Employment in the “Recovery”

C.P. Chandrasekhar

Despite scepticism about its sustainability, attention is focused on evidence that the crisis of 2008-09 is behind us, because of the fiscal stimulus put in place by governments across the world. But figures from the International Labour Organization (ILO) indicate that the impact of the stimulus on employment is uneven. In its January 2010 update, the ILO estimates global unemployment at 212 million in 2009, or around 34 million above its 2007 level, with most of the increase having occurred during 2009. In sum, the impact of the fiscal stimuli delivered by many governments does not seem to be, as yet, adequate to stall, let alone reverse the employment decline resulting from the crisis. This increase in unemployment was unevenly distributed, with Developed Economies and the European Union, Central and South-Eastern Europe and former Soviet states, and Latin America and the Caribbean accounting for more than two-thirds of the increase in the number of unemployed during 2009. In other words, Asia and the Pacific were much less affected.

This is surprising, since it is to be expected that countries that are more dependent on foreign trade and investment flows, such as those in South-East Asia, would have been more affected by the crisis. The region experienced the sharpest reductions in economic growth, to 0.5 per cent in 2009, down from 4.4 per cent in 2008 and an average annual rate of more than 6 per cent prior to the crisis.

It needs to be noted, however, that in most less-developed countries unemployment figures do not tell the real story. With social protection inadequate or lacking altogether, those in the working age groups need to take on some form of employment or starve. Hence, recorded unemployment rates tend to be low. Given the fact that unemployment is the exception, the impact of the reduction in growth is felt more in terms of deterioration in the quality of employment rather than a decline in its volume. One form that deterioration takes is an increase in employment that lacks features associated with “decent employment” such as adequate social security or collective bargaining arrangements. The group that obviously lacks such features consists of those categorised by the ILO as being in “vulnerable employment” such as own-account workers and contributing family workers. These are also workers often characterized by inadequate earnings, low productivity and difficult conditions of work.

One effect of the crisis in some Asian economies is a distress-driven increase in such employment. Consider, for example, a country like Thailand, for which employment figures under different status categories are available from the National Statistical Office till as recently as September 2009. The figures show that the increase in overall employment, which amounted to around 797,000 when we compare the first three quarters of 2008 with the corresponding period in 2007, stood at a significant, even if lower, 686,000 during the first three quarters of 2009 when compared with 2008. But this was accompanied by significant changes in the pattern of employment. The number of private employees, which grew by 260,000 between 2007 and 2008, declined by 45,000 between 2008 and 2009, ostensibly because of the impact of the crisis on the country’s export industries. Over the same periods the increase in the number of own-account workers rose from 116,000 to 444,000 and those in vulnerable employment as per the ILO’s definition rose from 504,000 to 604,000. One explanation is that, unable to obtain employment in the export industries that had hitherto sustained them, workers were seeking any form of employment in order to survive.

However, the experience differs across countries. In South Korea, average monthly employment, which rose by 144,833 between 2007 and 2008, fell by 71,750 between 2008 and 2009. What is remarkable was the sharp rise in the number of jobs lost in the self-employed (from 79,000 to 259,000), unpaid family worker (12,400 to 60,000) and daily worker (57,000 to 158,000) categories. That is, there was a huge decline in vulnerable employment. On the other hand, the absolute increase in the monthly average number of regular employees remained more or less constant in the 380,000 range. The crisis appears to have adversely affected sectors relying on self-employed or irregularly employed workers. On the other hand, the efforts of the government to fiscally stimulate the economy possibly kept regular jobs rising.

In sum, the syndrome where the return to growth, however limited, has not improved labour market conditions appears to be true of the Asian exporters as well.