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Labour market mismatches are getting worse
January 23, 2013
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NEW YORK: Global unemployment grew by another 4 million people over the course of last year amid weaker economic activity and lingering uncertainty about hiring, the International Labour Organisation said in its annual study of global employment trends. Its report highlights a number of shifts in the world of work. Labour participation rates are ebbing as more workers get discouraged. The mismatch between people without jobs and jobs without people is getting more acute. And youth are once again hardest hit.

“In the fifth year after the outbreak of the global financial crisis, global growth has decelerated and unemployment has started to increase again,” the Geneva-based United Nations agency said in its 239-page analysis.

Labour market mismatches are getting worse. “The length and depth of the labour market crisis is worsening labour market mismatch, contributing to extended spells of unemployment.”

Jobs in exporting industries are “particularly vulnerable” as trade weakened in some parts of the world. As a result, “new jobs that become available often require competences that the unemployed do not possess.”

These skills mismatches will make the labour market more slow to respond if economic activity does ramp up unless there are more policies to promote skills training, it cautioned.

All told, unemployment has swelled by 28 million people since the start of the financial crisis, with half of that increase in advanced economies. And the slowdown in those economies is causing “significant spillovers” into the labour markets of developing economies too.

About 197 million people were jobless around the world last year. And about 40 million dropped out of the labour market “as job prospects proved unattainable” — particularly in Europe.

The agency expects the unemployment rate will rise again this year and next, with the number of unemployed people hitting 210.6 million in the next five years.

Even regions that haven’t seen spikes in unemployment “often have experienced a worsening in job quality, as vulnerable employment and the number of workers living below or very near the poverty line increased.”

Conditions for young people aren’t likely to improve in the near term. About 73.8 million of them are unemployed globally and by next year that will grow by another half a million. More than a third of young people without jobs have been without work for half a year or longer and a growing number are getting discouraged and leaving the labour market.

The economic slowdown “has dramatically diminished the labour market prospects for young people, as many experience long-term unemployment right from the start of their labour market entry, a situation that was never observed during earlier cyclical downturns.”

Income growth is sluggish, with downward pressure on real wages through much of the industrialized world, which will hold back consumption, the ILO said.

Some areas are improving. The rate of working poverty is still decreasing, albeit at a lower pace than before the downturn. Some countries “have seen the emergence of a working middle class, which has now surpassed 40 per cent of the developing world’s workforce.”

The report offers several recommendations, among them easing policy uncertainty to give employers more confidence to hire” boosting job counseling” tackling mismatches by increasing skills and job retraining programmes, and — controversially, given the stain of many government’s finances — introducing short-term stimulus measures in some countries. The unemployment rate across the eurozone hit a new all-time high of 11.8 per cent in November, official figures have shown.

This is a slight rise on 11.7 per cent for the 17-nation region in October. The rate for the European Union as a whole in November was unchanged at 10.7 per cent.

Spain, which is mired in deep recession, again recorded the highest unemployment rate, coming in at 26.6 per cent.

More than 26 million people are now unemployed across the EU.

For the eurozone, the number of people without work reached 18.8 million said Eurostat, the official European statistics agency said.

Greece had the second-highest unemployment rate in November, at 20 per cent.

The youth unemployment rate was 24.4 per cent in the eurozone, and 23.7 per cent in the wider European Union. Youth unemployment -among people under 25 -was highest in Greece (57.6 per cent), followed by Spain (56.5 per cent).

The general trend however remains upwards and it makes it even harder for the governments concerned to collect the taxes they need to stabilise their debts”

Overall unemployment was lowest in Austria (4.5 per cent), Luxembourg (5.1 per cent) and Germany (5.4 per cent).

The eurozone and wider European Union economies are struggling with recession as government measures to reduce sovereign debt levels have impacted on economic growth.

However, European Commission President Jose Manuel Barroso said recently that he believed the worst was over.

Barroso said the turning point was last September’s promise from the European Central Bank to buy unlimited amounts of eurozone states’ debts, which has helped crisis hit countries borrow more cheaply.

But in the view of the UK’s Institute of Directors, whose members rely on demand from trading partners in the eurozone, this “has bought time, but that is all it has done”.

“It is clear that the economic implosion of several member states continues at a troubling pace,” said the business group’s chief economist Graeme Leach.

“The headline figures spell bad news, but that is compounded by the political and human impact of terrifying levels of youth unemployment in Spain, Greece and Italy.

“This saga is far from over, whatever President Barroso may believe, and it seems it is set to get worse in 2013.”

BBC Economics Correspondent Andrew Walker said: “The biggest rises, in per centage terms, were in countries at the centre of the eurozone financial crisis -Greece, Spain, Cyprus and Portugal. One striking exception to that pattern was the Republic of Ireland where unemployment fell. “The general trend however remains upwards and it makes it even harder for the governments concerned to collect the taxes they need to stabilise their debts.”

Rabobank economist Jan.Foley said the rise in unemployment was “the other side of austerity or structural reform.”

“There is a very worrying picture painted by these numbers, and governments do need to wonder if they need more pro-growth strategies in the next few years,” she told the BBC’s News Channel.

The record low for the eurozone unemployment rate was 7.2%, which was recorded in February 2008, before the financial crisis that first gripped the banking sector spread to the real economy.

Agencies

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