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Fragile employment

Work trends in a global context

Over 200 million people worldwide are officially unemployed and looking for work. A much larger number of people, however, has a job, but one that is uncertain, unstable and precarious and does not help them out of poverty. Rising economic growth levels are not necessarily resulting in higher wages for them, or higher employment rates. Therefore, the challenge is not only to create enough jobs for the growing world population, but also to create better jobs with a decent wage.

In the past six decades the number of jobs has risen worldwide from 900 million in 1950 to 3.1 billion in 2007. This image was recently distorted by the economic crisis that started in 2008, which resulted in a global job loss of 50.4 million alone in 2009, 1 and 67 million fewer employed people around the world in 2012 than expected following pre-crisis trends. 2 However, since the Second World War, humanity has done surprisingly well in generating employment opportunities to meet the needs of a rapidly expanding population and the increasing participation of women in the labour market. Higher economic growth rates that grew ten-fold in the last decades were also important factors for employment. 3 Yet this factor alone does not tell the whole story on employment. Work trends are related to many other factors, of which population growth is an important one. They furthermore depend on technological advancement, urbanization, 4 education and skills of the workforce, trends in sector developments, and trade and investment trends.

In addition, despite the enormous total rise of the number of jobs, the quality of work has not increased at the same rate. Work has become more informal and flexible worldwide. Half of all jobs worldwide are now considered ‘precarious’, and a quarter of all workers worldwide earn US$2.00 a day or less, which will be explained below.

More jobs, more unemployment

Since 1950, the world population has grown by 4.6 billion people and it now totals 7.1 billion. The employment-to-population rate is most commonly used to represent overall employment. The employment figure is the percentage of countries’ working-age population (ages 15 to 64 in most countries) that is employed, including people that have stopped looking for work. For the OECD countries, the employment-to-population rate was 64.2% in the 1970s and had its peak at 66.8% in 2007-2008. It reached 65.1% in 2012. 5 Before the 1970s the rate was much lower at around 56%, particularly because most women had no paid job.

From 1996 to 2007, global population increased by 16%, while total global employment grew with 17%. During this period the world added approximately 400 million more people and about the same amount of jobs and the global employment-to-population ratio (age 15+) remained virtually constant at 63%. What this tells us is that global job creation and global population growth were quite stable relative to one another. However, talking in absolute terms, unemployment has risen as well. In spite of the remarkable expansion of employment opportunities in recent decades, 202 million people globally were classified as unemployed by the International Labour Organization (ILO) in 2013. 6

Of this number, 74.5 million are young people aged 15 to 24 years old, and are unemployed and looking for work. The youth unemployment rate is 13.1%, double the official global unemployment rate. 7 But the World Bank estimates that the number of young people without a job is actually much higher at around 300 million people. 8 The ILO attributes the current youth employment problems partly to the economic crisis, but Pablo Christian Aparicio, Professor of Educational Sciences at the Eberhard-Karls University in Tübingen, Germany, argues that besides economic aspects, the more structural social constellation also contributes. For example, the place of residence, sex, ethnic and cultural belonging, and the education levels of the parents, greatly influence the chances of youth getting a job. 9

Figure 1. Growth of Global Population and Employment 1950 to 2007. Source: Šlaus, I. and Jacobs, G. (2011b) ‘Human Capital and Sustainability’, Sustainability Journal, 3 (1) 10

At this point a word of warning is in order (see also box 1). Though aggregate numbers are useful to identify global trends and to compare situations – between countries, regions, age groups, sexes, etc. – aggregate numbers regarding employment must also be used and interpreted with caution. This is because social and economic situations between regions of the world and between societies can differ greatly, and measuring and defining unemployment is a complex task.

Box 1. Reliability of employment statistics

Employment data have to be used with caution. Data can be influenced by definitions, methods of data collection, differences in years of the data and unreliability of data.

Jobs cannot be characterized by a single term or really measured by a single indicator. Unemployment rates are added differently based on local circumstances. Each region in the world uses different age ranges for the ‘working age population’. For example, the World Bank, UN and OECD use the age range of 15 to 64 for the working age population, while many researchers or institutes use the age range of 20 to 65 years. To a certain extent, aggregate numbers, percentages and rates regarding employment compare apples with oranges. There is, fortunately, one definition of unemployment that is often used (e.g. ILO, OECD). According to this definition, adopted in 1982 by the 13th International Conference of Labour Statisticians in Geneva, “the “unemployed” comprise all persons above a specified age who are: (a) ‘without work’, i.e. were not in paid employment or self-employment; (b) ‘currently available for work’, i.e. were available for paid employment or self-employment during the reference period; and (c) ‘seeking work’, i.e. had taken specific steps in a specified reference period to seek paid employment or self-employment’ (ILO 1996-2010).”

GDP growth and employment

Although GDP growth contributed to the increase of job creation, economic growth does not automatically lead to more jobs, nor does it guarantee better paying jobs. For example, despite impressive economic growth rates in emerging markets like China, with a GDP growth on average of about 10% a year since 1978, and Brazil with around 5% growth yearly since 2004, and India with several peaks of 10% yearly since the 1980s; 11 many people in these countries still face unemployment or have to work under poor conditions in the informal sector. 12 Most of the employment creation in emerging economies has not resulted in formal jobs that provide access to employment rights and benefits and social security, as Sandrine Cazes and Sher Verick show in their 2013 book, The Labour Markets of Emerging Economies: Has Growth Translated into More and Better Jobs? 13

For example, China expected to increase jobs through economic growth. Yet, the amount of jobs actually created (even -2.5% in some regions in 2012), did not increase at the same pace as the GDP growth (7.8% in 2012).jj If growth and work were indeed so correlated, the actual number of jobs created in China would be the result of a much lower growth, namely 2%. The same disappointing ratios of employment creation to GDP growth can be seen around the world in both the developed and less developed world, for example in Thailand (figure 2 in box 2.), South Africa, Turkey, 15 the UK, and France (figure 3 in box 2.). Even in Africa, a continent with high GDP growth rates in many countries, the male employment ratio did not significantly increase between 1991 and 2010 (figure 4 in box 2.). Take for example emerging Kenya where the ratio decreased from 72% in 1991 to 64% in 2010.

Box 2. High GDP growth versus little employment growth

Figure 2. GDP and Employment in Thailand. Source: Chandrasekhar, C.P. and Ghosh, J. (2010) ‘Economic background to political crisis.’ Monthly Review.

Figure 3. GDP, Working Time and Employment in France. Source: Pianta, M. and Vivarelli, M. (1996) ‘Unemployment, Structural Change and Globalization.’ ILO.

Figure 4. Male Employment Ratios between 1991 and 2010 in African Countries. Source: ILO database (2012), in: Kariobangi (2013) Africa is rising. Employment is not.

Hence, emerging economies like China, Indonesia, and Thailand, which have heavily focused on exports in the last decades to generate economic growth, are now trying to develop their domestic markets by changing their economic strategies. They are doing so by shifting from exports to increasing production for domestic consumption. They, like other countries in the region, are aiming to create more jobs in the next decades, but face challenges from rising population rates and advancing technology that replaces people.

Besides changes in employment, the world is also witnessing fundamental changes in the types of jobs available. This is due to technological change that affects labour productivity and international trade. Through technological change, food production, for example, could increase to feed the growing world population with less labour. However, most of the new jobs are in the service sector (figure 5). Nowadays more people work in service than in agriculture, which was traditionally the main employer. The industrial sector remains the smallest, but increasing, provider of jobs. 16 Especially in South Asia, employment in the service sector has been increasing. This region is increasingly competing with the service sector in developed countries. Over the last decades, a growing number of services have been outsourced to South Asia (and other emerging regions), similar to how manufacturing tasks have been outsourced for more than 40 years, particularly to East Asia. 17 Since 2010, China is the biggest manufacturer in the world, ahead of the US. 18 Despite the fact that more people are finding work in the services sector, industry remains the largest sector in China. 19

Figure 5. Worldwide Employment by Sector: 1950–2008. Source: Šlaus, I. and Jacobs, G. (2011b) ‘Human Capital and Sustainability’, Sustainability Journal, 3 (1)

Historical perspective

After the Second World War, governments in developed countries strived for full employment, with the aim that all eligible people who wanted to work could find employment at prevailing wage rates. The 1950s and 1960s saw very low rates of unemployment of around 3% on average as a result of the post-war boom and reconstruction work, where many developed countries could benefit. 20 Governments actively stimulated job creation through working schemes and investments in housing and infrastructure. At the same time, since 1950, technology has played an important role in the shift from manual labour to white-collar work in many developed countries. 21 Through investments in education and skills, workers could adopt and benefit from new technology to get better and higher paying jobs. 22 The international trade environment was stable with protection schemes to stimulate factory and service sectors to develop and create jobs for the increasing population. It must be said that the majority of women in this time period were classified in the category of ‘economically inactive’, because the majority stayed home and took care of the household.

The energy crises of 1973 and 1979 resulted in stagflation, with no economic growth and increased prices and unemployment. 23 Full employment schemes were under pressure because of the increasing public debt and rising inflation. The Western focus of governmental policy became more about inflation control, meaning that full employment could not be guaranteed anymore. The economic models show that placing employment above the needs of an economy at such a time would have increased prices even further. From the 1980s onward, the economic model of market thinking regarding deregulation, privatization, and free trade deepened. The idea was that all governmental interventions in the market had the potential to frustrate economic growth. Economic growth (national income) was a way of making markets work more efficiently. And growth would trickle down to the whole population and create jobs (See the article, ‘Revaluing labour’ in this dossier).

Globalization

Before 1980, most of the global employment growth took place in the Western world, but from the 1980s onwards, emerging East Asian countries and other parts of the developing world showed impressive employment growth due to an increase in international trade. Simple service-related tasks generated through computerization (and the fabrication of its components), like production work, could be outsourced and gave countries like China, Vietnam, Mexico, the Philippines and India, the opportunity to create jobs. However, it had a negative impact on the wage levels of the less-skilled workers in developed countries as a result of global competition (See the article, ‘Creating a global labour market’ in this dossier). 24

In the 1990s, the globalization of the financial sector became dominant, which made short-term profit- making one of the main goals for businesses. As a result, profits trickled down less to the workers and more to shareholders, investment banks, hedge funds and other investors (See the article, ‘Profits without labour benefits’ in this dossier). In the 1990s with the combination of optimism over the fall of communism and the rise of new economic powers – first in Asia with China, Thailand, India, Indonesia and Vietnam, and later in countries like Brazil and South Africa – worldwide unemployment began to fall. However, the jobs that were created were not always better jobs, as working conditions in the newly-created export sectors remained poor. Also, in developed countries the number of working poor was on the rise (See the article, ‘Job insecurity as the norm’ in this dossier), standing in sharp contrast to the emerging global rich who are not dependent on wages. Instead, the global rich tend to invest their money in capital worldwide and less in productive sectors where workers depend on the wages for a living.

The economic crisis, especially in developed countries, worsened many of these trends resulting in higher unemployment, lower wages and more insecure jobs. As said, almost 202 million people were unemployed in 2013, up from 177 million in 2000. 25 If we proceed with business as usual, the International Labour Organization (ILO) foresees that global unemployment will reach 215 million by 2018, because the pace at which people will enter the labour market (42.6 million yearly) will go faster than job creation (40 million yearly). For the period after 2018, the United Nations Development Group (UNDG) estimates that 470 million new jobs have to be created globally between 2016 and 2030, and the World Bank and ILO estimate that 600 million additional jobs are needed to obtain full employment. 26

Box 3. Global regional differences in employment trends

In contrast to the rising unemployment in Western regions where the exception is a rise of the unemployment rate of at least a percentage point in six European countries in the years to come (Greece, Italy, the Netherlands, Poland, Portugal and Spain) (OECD, 2013), most developing regions and especially the emerging markets have higher employment numbers now than before the crisis.

Latin America and the Caribbean have even seen a decrease of the general and youth unemployment rates over the last 13 years from 8.6% total unemployment in 2000 down to 6.5% in 2013 (ILO, 2014). A further gradual, yet more moderate, decline in unemployment is prospected until 2018.

The Central and Southeastern Europe (non-EU) and Commonwealth of Independent States, with 8.2% unemployment in 2013, also dealt with a lower percentage than in 2000 (when it still was 10.7%). Yet the region has not shown a continuous decrease as the 2013 percentage is the same as it was in 2007, while in the in-between years the percentage temporarily peaked to 9.9% in 2009 (ILO, 2014).

Southeast Asia and East Asia have shown impressive employment growth, however, with an extremely high population growth, unemployment remains high. East Asia accounts now for about 20% of the total world’s share of people without a job. This is the second position in unemployment shares globally, with 39.4 million officially unemployed in 2013 (an increase of 8.0 million people since 2007). Yet, in 2013, an estimated 415 million workers held a salaried job in East Asia (ILO, 2014). The region has seen impressive growth with a near doubling employment level in comparison to 1991. The share of wage workers in total employment increased from 18.5% in 1991 to 50.1% in 2013. In this period the region "successfully moved 464.5 million workers out of poverty, an astounding and unprecedented pace of improving household incomes and living standards,” according to the ILO (2014, p.53). The question for the region now is how to retain the trend of increasing employment, if investment and growth levels stabilize.

Decreasing quality of work

In addition to unprecedented job growth, the last half century has also been a period in which the quality of jobs available worldwide has improved dramatically due to the progressive shift from manual work to mental work, indicated by the falling percentage of the world’s workforce employed in low-wage agricultural jobs, according to the Club of Rome. 27 However, when jobs are scarce (even in times of economic growth) and needs are high, part of the population will accept any job, regardless of the remuneration, working conditions, and the match with their own skills.

Furthermore, the trend all around the world is to have a more flexible workforce, and this is increasingly so in the developed countries. The trend of flexibilization started before the global economic crisis, but has been exacerbated as a consequence of it. The number of people with a part-time contract in developed regions has increased over the last decades. 28 In 1985, around 9% of workers in OECD countries had a part-time job, and this number increased to 12% in 2007. Part-time work is generally higher among elderly, the youth and women. 29 A quarter of employed youth works part-time and often involuntarily. 30

The ILO attributes the trend of more part-time work to “the increase in the number of women in the labour market, but also to attempts to introduce labour market flexibility in reaction to changing work organization within industry and to the growth of the services sector.” 31 Flexibilization of labour is also reflected in the increase of temporary contracts. Currently, more than 10% of employees in OECD countries have a contract of half a year or less. 32 Prevalence is especially high among young people who are entering the labour market; 40.5% of employed youth in 2011 had a temporary contract. 33

For many emerging and developing countries informality is not a new trend. It is estimated that globally, up to 60% of the workforce is in the informal sector. 34 It is hard to know how many people work outside the formal structures and therefore, the estimations for developing and emerging regions range from 10% to 80%. 35 The precariousness of informal jobs is also reflected in data showing that more than 30% of the workforce in developing regions lives in a poor household and another 25% lives in a household just above the international poverty line of US$1.25 a day. 36 Meanwhile, many self-employed workers in the informal sector work more than 48 hours a week. 37 Women, especially in developing countries, participate less on the labour market, although in rural areas in emerging countries their participation is changing. 38 In South Asia and in the Middle East and North Africa, less than 30% of women have a job. 39 And when a woman does have a job, the woman is more likely to have a precarious job than a man. 

In addition to this, it can be said that for the 200 million people worldwide who do not have a job and are actively looking for one, 1.5 billion people do have a job, but one that is not formal, stable or secure. They work in farming and small household enterprises, or in casual or seasonal day labour. 40 Even though statistically, more than 3 billion people have a job, half of them thus do not have a decent one. Informalization of labour is certainly not a new trend, nor a trend caused by the global economic crisis (although the crisis may have aggravated it). Rather, it reveals structural problems related to the number of jobs that are available, the match between the skills of job seekers and the skills required for a job, labour market discrimination, and the tendencies of companies to rely on temporary workers. 41

Box 4. Defining the quality of work

Informal work, vulnerable work, unstable work, flexibilization, precariousness, and working poverty are different concepts that refer to the quality of work. Whereas ‘informal work’ and ‘vulnerable work’ focus on the formality of the job, ‘unstable work’, ‘precarious work’ and ‘flexibilization’ refer to the level of security and stability that the job gives. ‘Working poverty’ explains the impact these kinds of jobs can have on the financial circumstances of a worker and his or her family, or about the kind of jobs that these circumstances urge him to take.

Precarious workers often have no job security and face growing socioeconomic vulnerability (Remery, Van Doorne-Huiskes, and Schippers, 2002). Informality can refer to both work in the informal sector and informal work in the formal sector. Originally the term ‘informal sector’ was based on the distinction between wage employment and self-employment. Nowadays informal employment includes “(...) all remunerative work, both self-employed and wage employment, not recognized, regulated, or protected by existing local or regulatory frameworks, as well non-remunerative work undertaken in an income-producing enterprise" (Arnold and Bongiovi, 2012).

The increasing flexibility has altered many employees’ relation to work. With deregulations and more temporary jobs, workers are increasingly in a situation that is insecure, unpredictable and risky. Precarious work takes place both in the formal and in the informal sector and both in developed and developing countries. Long assumed to be a sign of underdevelopment, the informal sector remains pervasive throughout the world, also in countries that have experienced impressive growth rates. 42 Most precarious work in the developed world is within the formal sector. Of all people in the informal sector, the percentage of people that are self-employed or contribute to family enterprises is decreasing. 43 This decrease is probably due to the decreasing number of people working in agriculture, as we saw above. On the other hand, the percentage of informal workers in the formal sector without a contract or without social protection is increasing.

In insecure and unstable work and in unemployment numbers, certain groups are overrepresented, namely youth, elderly, and women. Although their participation is increasing, women continue to be underrepresented on the labour market. 44 When they have a job, though, it is more often an informal and low-skilled job than among men. 45 On average, women earn 10-30% less than men with the same kind of jobs. 46 According to the World Bank, “the differences [in earnings] are not fully explained by education, experience, or sector of work.” 47

The impact of low-quality jobs and increasing insecurity when one has a job is reflected in the fact that, especially in developing countries, part of the workers are still poor. The number of working poor is falling in line with the decreasing numbers of extremely and moderately poor in the developing world. 48 This decrease is especially visible in East Asia. However, the number of nearly poor workers earning between US$2.00 and US$4.00 a day in the developing world has increased from 15% of the workforce in 1991 to more than a quarter in 2011. 49 The share of working poor (by local standards) has also increased substantially over the last decade in both the United States and the European Union. 50 And especially in developing countries, there are still workers who work ’extremely long working hours’ in the manufacturing industry while still living in poverty (See the article, ‘Job insecurity as the norm’ in this dossier). 51

The challenge is not only to create enough jobs for the growing world population, but also to create better jobs with a decent wage. Therefore, a focus primarily on GDP growth is not enough, since growth does not automatically lead to higher employment rates in emerging countries and developed countries.

Co-readers

Abdoul Mijiyawa, Economist, African Center for Economic Transformation (ACET), Accra, Ghana

Jens Lind, Professor, Department of Sociology and Social Work, University of Aalborg, Denmark

Jan Rieländer, Economist, OECD Development Centre, Paris, France

Photo credit main picture: clockwork / Alosh Bennett via Flickr

Footnotes

Middle Class

Dossier

Middle Class

Research article

Related themes:

Summary

  • Rising GDP growth levels do not automatically translate into higher employment rates;
  • At the current pace, job creation cannot keep up with the number of people entering the labour market. The number of unemployed people that are looking for work reached over 200 million in 2013;
  • There is an increasing amount of workless people worldwide who are dropping out of the labour market and not officially looking for work, and who are not represented in the official unemployment data;
  • Worldwide, especially young people have a hard time finding a job. Officially around 75 million people in the age group of 15 to 24 years old are unemployed. Real, unofficial, youth unemployment is estimated to be 300 million;
  • The financial crisis has had little effect on unemployment rates in developing countries, however, unemployment has increased significantly in developed countries;
  • Southeast and East Asia have shown impressive employment growth, however, unemployment remains a problem because of the extremely high population growth;
  • Job creation has been historically successful with 2.2 billion jobs added globally since the Second World War. However, half of all jobs worldwide are considered ‘precarious work’, and a quarter of all workers worldwide earn US$2.00 a day or less.
  • Flexibilization of labour increased in 2007 before the economic crisis, wherein the number of people with a part-time contract in developed regions increased from 9% to 12%. Currently, more than 10% of employees in OECD countries have a contract of half a year or less.
  • For many emerging and developing countries, informality is not a new trend. Economic growth in these countries is not creating formal job opportunities for the large percentage of the population working in informal sectors.

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