G20 labour ministers meeting in Ankara on 4 September 2015
The current pattern of slow economic growth and insufficient job creation in G20 countries reflects a self-reinforcing cycle of weak wage and income growth, leading to deficits in aggregate demand, low business confidence and investment and insufficient labour market recovery, warns a joint agency report prepared for the G20 meetings
taking place this week in Ankara.
The International Labour Organization (ILO), Organisation for Economic Co-operation and Development (OECD) and World Bank Group (WBG) report entitled G20 labour markets 2015: Strengthening the link between growth and employment
shows that growth among G20 economies has averaged 3.2 per cent over the last three years compared to 4.1 per cent from 2000 to 2007.
The G20 unemployment rate – which rose from 5.1 to 6.0 per cent between 2007 and 2009 – remained elevated at 5.8 per cent in 2014. This has resulted in an estimated shortfall of 50 million jobs across the G20 compared to the start of the crisis.
Wage growth has suffered a significant slowdown, which, combined with the jobs gap, has led to a decline in the labour share of national income and rising inequality in most G20 economies.
“A weak economic recovery continues to weigh heavily on G20 labour markets, while the persistent lack of decent jobs is in turn hurting the recovery,” said ILO Director-General Guy Ryder, who’s taking part in the G20 labour and employment ministers meeting and their joint meeting with G20 finance ministers.
“The joint employment and finance ministers’ meeting can be of enormous service to G20 leaders by integrating policy initiatives that work on both the demand and supply side of labour markets, thus helping to get back on track for the G20’s 2 per cent growth ambition and making that growth more inclusive,” he added.
According to the report, the main reason for slow and disappointing job creation is not a decline in the employment intensity of economic growth1 but rather that economic growth itself is too weak to create sufficient jobs.
The employment challenge is not only related to the quantity, but also to the quality of jobs. In many G20 countries with available data, most of the jobs created between 2009 and 2014 were part-time. Since part-time jobs generally offer lower average earnings, lower levels of job security and weaker social protection coverage, this type of job creation provides less support than full-time work to household consumption and aggregate demand.
In emerging G20 countries, 51 per cent of workers were in vulnerable employment (which measures the share of own-account workers2 and contributing family workers in total employment) in 2014. This was a 3.9 percentage point reduction compared to 2009. Although these trends are moving in the right direction, the large share of workers that remain in vulnerable employment shows that informality, low pay and low productivity continue to be stubborn, on-going challenges.
“As this report clearly states, we need a comprehensive and multi-sectoral approach to reverse the current self-reinforcing cycle of slow growth, low job creation, weak wage and income growth and low investment. Policies that reverse the worrying trends towards greater inequality can both accelerate economic recovery and make growth more inclusive,” concluded Ryder.
Other reports prepared for the G20 meetings
• Income inequality and labour income share in G20 countries: Trends, impacts and causes
This report points to a broad trend in G20 countries toward rising inequality and declining labour share of national income. Income inequality has risen significantly in most advanced G20 countries, while in G20 emerging economies, results are mixed. There is a growing body of evidence that the labour share of income has followed a downward trend in most G20 countries over recent years and that, where this has occurred, it has contributed to the overall increase in inequality.
The report analyses the consequences and impacts of rising inequality and falling labour income shares on growth, and explores the causes of these trends.
• The contribution of labour mobility to economic growth
More than half of the world’s migrants (55 per cent or 128 million people) live in G20 countries, and remittances to and from G20 countries account for almost 80 per cent of global remittance flows, according to this report.
These figures indicate the importance of international migration for G20 countries, and suggest the key role that G20 members could play in maximizing economic and development benefits to sending and receiving countries as well as to migrant workers. The report focuses on the contribution of labour mobility to economic growth and discusses the issues that require attention.
1 Refers to how employment growth relates to growth in economic output – for instance, how much employment growth is associated with one percentage point of economic growth.
2 An own-account worker is a self-employed worker, potentially with one or more partners, who has no employees on a continuous basis.