Tatsat Chronicle Magazine

Interlinked Crises Impacting Global Employment Divide: ILO

June 1, 2023

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 per cent – estimates show that low-income countries remain far behind in the recovery process, according to the ILO Monitor on the World of Work – 11th edition .

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 per cent (10.9 per cent in 2019); for Sub-Saharan Africa, 6.3 per cent (5.7 in 2019); and for the Arab States 9.3 per cent (8.7 in 2019). Other regions have managed to reduce their rates substantially below pre-crisis levels, with 6.7 per cent in Latin America and the Caribbean (8.0 per cent in 2019), 6.3 per cent in Northern, Southern and Western Europe (7.0 per cent in 2019), and 7.8 per cent in central and Western Asia (9.2 per cent in 2019).

Growing employment divide

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 per cent, while the rate in middle-income countries stands slightly above 11 per cent. High-income countries register the lowest rates, at 8.2 per cent. 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 per cent in 2005 to 21.5 per cent in 2023, says the report.

Rising debt levels

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 polycrisis), 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 per cent in 2023, compared with 11 per cent in developing countries at low risk of debt distress.

Expand social protection to achieve social justice

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 per cent and 23.2 per cent of older persons receive a pension respectively, compared to 77.5 per cent globally. The Monitor finds that introducing universal basic old-age pensions in developing countries would increase their GDP per capita by 14.8 per cent within 10 years and reduce extreme poverty (share of people who live on less than 2.15 USD a day) by 6 percentage points – a drastic reduction from the current rate of 15.5 per cent.

Financing social protection is challenging, but not unattainable, says the report. 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 per cent of their GDP.

Coordinated financial support needed

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.