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Wednesday, March 25, 2009


The Director-General of the International LabourOrganization (ILO) called for a *Global Jobs Pact* toforestall a *prolonged and severe* jobs crisis that would lead to amassive increase in unemployment and working poverty.

The appeal followed a high-level, tripartite discussion at the ILOGoverning Body Monday, during which International Monetary Fund ManagingDirector Dominique Strauss-Kahn said increased cooperation between theIMF and the ILO was crucial in addressing the global economic crisis.

The high-level meeting also heard remarks by Mr. Guy Ryder, GeneralSecretary of the International Trade Union Confederation (ITUC); Mr.Alexander Shokhin, President of the Russian Union of Industrialists andEntrepreneurs; Jonathan Shaw, Minister for Disabled People and for theSouth East of the UK Department for Work and Pensions.

ILO Director-General Juan Somavia described international coordinationto tackle the crisis as weak, and said *the financial, trade,economic, employment and social roots of the global crisis areinterlinked and so must be the policy responses*. This is a mostimportant message ahead of the G20 Summit to be held in London nextweek.

The discussion was based on a study by the ILO*s InternationalInstitute for Labour Studies entitled The Financial and Economic Crisis:A Decent Work Response, that said that demographic projections suggestthat nearly 90 million net new jobs would be needed over 2009-10 toabsorb new entrants in the labour market and avoid a prolonged jobs gap.In earlier financial crises, the labour market recovered only 4 to 5years after the economic recovery, the study said.

"We need to implement a coherent and coordinated job-orientedrecovery strategy, based on sustainable enterprises, as soon aspossible," Mr. Somavia said. "If stimulus efforts are delayed thejobs crisis will be prolonged and severe and employment may only startto recover as from 2011."

The study by the ILO Institute examined current rescue efforts in 32countries, including all members of the G20. It said that while the IMFhad called for stimulus plans in the order of 2 per cent of GDP inresponse to the crisis, stimulus plans stand on average at 1.7 percent.The study also illustrates that stimulus as a percentage of GDP foradvanced economies - at 1.3 percent--is less than half that allocatedby developing and emerging economies.

The ILO survey also found that the stimulus packages lean heavilytoward financial bailouts and tax cuts instead of job creation andsocial protection and noted that on average, fiscal stimulus packagesfor the real economy are five times smaller than financial bailoutpackages.

"Only half of the countries examined have announced labour marketinitiatives and among those, the resources allocated to these measuresare relatively limited," said Raymond Torres, Director of the ILOInstitute, adding that social policy measures represent, on average, 9.2 percent of the total fiscal packages. In the case of labour marketmeasures, the figure is 1.8 percent.

The report also says that infrastructure programmes do not adequatelytake into account the need to reinforce the existing capacity ofbusinesses and skills supply - so that part of the infrastructurespending may result in higher prices, rather than higher production andjobs; some tax cuts will end in higher savings rather than higherdemand, output and jobs; and little is done to help youth and othervulnerable groups.

The measures moreover involve only limited social dialogue withemployers and unions and lack coordination across countries. Involvingsocial partners would help improve the design of the measures and helprestore confidence.

"The global crisis requires global solutions," emphasized the ILODirector-General. Lack of coordination diminishes the overall effect ofthe stimulus measures, making each individual country reluctant to movefaster than its trading partners and aggravating the recession. Thestudy also says trade protectionism would further depress world demandand wage deflation or weaker workers* rights would not only aggravatethe global crisis, but be perceived as unfair and aggravate the socialcrisis.

"The measures have also often failed to tackle the structuralimbalances that lie behind the crisis," Mr. Somavia said.

"Responsesto the crisis must not be piecemeal in nature and rolled outtemporarily, only to revert back to 'business as usual' as soon aspossible. Moving ahead with the Decent Work Agenda is crucial tosupporting the economic recovery, averting labour market and socialcrises and promoting social cohesion."

By coming together around a Global Jobs Pact, ILO constituents couldmake an important contribution to global policy coherence on theseissues. Such a Pact could ensure that stimulus measures moreeffectively tackle the transmission mechanisms of the crisis, namely thecredit crunch, the rapid deterioration in domestic demand conditions andthe recession in external markets, addressing key factors that nurturedthe crisis while building the foundation for a more sustainable economy.

The forthcoming International Labour Conference in June this year willfocus on tackling the Global Jobs Pact.

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