NGLS Roundup 84, January 2002

ILO Employment Forum: A Global Agenda for Employment

“The central global challenge at the start of the 21st century is to secure decent work for people everywhere in conditions of equity, security and human dignity and thus draw out of poverty the 1.2 billion who are living below the poverty line.”

—A Global Agenda for Employment, ILO 2001

introduction

The June 2000 General Assembly five-year review of the 1995 World Summit on Social Development (Social Summit) recognized the need to elaborate a coherent and coordinated international strategy on employment to increase opportunities for people to achieve sustainable livelihoods and gain employment. In this context, the General Assembly supported the convening by the International Labour Organization (ILO) of a World (Global) Employment Forum.

Held on 1-3 November 2001 at ILO headquarters in Geneva, the Global Employment Forum was attended by some 750 world political and economic leaders—including UN Secretary-General Kofi Annan, a number of heads of government, ministers, heads of UN organizations, senior representatives of Bretton Woods institutions, trade union leaders, employers' representatives, NGOs, academics and the media.

At the opening session, ILO Director General Juan Somavía said that the world is facing a major “decent work deficit,” adding that in the course of the 1990s, global unemployment grew from 100 to 160 million. “Today, there are about 1 billion people who are unemployed, underemployed or working poor....All this represents a major crisis of human security.” He said that the combined effect of the unresolved problems of persistent poverty, inequality and a process of globalization whose benefits are not reaching enough people, has been exacerbated by an accelerating downturn in the economic cycle of all major economies, which began this year. “We are staring into the face of the first synchronized world recession of the globalization era.”

This trend has been aggravated by the economic repercussions of the 11 September terrorist attacks on the United States. At the opening of the Forum, the UN Secretary-General said, “The ramifications of September 11 go far beyond peace and security concerns; they will also have a severe and multiple impact on human security. Nobody can forecast with precision the economic and social consequences, but we already know that poor economies will pay the highest price. We know millions of people will become more vulnerable to poverty than before. Our mission to improve the lives of peoples everywhere has become more important and urgent than ever.”

The Secretary-General of the United Nations Conference on Trade and Development (UNCTAD), Rubens Ricupero described unemployment as more than a social scourge or an economic dysfunction. “It is a personal tragedy, the ultimate defeat in a society where social identity is defined by work. The failure to find lasting solutions to mass structural unemployment and to the growing inequality within and among nations is perhaps the most dismal failure of the last century.”

The three-day Forum provided a rich discussion of the multifaceted challenges of addressing the global decent work deficit. It included keynote speeches by former United States Labour Secretary Robert Reich and the 2001 Nobel Prize Laureate for Economics, Joseph Stiglitz, who was also former Chief Economist at the World Bank. Mr. Stiglitz provided a sharp critique of the neoliberal paradigm that has dominated economic policy over the last two decades (the so-called Washington consensus), which was echoed by many participants at the Forum. He then outlined a range of far-reaching proposals for policy alternatives and international financial architecture reform, based on neo-Keynesian economics. Among these were proposals to create a new international liquidity (Special Drawing Rights) to finance global public goods and, at the same time, stimulate non-inflationary growth and full employment; and to enhance the surveillance role of the ILO.

At the closing session, Mr. Somavía suggested that what was achieved during the three-day meeting was “more than just talk.” The Forum had endorsed by acclamation a coherent and comprehensive global strategy for employment, including the need to develop a global stimulus package as a coordinated international response to global recession, and to forge Global Alliances for Employment in the form of close cooperation between the ILO, other UN agencies, the Bretton Woods institutions, national governments and social partners.

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“We must confront the fact that globalization today is facing a crisis of legitimacy. It is sad that the policy debate on globalization has so frequently become blocked in polemics. It would be interesting just to ponder on what the results of a world referendum on today's model of globalization might be. It could cast light on the silent sense of powerlessness felt in so many families around the world. That is the heart of the legitimacy crisis.

“International organizations have a responsibility to deal creatively with this reality. It is in times of crisis that we are given the opportunity to think differently. If this means daring to step out of the cage of our orthodoxies, then let's dare.”

—ILO Director-General Juan Somavía's opening speech at the Global Employment Forum

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A new global agenda for employment

Mr. Annan noted that the Member States gathered at the September 2000 Millennium Summit “had pledged to free their peoples from the abject and dehumanizing conditions of extreme poverty” and resolved to halve their numbers by 2015 as part of the so-called UN Millennium targets. He insisted that “greater and more focused efforts will be required urgently if we are to stand any chance of meeting the goals set out in the Millennium Declaration.” The ILO's response to the Millennium Summit Declaration and to the General Assembly's Social Summit review was the preparation of a Global Agenda for Employment. It was presented in the form of a discussion paper to Forum participants by former Swedish finance minister Allan Larsson, now working closely with the ILO Employment Sector.

Mr. Larsson noted that unemployment is a serious problem in many developed countries, adding that 160 million unemployed individuals are officially registered in the world today. Unproductive work is the main problem in the developing world. There are more than 500 million people who are working under conditions that can be described as extreme poverty. In the next ten years there will be an additional 500 million people in the world labour force—young people with better education and training—prepared to work; 97% of them, he said, are located in developing countries. “What will happen to all these people, the unemployed, the working poor and the future workforce?” Mr. Larsson asked. To gauge future prospects, he sketched out three alternative “scenarios” outlined in the Global Agenda for Employment, which he said would illustrate the “growth dividend” of a decent work strategy. “The integration of one billion men and women into employment and into more productive employment,” he stressed, “is the big challenge in the next ten years.”

—The first scenario, “business as usual,” is based on the employment performance during the 1990s, in terms of productivity and job creation. “This is a bad alternative,” Mr. Larsson said. “There will be more jobs, but low productivity jobs and there will be 40 million more unemployed, 200 million totally. This scenario is contrary to the UN Millennium targets for poverty reduction.”

—The second scenario illustrates a policy aimed at halving unemployment. It offers a small growth dividend. Mr. Larsson describes this scenario as desirable, but not sufficient. “There will be some 80 million more employed...compared to the ‘business as usual' scenario. However, such a development is not enough for a successful fight against poverty.”

—The third scenario illustrates the potential of a policy which successfully reduces both unemployment by half and reduces extreme poverty by half. Employment would be made the centrepiece of global development strategies. “Such a decent work strategy will offer a strong growth dividend,” Mr. Larsson said, “contributing to make the UN targets for poverty reduction a reality, in fact the only way to make them a reality.”

While there is no panacea or “quick fixes” to respond to the challenge, Mr. Larsson suggested that the chances of moving from the first to the third scenario would require a new approach to employment policy, based on the experience of policy developments during the second half of the 20th century. In the first two to three decades after World War II, he observed, governments and international organizations put strong emphasis on employment as a central goal for economic policies. In that spirit, ILO Convention No. 122 on full, productive and freely chosen employment was established and ratified by a great number of ILO Member States. “However, in the last two decades this strong focus was lost,” he noted. “Employment became a residual, and employment policies became a sector policy with limited scope and measure. Our experience from this period tells us that public policies matter. When employment was given low priority, employment policies were seriously weakened. So was the fight against poverty.”

In the Global Agenda for Employment, the ILO suggests a review and a rethinking of the present approach around two basic commitments to be made by governments and by the UN and Bretton Woods institutions:

—To make full and sustainable employment a central macro-economic objective, not a “residual” of economic policy.

—To make employment policy a concept of coordination of all policies, macro- as well as structural policies, toward full and sustainable employment, not a sector policy in the margins of economic policy.

The rationale for these commitments, as well as the policy and institutional reorientations they would imply, were well illustrated by the Forum's keynote speakers, Robert Reich and Joseph Stiglitz. The following sections highlight some of their main propositions related to Keynesian economic policy alternatives and reform of the international financial architecture.

fiscal/monetary policies: centrepieces of social policies “During the time I was labour minister (Secretary of Labour),” Mr. Reich recounted, “the Treasury Secretary told me again and again that fiscal and monetary policy was none of my business. But now that I am no longer Secretary of Labour, I can assert to you that it is the business of labour ministers; it is the business of people who are concerned about employment….It is not solely the province of financial ministers or central bankers.…Both fiscal and monetary policy must be understood as centrepieces of social policy.”

The debate on the orientation of fiscal and monetary policy is commonly couched in terms of a trade-off between growth and employment creation on the one hand, and the fight against inflation on the other. It has now been widely recognized that over the last two decades, central bankers, finance ministers and their representatives in international financial institutions such as the International Monetary Fund (IMF) have tended to place primary emphasis on the fight against inflation. According to Mr. Reich, this has led to somewhat dogmatic and rigid policy positions—based on the notion that inflation is like a genie, that once out of the bottle cannot be put back in. He described this as “a false and dangerous metaphor, with no empirical basis in modern recent history.” Joseph Stiglitz would later refer to this as the “precipice theory” for which he also said there was no empirical evidence.

Mr. Reich made it clear that it is essential to combat inflation, particularly accelerating inflation, which he described as bad for everyone, including the poor. He went on to make the point that there is a considerable element of discretion, scope for experimentation and re-adjustment in the design of fiscal and monetary policy. He explained that when he became Secretary of Labour in 1993, the assumption among economists was that the so-called “natural rate of unemployment” (the rate below which you could not go without risking accelerating inflation) was 6% unemployment for the United States. Yet it became possible to achieve significantly lower levels of unemployment than 6% without risking accelerating inflation, and some had argued it could have been stretched even further. The question, he said, is thus whether decision makers “err” on the side of fighting inflation, or “err” on the side of enhancing, or at least protecting, the level of employment. “We know that inflation can be controlled if we begin to see it accelerating; we need to move toward as full employment as we possibly can.”

In his keynote speech to the Forum, Joseph Stiglitz echoed much of what Mr. Reich had argued concerning the apparently excessive emphasis placed on the fight against inflation at the expense of job creation, particularly in a period of global deflation. In this regard, he expressed serious concern that many central banks around the world (including the recently established European Central Bank) are legally independent from government and public oversight, with a narrow mandate to ensure price stability. He said that these institutions are dominated by financial interests and have no labour representation, describing them as “institutional monsters” that are biased against solving the problems that the world is facing today—unemployment and a global slowdown.

economic policies in whose interests?

A central theme of Mr. Stiglitz's presentation was the assertion that mainstream policy prescriptions—presented by their advocates as aiming for the general public good—are in fact mainly serving the interests of global capital at the expense of workers, and indeed in many cases of domestic enterprises as well. Much of conventional economics, he said, has provided considerable intellectual backing to such policies (often referred to as “neoliberal” or “Washington consensus” policies). He drew from his research on information economics, for which he was awarded the Nobel Prize, to demonstrate the misleading nature of many basic economic propositions which, translated into policy, have in many cases had very negative consequences on workers, social cohesion and human wellbeing worldwide.

One such proposition is to treat labour markets as comparable to markets in goods and services, or to treat labour on a par with other production inputs, such as steel or machinery. He said this has served as a basis to oppose measures resulting from workers' claims (such as labour union rights, minimum wage legislation or requirements on basic working conditions) as undue interferences with the free workings of the economy. Another is to assume away the inherent asymmetry in the bargaining relationship between labour and capital. Even when rights of association have helped to correct such imbalances, he said, it is common that workers are still in a disadvantageous position. “It is far easier,” he said, “for an employer to replace recalcitrant workers than for employees to ‘replace' a recalcitrant employer, especially when the unemployment rate is high.”

Mr. Stiglitz argued that there is also a range of policies, sometimes seemingly remote from the labour market, which affect the outcome of the bargaining process. “Capital market liberalization enhances the bargaining power of capital: effectively, it gives ‘capital' the right to announce that if it is taxed unduly, or if other measures that it disliked are adopted, it will take its money out of the country. It enhances the threat point [bargaining power] of capital, and therefore tilts the outcome in its favour.” Thus, he noted, “labour market flexibility” and “capital market liberalization” may appear as symmetric policies, freeing up labour and capital markets respectively, “but they have very asymmetric consequences—and both serve to enhance the welfare of capital at the expense of workers.”

Moreover, he said, widespread capital market liberalization policies have contributed to economic crises around the world, such as the East Asian crisis of 1997-1998. Such policies have enhanced investment risks (and thus high short-term returns to speculators on financial markets) beyond the coping ability of many developing countries. “It seems perverse simultaneously to argue both for measures that enhance global volatility and against measures that enhance worker security. Yet this is precisely the position that advocates of the neoliberal doctrines have taken.”

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“Globalization has shifted power from the national level to the international level; but it is business not governments who are exercising real power at the international level, which has meant, of course, that, where binding international regulations have begun to emerge, they protect business and capital and not the jobs and standards of ordinary working people.”

—Speech by Bill Jordan, General Secretary, International Confederation of Free Trade Unions (ICFTU) at the opening session of the Global Employment Forum

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reform of the international financial architecture

Many Forum participants noted that in the face of a global economic recession, and particularly in the aftermath of 11 September, many developed countries are beginning to adopt so-called Keynesian policies (or “counter-cyclical” fiscal and monetary measures to stimulate the economy through government intervention in the face of an economic downturn). Yet it was pointed out that these same governments, through their representatives in international financial institutions (IFIs), have for a long time advocated “contractionary” (or “pro-cyclical”) measures (cutbacks in government expenditure, hikes in interest rates) when developing countries face a recession, and continue to do so even today, as in the case of Argentina. Many participants pointed out that while the advocates of such measures argue that these are designed to reassure investors (by “getting the fundamentals right”), the results, in terms of further economic slowdown and social unrest, have tended to have precisely the opposite effect.

The Original Bretton Woods Mandate

Mr. Stiglitz contrasted the current policy prescriptions of the IMF with those that would have derived from its original mandate: “The IMF was established more than a half century ago out of fears that, as the Second World War came to an end, the world would sink again into a global recession. The IMF was supposed to be a pressure on countries to have expansionary policies, recognizing that a downturn in one country has spillovers on others (a negative externality) and to provide the resources with which that could be done. It has not only abandoned its original mandate; it has, perversely, taken up the opposite banner, all too often providing funds to countries only on the condition that they engage in contractionary policies.”

Mr. Stiglitz suggested that the IMF's international surveillance, undertaken in relation to individual countries' macro-economic policies and financial institutions (the so-called Article IV consultations), needs to be subject to a countervailing surveillance mechanism, one that focuses on the impact of economic policies on employment. He further suggested that such reviews, or “labour impact assessments,” be conducted by the ILO; however, the basic international economic architecture would first need to be reformed to permit this.

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Towards a Comprehensive Employment Strategy

“The debate at the Forum represented an important step in developing a comprehensive employment strategy. Employment should not be a residual but an overarching goal of economic policy. Employment policy should not be viewed as a sectoral policy at the margin of economic policy-making. It had to be the successful coordination of all policies—macro-economic and development policies, and structural and labour market policies. The main elements of such a strategy as emerged during the discussion rested on the following ten points:

—Trade as an engine of employment growth based on unhindered access to markets of developed economies by developing countries, especially for agricultural and labour-intensive products.

—Turning the risk of a digital divide into an international digital opportunity. Developing countries had to leapfrog into the digital economy and the North should launch an IT “Marshall Plan” for the South—inclusion of the developing world is in everybody's interest.

—Ongoing initiatives to promote environmentally sustainable development in agriculture, energy and transport should be fostered and the job opportunities this would create should be tapped.

—Monetary and fiscal policy stimulus had to play a pivotal role in counteracting the risks of recession in the short term, including through stronger coordination of macro-economic policies.

—In developing countries, stability and structural adjustment programmes should be modified to allow greater fiscal space for enhanced spending especially on education, health and social development. Debt relief needed to be accelerated and development aid to be strongly reinforced.

—To raise educational levels and training opportunities there was a need for greater investment in people's opportunities to obtain education and employable skills.

—Health and safety were a basic investment in people with direct and very positive implications for productivity.

—Employability and adaptability should be fostered through active labour market policies, including the fight against all forms of discrimination and stronger assistance to the working poor. Specific strategies were needed for the informal economy.

—A safety net for social protection had proved to be a powerful enabling condition for people to adapt to change.

—Social dialogue and respect for core labour standards should underpin all these priorities. A strong involvement of social partners was a key factor for their success. More democratic governance would be an important outcome.”

—Summary report of the Global Employment Forum (GB.282/ESP/1/2), ILO, 2001

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The Trade Deficit Trap

Mr. Stiglitz argued that international financial architecture reform must also be viewed in light of the question of trade deficits. He said that in the current doctrine, “countries with large trade deficits are told to cut them back” without there being commensurate pressure on large surplus countries—as had been envisaged by the British economist John Maynard Keynes when he was one of the chief negotiators during the post-World War II Bretton Woods negotiations. If a country cannot boost its export earnings sufficiently to close the trade deficit, it must logically cut back its imports. Since raising import barriers is also discouraged, there remain few options but to cut back effective demand through contractionary measures, despite their contribution to a global slowdown and their predictable toll on further job losses and cut backs in essential public services. “The sum of all trade surpluses and deficits must add up to zero; so if some countries—like Japan and China—insist on having large surpluses, other countries must have correspondingly large deficits. The deficits are like hot potatoes. As one country is forced to eliminate its deficit, it must show up somewhere else in the system. With a focus on trade deficits, no wonder then that there is always an impending crisis somewhere in the world,” Mr. Stiglitz said.

Special Drawing Rights

The remedy proposed by Mr. Stiglitz is one which he said was already very much in the minds of Keynes and others when the IMF was established. It is a framework of enhancing aggregate purchasing power through the creation of what is known as Special Drawing Rights (SDRs)—an international liquidity based on a basket of hard currencies. “One way of thinking about it,” he suggested, “is the following: Assume that the nations of the world wish to maintain reserves equal to a fixed percentage of their gross domestic product (GDP). With global GDP of around US$40 trillion a year, and growth of around 2%, if reserves were equal to 5% of GDP, aggregate reserves would grow by US$40 billion a year. (Given China and Japan's surpluses, a number twice that size might be more realistic.) An annual issue of SDRs in that amount would just offset the purchasing power that was set aside in reserves, and thus not be inflationary.”

Mr. Stiglitz suggested that the SDRs could be used to pursue global interests (global public goods), such as helping the poorest countries and improving the global environment. “The time is ripe for the IMF to return to its original mission—ensuring global liquidity, to enable sustained global growth, and with that growth, full employment.”

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ILO's Decent Work Agenda

“The Global Agenda for Employment is a major strategic dimension of the ILO's decent work agenda in which basic rights at work, employment, social protection and representation and social dialogue must advance together. They are a package. Rights at work embody core values, but they make no sense without work. Employment not only generates income and produces an output, it is a means of social integration. Social dialogue generates partnership and consensus on achieving the goals of decent work. Both social protection and employment contribute to the fundamental need for a level of income security. All these different elements are mutually reinforcing, and the best way to achieve any one of them is by moving towards them all at the same time.”

—A Global Agenda for Employment, ILO 2001

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conclusion and follow-up

The Global Forum on Employment covered many other dimensions of the challenges facing the world of work in the coming decade. This included discussions on the informal economy; technological change and the digital economy; education and training; youth employment; and the relationship between employment and trade.

Much of the discussions on trade hinged on what would be the outcome of the Fourth Ministerial Conference of the World Trade Organization (WTO) held the following week (see Go Between 89). It was hoped that developed countries would commit to opening up their markets to developing country exports, especially agricultural and labour-intensive products, as a major potential for job creation in poorer countries. Concerns were also expressed about the negative impact of trade liberalization on domestic enterprises, livelihoods and jobs in developing countries. The controversial question as to whether labour standards should be introduced in the WTO, in view of its powers of sanctions as a proposed means of enforcement, was strongly debated. However, there was some agreement that the legitimate place for monitoring and enforcement of workers' rights is the ILO.

The plethora of ideas and proposals that were made in various parallel roundtables and plenary sessions were summarized by the Forum's rapporteur and endorsed by Forum participants in the closing session (see box on page 5).

The new Global Agenda for Employment calls for Global Alliances for Employment and for the international community to make two basic commitments: making full and sustainable employment a central macro-economic objective, and making employment policy a basis for coordination of all macro-economic and structural policies. The current draft will be subject to consultations with other UN agencies and with the Bretton Woods institutions, and a revised text will be presented to the ILO Governing Body for decision.

The Forum's rapporteur suggested that the ILO may build on Mr. Stiglitz's suggestion to develop a methodology and indicators for employment impact assessments of global economic strategies and of economic reform programmes at the national level, as part of a possible enhanced surveillance role for the ILO.

The outcome of the Global Employment Forum is closely related to the ILO's Decent Work Agenda (see box) and its enhanced work on the Social Dimension of Globalization. The ILO's Working Party on the Social Dimension of Globalization, which brings together its tripartite constituency of workers, employers and governments, will also act as a high-level forum for multilateral discussions on specific themes. At its session on 12 November 2001, it began examining the impact of trade liberalization on employment, with input from UNCTAD and the WTO, and will pursue discussions on this theme at its session in March 2002.

At its 282nd session in November 2001, the Governing Body of the ILO formally approved Mr. Somavía's initiative to establish a World Commission on the Social Dimension of Globalization. The Commission will be composed of eminent persons with a high level of knowledge and experience to give an authoritative overview of the social dimension of globalization and to identify policies for globalization which promote open economies and development with social justice. The Report of the World Commission will be presented to the Director-General of the ILO by March 2003.

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This edition of NGLS Roundup was prepared by the United Nations Non-Governmental Liaison Service (NGLS). The NGLS Roundup is produced for NGOs and others interested in the institutions, policies and activities of the UN system and is not an official record.