Mutually reinforcing crises have worsened global employment divide —ILO report

Mutually reinforcing crises, including rising debt levels, are disproportionately affecting developing countries, worsening the global employment divide between high-income and low-income countries and widening existing inequalities exacerbated by the COVID-19 pandemic, says a new ILO report.

While global unemployment in 2023 is expected to fall below pre-pandemic levels (to 191 million, corresponding to a global unemployment rate of 5.3 percent), estimates show that low-income countries remain far behind in the recovery process, according to the 11th edition of the ILO Monitor on the World of Work.

ILO projects that low-income countries in Africa and the Arab region are unlikely to recover to pre-pandemic levels of unemployment this year. For North Africa, the unemployment rate in 2023 is projected to be 11.2 percent (10.9 percent in 2019); for Sub-Saharan Africa, 6.3 percent (5.7 in 2019) and for the Arab States 9.3 percent (8.7 in 2019).

Other regions have managed to reduce their rates substantially below pre-crisis levels, with 6.7 percent in Latin America and the Caribbean (8.0 percent in 2019), 6.3 percent in Northern, Southern and Western Europe (7.0 percent in 2019) and 7.8 percent in Central and Western Asia (9.2 percent in 2019).

Beyond unemployment rates, a new indicator developed by the ILO, the jobs gap, offers a more comprehensive measure of the unmet demand for employment, especially in developing countries. It captures all persons who would like to work but do not have a job.

Variations in the jobs gap point further to a global employment divide. Low-income countries face the largest jobs gap rate at an alarming 21.5 percent, while the rate in middle-income countries stands slightly above 11 percent.

High-income countries register the lowest rates, at 8.2 percent. Furthermore, low-income countries comprise the only country income group that has seen a long-term rise in the jobs gap rate from 19.1 percent in 2005 to 21.5 percent in 2023, says the report.

The report also noted for developing countries, rising debt levels add additional challenges, considerably narrowing the scope for policy interventions. Financial and fiscal constraints hamper responses to complex threats, which include conflict, natural disasters and economic crises that tend to reinforce themselves (a poly-crisis), worsening the jobs gap.

According to the report, low-income developing countries that are in debt distress are facing a significantly higher jobs gap, reaching 25.7 percent in 2023, compared with 11 percent in developing countries at low risk of debt distress.

The report also highlights significant social protection policy gaps in developing countries and provides new evidence that increasing investment would bring large economic, social and employment benefits and narrow the global jobs divide.

It examines basic old-age pensions, especially in lower-middle-income and low-income countries where just 38.6 percent and 23.2 percent of older persons receive a pension respectively, compared to 77.5 percent globally.

The Monitor finds that introducing universal basic old-age pensions in developing countries would increase their GDP per capita by 14.8 percent within 10 years and reduce extreme poverty (share of people who live on less than $2.15 a day) by six percentage points – a drastic reduction from the current rate of 15.5 percent.

Financing social protection is challenging but not unattainable, the report says. For developing countries, the annual cost of providing old-age pensions at the level of national poverty lines would be the equivalent to 1.6 percent of their GDP.

The analysis provides a strong case for global financial support for job creation and social protection during a time of multiple crises and shocks to ensure that recovery and reconstruction will leave no one behind and support long-term structural transformation.

The report stresses the critical importance of creating fiscal space for social investments in low-income countries. This needs to be considered with urgency as part of the current global discussion on the reform of the international financial architecture.

“The findings of this report are a stark reminder of growing global inequalities. Investing in people through jobs and social protection will help narrow the gap between rich and poor nations and people.

“This is why the ILO is launching a Global Coalition for Social Justice. The coalition will bring together a wide range of multilateral bodies and stakeholders. It will help to position social justice as the keystone of a global recovery and make it a priority for national, regional and global policies and actions,” said ILO Director-General, Gilbert F. Houngbo.

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