DESPITE measures by the governments, unemployment in OECD countries is still two million higher than in 2011. Policymakers need to think out of the box as both monetary and fiscal policies have failed to dent the lengthy queues of people seeking work.
In this first part, the extent of the problem will be spelled out. The second article, Tackling the Curse of High Unemployment, will explain why current economic policies have failed and propose measures with the aim of encouraging debate on how to counter the unemployment scourge more effectively.
Policies are failing to stem unemployment
Despite quantitative easing (QE) and ultra-low interest rates since the global recession five years ago, the jobless level in Organisation for Economic Co-operation and Development (OECD) nations is around 47 million, which is some two million higher than 2011.
Unemployment worldwide is around 200 million according to the International Labour Organisation (ILO). Thus about 150 million people are without jobs in developing Asian, African and South American nations. The ILO estimates that the number of jobless young people has risen to a staggering 73 million worldwide, an average unemployment rate of over 12 per cent.
So far politicians, central bankers and economists, living in their prosperous financial bubble, persist with failed measures as they tinker with statistics and seemingly fail to come to grips with the real world. The US and UK have made some progress in cutting unemployment, but the euro straitjacket and austerity packages have caused unemployment in the eurozone to soar to new heights.
In the 28-nation Europe Union, some 5.7 million young people are struggling to find jobs and, in the eurozone alone, there are 3.6 million without work, an unacceptable jobless rate of 24 per cent. In Spain, youth unemployment is some 57 per cent and Greece, 55 per cent, according to official EU figures.
|Country||Unemployment rate%||Jobless Level (millions)|
|SE Asia & Pacific||4.5||14.4|
Young people remain worst affected
Unemployment figures do not tell the full story. In both the developed and undeveloped world it is difficult for graduates and other young unemployed men and women to obtain jobs of their choosing. Many Spanish, Greek and East European young people travel to Germany or Britain to work as cleaners or earn money in other menial jobs. The statistics exclude people who are lower-paid freelance part-time workers and consultants who have lost their full-time jobs.
It has also become fashionable in countries such as the United Kingdom for organisations to offer interns “work experience” which turns out to be unpaid menial jobs. Interns, regardless of qualifications, talent or knowledge, continue working as they fear that they will not receive good references. They also hope against hope that a paid job might be in prospect. If there are such jobs, they tend to be poorly paid, with few exceptions. Those who have the education and skills to succeed, invariably find that the careers that they had dreamt about in schools and universities are not available. They are forced to accept second or third best jobs that do not give them maximum satisfaction, enjoyment and rewards but which give them limited opportunity for advancement. In emerging nations, multi-millions of families pool miserly wages to either survive in towns or cities or are tenant farmers.
Inequality in a global world
The jobless problem is both cyclical and structural.The inevitable macroeconomic results are housing, health, education and social inequities. In the past few years the 1-5 per cent of the wealthy and better-off business people and professional classes have benefited from soaring stock markets, property and other asset classes. Central bankers had hoped that there would be a “trickle down” effect. Instead, the gap between the rich and poor has widened. In numerous cases, companies’ profits have increased because of cost cuts which include layoffs. Within the OECD and elsewhere, economies are reliant on demand from people who have jobs. But dole queues, under-employment and the fear of losing jobs has caused the insecure employed to be wary of excessive spending, so inadequate demand has been a drag on growth.
The structural problem, especially in the West, is globalisation, causing a shift in manufacturing from textiles, motor cars, steel, electronics and other products to cheap labour nations such as China and India. India and other emerging nations are also increasingly providing call-centre and other services. The second structural factor is the growth of artificial intelligence robots that take over routine tasks in factories and other previously labour intensive projects, 3D printing and other technical aids.
Demographics and Social Costs
Baby boomers have either reached or are reaching pensionable age. Since a vast number of pensions have underperformed and global companies are dumping expensive corporate salary schemes, annual pensions are generally inadequate. The inevitable result is that older employees are hanging on to their jobs for as long as possible. There is thus a logjam in the private sector, making it much more difficult for 15-24 year-olds to enter the job market.
Failed political and economic policies have created a vicious circle. Families on lower incomes require support from social services which can’t cope because governments are slashing expenditure. Health inequities are widening between the well-off and the growing numbers of people who have slipped down the ladder. Mental stress, despair and depression directly dent productivity. The long-term impact is heart and other diseases which, in turn, raise health, social and economic costs.
In the meantime, indebted governments are being forced to cut spending so civil servants in government and municipalities are being made redundant or are taking early retirement. Civil service careers in the West are becoming scarce and as in the private sector, there are invariably thousands of applicants for a single job. Finally the broadening of the European Union has created a flow of immigrants that have taken jobs from locals. This, in turn, has boosted the fortunes of Far Right extremist parties in France and Greece.
Bottom line: Radical innovative economic policies are needed to combat low growth and growing unemployment.