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News : Global Economy Last Updated: Jan 9, 2015 - 5:16 AM

World's biggest economies warned on poor quality jobs, stagnant pay
By Michael Hennigan, Finfacts founder and editor
Sep 10, 2014 - 7:04 AM

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The World's biggest economies have been warned on the reliance on poor quality jobs with little security coupled with stagnant pay.

A large and persistent shortfall in the number and quality of the jobs being created in G20 countries is affecting prospects for re-igniting economic growth, according to a report prepared by the ILO, the OECD and the World Bank Group [pdf] for the G20 labour and employment ministers meeting taking place in Melbourne this week.

The Group of 20 comprises the 19 leading developed and emerging economies (and the EU): Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, South Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the United Kingdom, and the United States. Spain is invited every year as a permanent guest and the host country, currently Australia, also chooses countries to invite as guests.

G20 members represent around 85% of global gross domestic product, more than over 75% of global trade, and two-thirds of the world's population according to the IMF.

“There is little doubt there is a global jobs crisis,” said Nigel Twose, the World Bank’s senior director for jobs. “There is a shortage of jobs and especially quality jobs.”

The report says that despite some recent improvement, slow recovery from the financial crisis means that many G20 economies still face a substantial jobs gap, which will persist until at least 2018 unless growth gains momentum. With more than 100m people still unemployed in the G20 economies and 447m 'working poor' living on less than $2 a day in emerging G20 economies, the weak labour market performance is also threatening economic recovery because it is constraining both consumption and investment.

The report says that real wages have stagnated across many advanced G20 and even fallen in some. Wage growth has significantly lagged behind labour productivity growth in most G20 countries.

"The decline in labour’s share of income observed in most G20 countries over recent decades has continued in some while in others the labour share has stagnated. Wage and income inequality has continued to widen within many G20 countries, although progress has been made in a few emerging economies. On another positive note, working poverty has declined in many emerging G20 countries, notably China, although informal employment remains a major obstacle to improving job quality, particularly in emerging and developing countries."

It adds: "Stronger economic growth is a necessary but not sufficient requirement for strong job creation. Re-igniting economic growth also depends on recovery of demand, and this in turn requires stronger job creation and wage growth. Without confidence in their job and income prospects, households will continue to be cautious about consumption and firms will remain hesitant to invest in productive capacity until they see demand rising for their products and services. In the advanced G20 economies, large jobs gap and stagnating wage income have constrained both consumption and investment as sources of aggregate demand. In the emerging G20 economies high levels of under-employment and informality undermine both current consumption and potential output and productivity growth in the long-term. G20 countries need more and better jobs as a foundation for sustained growth and the wellbeing of their societies. "

Key findings of the report include:

  • Wage growth has significantly lagged behind productivity growth in most G20 countries, while wage and income inequality either remains high or has widened..
  • Real wages have stagnated, or even fallen, for many in advanced G20 economies.
  • In emerging G20 economies, high levels of under-employment and informality are constraining both current output and future productivity.

Looking ahead, the report says that achieving sustainable, equitable and inclusive growth requires policies across all relevant sectors that improve productivity and wages, employment opportunities and outcomes, particularly for those groups most affected by the crisis or who are vulnerable. Demographic changes, such as rapid population ageing in some countries and rising youth populations in others, also mean that governments need to promote the labour market participation of women, youth and other under-represented and vulnerable groups, enhance their skills and provide job-search support.

The report also highlights social protection, social dialogue, rights at work, and workplace safety as areas in need of further action.

Quality job creation and robust, equitable growth are intertwined goals, the study concludes. “Policy interventions that address both the demand and supply sides of the labour market are essential to reverse the current self-reinforcing cycle of slow growth, low job creation and low investment. Such policies would be much more effective if taken collectively and coordinated at the G20 level.”

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