in the accessibility, level and duration of unemployment benefits. Increased poverty should prompt stronger income-support programmes. The widespread loss of private savings during the stock market crash should prompt enhanced public pension benefits.
These programmes clearly make the most difference to those who are unemployed or retired. However, knowing that such safeguards are adequate would make all citizens more confident and more willing to make major purchases. At a macroeconomic level, programmes that automatically expand if the economy contracts provide much needed stability.
Minimum wages are an essential form of social protection for workers. They also help ensure that any tax benefits for employment income actually help low-income workers rather than allowing employers to pay lower pre-tax wages. At a macroeconomic level, minimum wages limit the possibility of deflation. Consequently, minimum wage schemes need to be broadened and, in view of the high consumption propensity of lower-income workers, minimum wages need to be raised.
Of course, society needs to do more than just ensure that people do not fall below minimum levels of income. The public policy goal should be a continuous improvement in economic conditions that benefits all people. Future growth should be based on wages rising along with productivity, to give workers a fair share of the wealth they produce and enough purchasing power to demand the output that our economy supplies.
Trade unions and collective bargaining serve this crucial economic purpose. In drafting and applying labour legislation, governments should seek to facilitate rather than impede workers joining unions. Governments should encourage collective bargaining. In particular, they should co-operate with the labour movement to develop structures for the growing number of agency and other precarious workers to meaningfully negotiate with their ultimate employers.
“Decent work” needs to be more than a slogan. It should be the focus of concerted public policy. Rather than maintain a dangerous shift towards austerity, governments must prioritise decent work through the essential measures described in this article-public investment, social protection and respect for workers' rights.