EMPLOYMENT for all by 2000
From Job-less Growth to Job-Led Growth
Report of the Working Group
International Commission on Peace and Food
2352 Stonehouse Drive, Napa, California 94558
ICPF Working Group on Employment:
Garry Jacobs - Convenor
M. S. Swaminathan
Robert van Harten
Unemployment is a major cause of concern for governments around the world. The subject evokes pessimistic prophesies of a fast-approaching future in which tens of millions of people are unable to find jobs, technology replaces human labour, welfare systems collapse under an unbearable burden, children have less economic opportunity than their parents, and markets and governments are powerless to do anything about it. None of these outcomes is inevitable or even likely, provided society acts decisively to meet the challenge. A global overview of employment cannot do full justice to the special circumstances, problems and potentials of specific regions and countries, but it can address the growing perception and concern that employment has become a problem beyond the means of governments or the global economy to eradicate or even contain.
Employment is the essential basis for peace, food security and human development. When job opportunities are not available, social tensions and violence increase, threatening society. We are now capable of producing all the food and other basic necessities we need to feed, cloth and house everyone, but without sufficient opportunities for employment, people lack the purchasing power needed . Lack of employment opportunities is also directly linked to destruction of the environment.
The employment problem needs to be viewed in a long term and global perspective. The world economy has generated more than one billion jobs in the last four decades, more than were created during the previous four centuries. If past trends continue, it will create another 1.3 billion during the next 35 years. Contrary to common belief, the overall employment rate, the percentage of the working age population with jobs, has risen steadily in the post-war period. While automation does eliminate specific types of jobs, on the whole technological development creates many more jobs than it destroys. Hand in hand with an enormous quantitative growth, the quality of jobs has increased dramatically.
Despite these achievements, unemployment is of growing concern because population has expanded in recent decades even faster than job creation and because a larger percentage of the population, principally women, seek employment more now than at any time in the past. Recently, this trend has been aggravated by the sharp cuts in military spending, the extreme disruption of the centrally planned economies of Eastern and Central Europe, large government deficits and recession in the industrialized nations and their consequent impact on developing countries. Unless concerted action is taken, global unemployment is estimated to increase by 130 million during the 1990s.
This report presents a comprehensive package of strategies to stimulate more rapid increase in employment opportunities in developing and developed countries. The achievements of East Asian nations demonstrate that tremendous increases in productivity and employment can be achieved based on strategies that improve skills, organization, technology and investment. Agriculture has been a driving force for job growth in many of these countries, leading to the development of agro-based and down-stream industries. Investment in education and technical skills accounts for more than half of the increase in productivity that has fueled the growth of these economies. Improving the quality and quantity of primary education, especially in rural areas and for women, is the single most effective measure for continuous job growth. Promotion of small businesses and entrepreneurship, tapping new markets, improved technical and vocational training, an employment-oriented education, dissemination of information about markets and technology, smaller and more responsive types of industrial organization blending traditional and modern technologies, efficient and flexible labour markets, and expansion of the service sector are key elements of a successful job creation strategy.
Given the right mix of policies, good government and a conducive international environment for trade, technology transfer and investment, every nation has the capacity to develop and meet the employment needs of its people within the next one or two decades. While many successful prescriptions are known to all, very few are systematically and efficiently applied. Africa can benefit enormously by applying strategies that have worked in Asia. The "Prosperity 2000" program evolved by ICPF for India outlines a mix of these strategies to generate 100 million new jobs within a decade or less, which will be sufficient to raise 30 percent of the world's poorest billion people above the poverty line.
The present job crisis among Western nations is largely structural . A solution cannot be accomplished by mere incremental adjustments within the context of present attitudes and policies. A radical change is essential and inevitable. Employment must, and will come to, be recognized as a fundamental human right.( either as the result of bold leadership or in response to a growing social crisis.) This is a natural step in the historical development of government's role in insuring the education and welfare of its citizens. Without access to jobs, people lack the ability to ensure their own survival and support in modern society, where every type of human activity is regulated by government. Virtually all regulations--trade, labour, welfare, environment, zoning, licensing, commerce, transport--impact directly or indirectly on employment opportunities. Recognizing the right of every citizen to employment is the essential basis and the most effective strategy for generating the necessary political will to provide jobs for all. Pragmatism as well as idealism compels this step.
A package of strategies is presented to achieve full employment in the West based on a mix of elements that includes promotion of self-employment and small business development, redistribution of work through voluntary part-time and shorter working hours, changes in the structure of social security payments and taxes, restructuring of welfare programs to encourage retraining, wage controls, better labour market information systems, raising minimum educational standards, reorienting higher education to match skills better with jobs, intensifying training programs, re-examining government policies that impact on job creation, environmental work projects, national service corps and mechanisms to generate a more equitable distribution of incomes. The continuous development of knowledge and productive capabilities of the human being through liberal investments in education and technical training is the ultimate key to insuring employment opportunities for all in the future.
Globalization makes it impossible for individual countries to resolve their employment problems in isolation. A coordinated international effort is called for. Practical steps based on mutual benefit are needed to improve the global climate for economic growth and job creation by evolving stable and supportive policies to regulate capital flows, foreign trade, debt, commodity pricing, immigration and labour movements, transfer of technology, investment, military spending and the arms trade.
The single greatest barrier to solving the world's employment problem is the perception that jobs are a zero sum game, in which every gain by one country or part of the world necessarily involves a loss by another. There is nothing inevitable or immutable about the growth pattern of the world economy. Nor is employment an independent variable beyond the constructive influence of public policy. Our present system is the product of perceptions and choices that can and will change as its inadequacies and inconsistencies become more pressing and more apparent.
With demand satiated or stagnating in the West, the global economy needs a new engine to drive growth in developed and developing countries. The further growth of incomes and employment in the Third World is the ultimate key to stimulating continuous growth of incomes and employment for the entire world economy. Recognition of this can lead to a reorientation of policies that will support greater growth and prosperity for all.
Strategies for Developing Countries
1. Utilize agriculture as an engine by programs to upgrade technology, improve skills, raise productivity, ensure supply of essential inputs, establish marketing and distribution channels, create linkages between agriculture and industry, and cater to export markets.
2. Promote Small Enterprises by policies to make technology, training, credit, marketing and distribution channels more easily accessible to small business and by forging links between universities, research institutes and small enterprises.
3. Raise skills to increase productivity by vastly expanding the lower tiers of the agricultural, technical and vocational training systems at the local level to provide practical training in job-related skills.
4. Improve distribution systems to develop untapped markets by identifying missing links and establishing successful model programs that bridge the gap between rural producers and urban or overseas markets.
5. Develop export-oriented markets by forging foreign collaborations and technology transfer, creating an attractive commercial environment for foreign investment, and continuously building up the skills of the labour force.
6. Encourage import substitution focusing especially on food, energy, and selected manufacturing.
7. Place the employment objective high on the national agenda and consciously plan to stimulate growth in employment.
8. Actively encourage and support growth of the service sector through programs similar to those that have successfully supported expansion of small industry in many countries.
9. Reduce the mismatch between supply and demand for skills by first making a careful; assessment of present supply and demand for key skills. Compare the density of different types and levels of skill with countries at the next higher stage of development and evolve programs to raise the quantity and quality of skills to that level.
10. Conduct a comprehensive study of successful systems and institutions from developing and developed countries that can be transferred and adapted to local conditions in order to accelerate development in each field of activity.
11. Raise the educational qualifications of the workforce on a war footing to the level pertaining in more economically advanced nations. Place particular emphasis on primary and secondary education, rural education and education and young girls.
12. Reorient the educational curriculum at all levels, especially higher education, to impart the knowledge and attitudes needed to promote self-employment and entrepreneurship rather than salaried employment.
13. Encourage the establishment of new institutions, programs and systems to speed and extend the dissemination of practically useful information as a powerful catalyst for more rapid social progress. Encourage a national climate of openmindedness to foreign ideas, influences and success stories.
14. Evolve new organizational patterns for existing industries based on adaptation of new technologies in small, decentralized, labour intensive production units in order to make these industries more efficient and competitive.
15. Unleash the social energies and public initiative by redefining the role of government as that of a pioneer, catalyst and stimulant to the development of society, rather than as prime mover, owner and controller.
16. Introduce special employment programs for vulnerable portions of the population during the transition to a full employment economy.
17. Increase the speed of commercial transactions, especially money flows, in the economy by streamlining government and banking procedures, ensuring rapid utilization of funds by all government agencies, setting strict limits on the time taken for bank transfers, introducing agencies for credit verification and collection of unpaid bills, and improving the telecommunications infrastructure.
18. Evolve a comprehensive plan to achieve full employment by identifying untapped growth potentials in agriculture, industry, exports and services similar to the "Prosperity 2000" strategy developed by ICPF for India. Launch a nationwide program to implement all employment-related strategies on a highest priority basis.
Strategies for Full Employment in Advanced Industrialized Nations
19. Promote small businesses by expanding services to support new enterprises, introducing training courses, testing and certification for those who want to start businesses, and establishing business incubators to provide work space and shared services as well as technical, financial and marketing expertise to start-up companies.
20. Reduce business failures by expanding programs for management training, small business education and counseling, marketing assistance and financial management.
21. Redistribute work by reducing working hours and encouraging voluntary part-timism by removing the artificial barriers to job-sharing created by employment laws, social security tax laws, administrative procedures and trade unions.
22. Modify social security payments to increase the difference between minimum wage and maximum payments for the able-but-unemployed to provide greater incentives to job seekers for re-employment.
23. Orient social security programs toward re-employment through a comprehensive program of education and vocational preparedness for the unemployed, compulsory retraining for those who are unemployed for more than six months, and a strictly managed penalty system for unemployed persons who refuse three job offers and do not seek retraining.
24. Introduce wage controls to maintain competitiveness in return for a strong commitment by business to expand job creation.
25. Modify tax policies to reduce the incidence of taxation on labour and raise taxes on capital employed, non-renewable energy and material resources and arms exports.
26. Promote new types of enterprises, such as the highly successful EXODO retraining and employment cooperatives.
27. Improve labour market information systems within and between countries by increasing the accuracy and comparability of data, requiring mandatory reporting by businesses of all sizes and freely exchanging information between cities, states and countries on successful employment generating strategies.
28. Launch a nationwide public educational program on the tremendous potential gains in productivity from increased training and support initiatives to intensify training programs for all employees by every type of commercial and non-commercial institution in order to systematically upgrade the technical, vocational, organizational and managerial skills of the workforce.
29. Establish an apprenticeship program that combines classroom schooling with on-the-job skills training to ensure a smooth transition to employment for those who do not pursue higher education.
30. Create programs linking demilitarization with urban employment by utilizing the vast physical, educational and organizational resources of the military to impart training to unemployed youth.
31. Utilize national service organizations to carrying out educational, public health, environmental and other public service activities as part of a training-cum-employment program for youth, demobilized servicemen and retirees.
32. Provide information and incentives to reorient the curricula of colleges and universities in order to adjust course capacity to match the supply and demand for occupational skills.
33. Redirect welfare expenses for creating jobs by paying welfare recipients to carry out public service activities in return for welfare payments.
34. Re-examine public policies to assess the impact of legislation and regulations on employment and modify those that can be changed. Require employment assessment of new policy initiatives prior to adoption.
35. Raise the compulsory minimum standard, the average level and the quality of education in all fields and at all levels as a powerful medium term stimulus to job creation.
36. Make income distribution more equitable in order to stimulate greater demand, consumption and economic growth. Introduce a 'maximum wage' law requiring firms to pay taxes on exorbitant executive compensation.
37. Introduce new systems to build public confidence in government, industry, banks, economy and the future, in the same manner as the U.S. Government instilled public confidence in the banks by establishment of the Federal Deposit Insurance system.
Strategies at the Global Level
38. Expand the G7 to G10 or G12 and jointly set up a common international investment and employment program.
39. Organize under the ILO an international research program to construct a truly global employment model, showing the impact of plant closings, movement of industry to low-wage countries, changing patterns of trade, economic growth, immigration policies, refugee movements and other factors on employment opportunities around the world.
40. The growth of the Third World economies is the greatest potential engine for economic expansion and job creation in the West. Government policies based on recognition of this fact can considerably improve the climate for development of the Third World and correspondingly stimulate further job growth in the West.
41. More than two billion people in developing countries representing about 35% of the entire world's population are dependent on agriculture as a primary source of livelihood. This compares to 45 million people in industrialized countries, which is less than 1% of the world's population. The industrialized nations spend more than $300 billion annually on agricultural subsidies to support their farm population, which is nearly seven times the total world overseas development assistance. Agricultural subsidies in the North not only place powerful constraints on exports from developing countries but also directly interfere with the livelihood of one third of the entire human race. The reduction and eventual elimination of these subsidies, which is contemplated by GATT, represents the single most important step that can be taken to improve the employment opportunities for people in developing countries.
42. Launch a major initiative to change social attitudes about work by educating the public so that those who do not need to work financially can seek and find socially respected and psychologically satisfying alternatives to paid employment.
In the brief period since Mikhail Gorbachev's initiatives ended the threat of nuclear confrontation between East and West, employment has emerged as the No.1 political issue worldwide. Recent experience with jobless growth in Western Europe and North America has raised fears of a long term decline in the employment generating capacity of the Western market economies, with devastating implications for most of the developing world. Increasing unemployment is raising the cry of protectionism, exerting pressure for reduction in foreign aid flows and generating strong resistance to liberal immigration policies. The notion of a progressive and permanent decline in the creation of new employment opportunities looms as a specter over the world's future economic prospects.
In the USA, official unemployment in late 1993 hovers around 6.8 percent, up markedly from a few years ago. But this figure understates the true number of unemployed, including those who have given up seeking jobs, which is probably above 10 percent. Although the unemployment rate in the U.S. remains below the level in the early 1980s, most of the job growth in the past decade has been in the lower wage service sector, rather than manufacturing industries. The impact of layoffs on the overall unemployment rate is heavily skewed against minority groups. Blacks are twice as likely as whites to be without jobs. Overall it has been estimated that more than 35 million Americans, 14.2 percent of the population, were living on incomes below the poverty line in 1991, including 30 percent of all blacks and Hispanics. Of the poor, 40 percent are children. Much publicized cuts in defense spending are projected to eliminate between 1.5 and 3 million jobs over the next five years. Despite continuing announcement of layoffs that are part of the on-going restructuring of corporate America, the U.S. economy added 1.8 million net jobs during 1993, primarily through growth of small and mid-sized companies. But there are strong indications that the problem is not merely a reflection of a short-term economic dip. The current situation is the result of a number of important long-term trends that will continue to have an impact on American society throughout the coming decade.
West European unemployment rates have reached the highest level in 30 years. They are projected to exceed 12 percent or 18 million people in 1994 and remain high throughout the decade, prompting EC President Jacques Delors to call employment Europe's "Achilles heel". Recent plant closings in Italy and other European countries have raised the likelihood of violence by disenchanted workers. Unemployment among people under age 25 is of special concern in many European countries. In mid 1993, the youth unemployment rate (aged 16-19) averaged nearly 20 percent, with rates of 36 percent in Spain, 28 percent in Ireland, 27 percent in Italy and 23 percent in France. Of equal concern is long-term unemployment (greater than one year), which averages around 45 percent of the unemployed and 4 percent of the labour force in the European Community as a whole and accounts for 80 percent of the jobless in Belgium and Italy. The emerging situation is posing a challenge to the European concept of the welfare state.
Employment in Eastern Europe has been severely disrupted by the breakup of the Comecom, the dissolution of the USSR and the movement of these countries from centrally planned to market economies. From the beginning of 1990 up to March 1992, registered unemployment grew from 100,000 to over 4 million, despite the rapid growth of jobs in the private sector. All these countries have experienced heavy job losses in the State sector and in agriculture. The impact would have been substantially larger were it not for their reluctance to abandon fully state control and support to firms. These economies all suffered from latent unemployment and underemployment during earlier decades, so the figures are indicative of a chronic problem. According to rough estimates, unemployment is currently around 18 percent in Bulgaria, 14 percent in Poland and Hungary, 8 percent in Romania and 5 percent in Czechoslovakia. Youth unemployment rates are 60 percent in Bulgaria and Poland. Joblessness has risen significantly in the republics of the CIS as well, but reliable data is difficult to obtain.
The challenge of creating "jobs for all" is not new to developing countries. The slow down in economic growth in Sub-Saharan and North Africa, the Middle East, Latin America and the Caribbean during the 1980s, declining terms of trade and the rising pressure for protectionist trade practices in the West, coupled with projections of continued high rates of population growth in many regions indicate that employment will be an even greater problem in much of the developing world during this decade.
In Latin America, 192 million people representing 46 percent of the population live under the poverty line, out of which 22 percent are considered "extremely poor". Urban unemployment is down slightly to around 8 percent, but average industrial wages in the region fell by 17.5 percent and the number of workers in the lower wage, less stable informal sector doubled during the 1980s. Population growth is down to 2.1 percent per year compared with 2.7 percent for the period 1950-90, but a 72 percent increase in labour participation rates for women is causing the work force to continue to expand rapidly. This region needs to double its growth rate in jobs and create 89 million new jobs during the 1990s in order to provide full employment opportunities for all its people.
In Sub-Saharan Africa--home to 20 of the 25 poorest nations in the world--urban unemployment afflicts some 14 million people, representing 15-20 percent of the workforce, and is projected to more than double in the next ten years. Real wages fell sharply throughout the region during the 1980s. The informal sector now constitutes more than 60 percent of the urban labour force. Typically, youth comprise 65 to 75 percent of the total unemployed. With its population still growing at 3 percent annually, these countries need to create 100 million new jobs in the coming decade just to maintain their present levels of unemployment.
High population growth coupled with a severe economic slowdown have generated high rates of unemployment in the Arab countries, estimated to exceed 25 percent during the 1990s, in spite of the very low labour participation rates among women in this region. In the aftermath of the Gulf crisis, labour supplying countries such as Jordan, Lebanon, the Sudan and Syria have suffered the most. Returnees swelled Jordan's population by 8.4 percent and caused unemployment to rise above 20 percent.
The countries of Asia and the Pacific have made the greatest strides in job generation during the 1980s and are poised to continue expanding rapidly. The Newly Industrializing Economies (NIEs), Hong Kong, S. Korea, Singapore and Taiwan-China, are all facing severe labour shortages, with Malaysia, Thailand and Indonesia also moving into labour shortage situations. But other Asian countries continue to face major challenges in creating sufficient jobs for all. Despite China's rapid economic growth in recent years, the country still has a pool of 130 million surplus rural workers and 5 million urban unemployed. According to ICPF projections, India needs to create at least 100 million new jobs in the next ten years in order to raise all its poor above the poverty line.
A variety of factors contribute to the aggravated employment situation confronting most regions of the world today. Some of these causes are chronic tendencies that have persisted over decades. Others are of more recent origin or acuteness. The latter group includes:
o Reduced military spending has declined globally by one-third in real terms over the past four years--an unprecedented and remarkable achievement. The arms industry presently employs more than 15 million people worldwide, 90 percent of which are in the former Soviet Union, China, U.S. and Western Europe. The U.S. alone has lost one million defense jobs since 1987. From 1987 to 1997, the decline in defense-related employment in the USA alone could reach 2.6 to 2.8 million, more than canceling out the growth of 2.1 million defense jobs during the previous decade. Globally employment in defense industries is expected to decline by at least 3 to 4 million jobs by 1998.
o Strong pressure to reduce large government deficits in the developed-industrialized nations has resulted in reduced government spending and slower economic expansion in these countries.
o The breakup of Comecom and the USSR has had a strongly negative impact on trade within Eastern Europe, as well as with the industrialized West and developing countries.
o The extreme disruption of the centrally planned economies of Eastern and Central Europe during the early stages of their transition to market economies has led to high domestic unemployment in most cases.
o The high interest rates in Europe, resulting in part from tight monetary policies pursued by Germany, the largest European economy, to offset the enormous costs of reunification have had adverse effects on investment, growth and employment in the region.
o The increasing competitiveness of the Newly Industrialized Economies of Asia and most recently China has displaced jobs in the West.
o In response to intense competitive pressures from abroad, Western multi-national corporations have taken unprecedented steps to restructure and down-size their operations, resulting in massive layoffs and little new job creation by large corporations.
o Gains in productivity due to new technology, particularly delayed gains from the micro-computer revolution of the 1980s and the growth of factory automation, have slowed job growth.
o Slow recovery from the recent global recession has slowed growth of foreign trade.
o The impact of structural adjustments programs has slowed economic growth and new job creation in a number of developing countries.
As the recent proliferation of local and intra-state conflicts clearly demonstrates, the end of the confrontation between East and West has not eliminated the incidence of war. Poverty and unemployment are closely linked to most instances of social unrest--tribal wars, civil wars, urban crime and violence. The growing demand of people everywhere to share in the benefits of modern society and the rising frustration with their comparatively slow or insubstantial progress have led to increasing social tension and violence that can only be alleviated by providing these people with opportunities to improve their living standards. Unemployment is a direct threat to social stability. Employment is the essential foundation for eliminating social conflict. A sustainable peace within nations and around the world requires the achievement of sustainable livelihood for all people. Unemployment is also a major cause of massive migrations, both to urban areas within countries and across borders, which has become a highly destabilizing factor in many regions. Employment is essential for peace and security, the most fundamental needs of every society: hence the call, "Employment for Peace".
Studies in the USA indicate the long term effect of demilitarization and conversion on employment and economic growth will be positive. But in the short term, they have had a severe negative impact both in the USA and Russia, perpetuating high levels of arms exports and generating considerable political and social resistance to rapid demilitarization, which can free enormous resources for more constructive social purposes.
Global food security can only be achieved when everyone has the minimum purchasing power required to procure their food needs. According to FAO, there is no global food shortage. Today, more food is produced on less land, but still about 800 million people are malnourished, 2 million people are threatened with starvation, and 40,000 children die daily due to causes of malnutrition. Economic entitlement, rather than a shortage of food or food production capacity, is the key to global food security.
Employment is also closely linked to human development. The acquisition of education and productive skills is essential for generating new employment opportunities and stimulating income growth. Experience has shown that it is not possible to achieve the dual goals of high levels of per capita national income and equitable income distribution without full or nearly full employment. Employment is the most reliable way to distribute the fruits of development among people.
Job creation during the 20th century
There is a widespread belief that joblessness is destined to become a more and more difficult problem to resolve in the coming decades. Yet viewed from an historical perspective, the evidence points to a different conclusion. The last half century has been a period of unprecedented job growth. Over the past 40 years, the global economy has generated more than one billion new jobs, and if the trend of past decades continues, it will generate more than 1.3 billion additional jobs during the next 35 years.
Rising unemployment and public anxiety about declining long term employment opportunities are not new. The radical transition of the U.S. economy late in the last century, prompted by the mechanization of agriculture and the introduction of mass production processes, displaced 4.4 million farm workers and forced many people, who could not rapidly adjust to the new skill requirements, into part-time and temporary jobs. Double digit unemployment persisted in America throughout much of the 1890s, resulting in violent outbursts of labour unrest and visions of a dismal future for workers. But in the years that followed, these dire visions proved to be wrong. Employment expanded at a phenomenal rate during this century, rising four-fold from 29 million jobs in 1900 to 118 million in 1990. Today, the same process appears to be unfolding in a new form. The recent slow-down in job growth is the result of a structural change in the economy rather than a long term decline. According to projections by the U.S. Bureau of Labour, total employment in the USA is expected to increase by another 25 million by 2005.
The same trend is true for the industrialized nations as a whole. Between 1967 and 1990, total employment in OECD countries rose by 87 million jobs or 30 percent. During this period, unemployment rose by 15.4 million persons, representing a doubling of the average unemployment rate. The primary reason for rising unemployment was that overall employment rates (the percentage of the population employed) have risen steadily in the more industrially developed nations during the post-War period, largely due to a 22 percent increase in the participation of women in the work force. Thus, more people are working than ever before, yet at the same time more people are unemployed, because a larger proportion of the population seek jobs. During this century, the employment rate in the U.S. rose from 38 percent to 46 percent of the total population and is expected to reach 51 percent by 2005. Japan has created 27 million new jobs since 1950 and its employment rate has risen from 43 percent to over 51 percent. In the European Community the employment rate has declined by 1 percent since 1965 and is presently just under 41 percent.
To some extent, the difference between European and American performance is attributable to the far higher percentage of the European work force engaged in agriculture 25 years ago. In addition, during the 1980s Europe chose a high wage path to growth, passing on the benefits to the existing work force but creating relatively few new jobs. The USA, with a similar growth rate over the decade, showed lower income growth per worker, but steadily raised the employment rate. The average employment rate in Europe (measured as a percentage of the working age population) is 60 percent, compared with 70 percent in the USA and Scandinavia, where activity rates for women are much higher. In Scandinavia and Japan, a high level of employment has been achieved with an income distribution more equal than in the rest of Europe and in North America. In the USA, both employment and income disparities have increased at the same time, largely due to the creation of many low wage jobs in the service sector.
Job growth has been quite rapid in the developing countries over the last forty years, more than doubling total employment. For example, the populations of Brazil and Ecuador both doubled between 1960 and 1990, yet growth in jobs was even greater. The economies of East and South East Asia expanded even faster, leading to near full-employment and labour shortages in Hong Kong, S. Korea and Singapore, and declining unemployment in Malaysia, Indonesia and Thailand. In South Asian countries, unemployment is still high, around 25 percent of the labour force.
The single most important factor behind rising numbers of unemployed persons and increasing absolute numbers of families below the poverty line in developing countries has been the rapid growth of population in these countries during the last half century. The 2.4-fold expansion of population in the Third World and more than doubling of the economically active population since 1950, have generated enormous pressure on economic systems in developing countries to expand rapidly enough to absorb new entrants to the work force. Overall, the percentage of the total population employed has declined by nearly 4 percent during this period due to the more rapid expansion of population in these countries. Population growth rates continue to fall steadily in most countries, with the exception of Africa. This trend could provide an opportunity for economic growth and job growth to catch up with the population explosion of recent decades.
Along with rapid quantitative job growth, the global economy has achieved dramatic qualitative gains in the nature of employment. During recent decades, there has also been a marked movement away from subsistence level occupations, primarily in agriculture, to more skilled and remunerative forms of employment. Worldwide, the percentage of the work force engaged in agriculture has fallen by 24 percent since 1950, from 67 percent to 51 percent. In the more developed regions, the decline is much more dramatic, from 38 percent to 13 percent. In Africa, it fell from 82 percent to 69 percent. At the same time, global employment in industry rose from 15 percent to 21 percent and in services from 18 percent to 28 percent.
The shortages of jobs and the resulting poverty represent the most pressing social problem in the world today. But viewed in a historical perspective, it is clear that substantial progress has been made during the last quarter century, making humankind as a whole more prosperous than at any previous period in recorded history. Between 1965 and 1985, per capita consumption in the developing world rose by 70 percent. Despite the paramount concern raised by the persistence of high rates of unemployment in recent years, available data does not reveal any long term trend towards rising unemployment. The growing worldwide concern over employment partly arises because the population has come to enjoy and expect continued rapid growth in living standards, a greater participation of women, more social security and a more active role of government in economic affairs. It is also due to the fact that the media today exposes the average citizen to a tremendous barrage of information, which tends to dramatize the impact of short term trends or isolated aspects of a more complex phenomenon. For instance, the highly publicized figures of corporate down-sizing do not reveal what proportion of the jobs are simply being moved from large corporations to their smaller suppliers. The public is appalled by the quantitative presentations of the employment problem, without realizing that while the absolute numbers are large, in most instances the percentages are less than before and the magnitude of the problem has actually been declining.
Impact of Technology, Environment and Organization
Much of the pessimism over the future of employment opportunities arises from the widespread belief that machines are progressively replacing people in the workforce. No doubt, in the short term, technological development can lead to a mismatch between jobs and skills leading to higher levels of unemployment. But historically, there has been a strong positive correlation between technological development and job creation. Technological revolutions spur the general advancement of society, give birth to new products, new activities, new needs, and eventually create many more jobs than they destroy. Studies of factory automation technology in Third World countries by International Labour Organization show that "overall employment and trade effects of new technology have been clearly positive in major user countries." Historical economic research supports the conclusion that in the long term, there has been "no tendency for rising unemployment due to people being kicked out of jobs by machines."
Rising environmental standards in industrialized countries have frequently been opposed on the grounds of their negative impact on jobs. Yet there is substantial evidence that "Environmental protection is not a job killer, but a job maker." Increased reliance on solar energy and energy conservation measures could generate four million additional jobs in the USA. Environment regulations are projected to generate 680,000 new jobs in UK by 2005. Employment in Europe's waste management industry is projected to grow by 50% or 1.2 million jobs in the 1990s. On the other hand, the failure to prevent environmental degradation is very directly linked to loss of employment opportunities, especially in the developing countries. During the past 50 years, more than 65 million hectares of grazing land in Africa have been turned into desert, affecting the livelihood of nearly 100 million people. Approximately 10 million people have become environmental refugees. Nearly 80 percent of the poor in Latin America, 60 percent in Asia and 51 percent in Africa are presently living in marginal areas that are highly vulnerable to environmental degradation.
Not only changes in technology and attitudes to the environment, but every major advance in social attitudes, institutions, values and life style--higher standards of education, new types of organization, shifting attitudes toward marriage and the role of women, rising expectations concerning the rights of citizens and the responsibilities of government, greater seeking of comforts and recreation--has a duel effect on employment, creating jobs in some areas and destroying them in others. Higher education tends to reduce the willingness of people to accept jobs involving manual labour, but it also spurs creation of many new jobs by increasing demand for books, newspapers, information of all types and in all forms, scientific research and higher technology, new products and services, more travel and better health care. It is true that technology allows ten people today to accomplish what was done by 100 people a century ago. But it is also true that it permits 100 people to acquire and enjoy what was enjoyed by only 10 or perhaps only one person a hundred years earlier, thereby multiplying demand and employment in other fields. Those who refuse to believe in a future that is strictly limited to an extrapolation of past trends argue that the numbers and quality of 'jobs' will be a function not of physical constraints but of human resourcefulness and ingenuity.
"But with information now the dominant resource, the most important factor that limits expansion of work is not land or raw material or capital equipment or transportation, but the ultimate components of dynamism: science, technology, values and social organization--in a word, the human imagination."
It is not only the technology employed, but also the organization of production that determines the number of jobs created. Recent experience indicates that proper blending of new technologies in existing productive sectors can give rise to a process of industrial rejuvenation. In the Prato region of Italy, modern telecommunications technology has been utilized to preserve a highly decentralized, small scale pattern of production in textile manufacturing and in non-material upstream and downstream functions. The new technology enables small firms to match the competitiveness of countries with much lower labour costs. The Italian economy has grown rapidly based on a pattern of geographical specialization in single-sector production in clothing, leather goods, jewelry, furniture, marble and ceramic tiles, catering to niche export markets in which it has a dominant position.
"Emerging technologies have a complex effect on wider job prospects...They can revitalize the whole economic structure with new products and new production methods, thus vastly expanding economic horizons and generating unlimited opportunities for new jobs, new skills and new activities...There are no obsolete sectors--only obsolete firms or obsolete managements...The refusal to innovate leads to loss of jobs in a competitive world."
The Western pattern of mass production by monolithic corporations that emerged during the first three quarters of this century is no longer the inevitable, or even the obvious, pattern for the coming decades. The down-sizing of major corporations around the world is occurring side by side with the rapid proliferation of smaller, technology intensive firms that are faster at adapting new technology, more flexibility in meeting specialized customer needs and generate more skilled, better paying jobs. The term craft production techniques has been used to contrast this with the mass production pattern. A small scale, decentralized pattern of production represents an attractive direction for the future development of enterprise.
Changing Concept of Work and Employment
The most powerful impact of new technologies on employment is not quantitative but qualitative. Emerging technologies reduce physical inputs and increase the content of research, technology, information, software, design and marketing, thereby increasing the demand for a more educated and skilled workforce. Technology is contributing to a redefinition of the concept of work, which is gradually shifting from a lifetime of physical labour to manufacture material products toward mental activity and constant learning to provide knowledge-intensive services.
Even a more profound change in our notion of employment is likely in coming decades. Prior to the industrial revolution, work for most people meant self-employment in agriculture, crafts and trade. Farmers employed themselves in their fields. Women employed themselves in raising families. Few looked to the State or the wider economy to provide them with work. The increasing scale and complexity of economic activity changed that. Gradually, employment in corporations, government and other institutions came to be viewed as the primary model. The limitation in the growth and proliferation of these institutions has generated an imbalance between job seekers and employment opportunities. Historically, this is a very recent development and one that is not likely to survive more than another half century. By then the development of technology will most probably eliminate the necessity for most people to participate in the production and provision of material goods and services.
Yet, even then, the need for work will survive for social and psychological reasons. Socially, employment has acquired a social value as a mark of status and accomplishment, with the result that many people feel compelled to seek jobs even when they do not require additional income. Psychologically, work is a field of self-expression and growth for the individual, which has a natural place even when economic necessity is absent. We must ultimately arrive at a notion of work that enables every individual to obtain the physical necessities of life, achieve social acceptance and respect, and develop themselves through the expression of their knowledge, skills and capacities in work. This change in cultural values will take time and needs to be fostered throughout the education system.
Prognosis for Employment in the 21st century
Even when we set aside the false impressions and conventional wisdom that have clouded perceptions of this issue, projections of employment growth are at best uncertain for several reasons. First, accurately measuring true level of unemployment is difficult even in Europe and North America and virtually impossible in many countries where reliable data is not available. Second, with the very rapid pace of technological advance, it is difficult to foresee the impact of new technologies even ten years from now. Third, the dramatic progress achieved in recent years by countries such as China and Thailand underline the fallacy of making projections based on past trends. Finally, the task is further complicated by the fact that nearly all projections of employment growth are based on national models. No comprehensive analysis of employment relationships exists from the perspective of the global economy. Employment markets have to be viewed in a global perspective in order to understand the overall net effect of the movement of refugees, immigrants and guest workers, the growth and transplantation of industries, the impact of changing patterns of international trade, and the shifting of jobs between industries and regions. Employment, like fiscal and monetary policy, is no longer fully under control of national governments, e.g. change of another country's tariff barriers can attract money and jobs overseas.
Nevertheless, there are some things that we do know with a fair degree of certainty:
o To provide employment for every job seeker, the world needs to create approximately one billion new jobs during the next decade, which represents a growth rate of more than 4 percent per annum versus the less than 3 percent achieved during the 1980s.
o About 95 percent of the growth in the world labour force over the next 35 years will take place in developing countries. The labour force in these countries increased by 400 million persons between 1960 and 1990, due to a population growth rate of 2.3 percent. It is expected to rise by another 260 million during the 1990s.
o Employment in the East Asian economies is projected to grow by 37 percent between 1990 and 2000, while the labour force will increase by only 17 percent.
o In contrast, employment growth is projected to lag behind labour force growth in South Asia, Latin America and Sub-Saharan Africa.
Table I presents UNDP's projections for the growth rates in the active labour force and in employment for major regions during the 1990s.
Table I: Index of Growth in Employment and Labour Force 1990-2000
|(1990 = 100)||Employment
E. & S.E. Asia
If these projections hold true, global unemployment will rise by an additional 130 million people during the 1990s. Our thesis is that there is a great deal that can,and should,be done to prevent this outcome and even reverse the trend, leading to sharply reduced levels of unemployment and progressive eradication of poverty over the next decade.
The concept of employment as a salaried occupation in large commercial or public institutions is evidently an inappropriate and unrealistic model for most developing countries to strive toward. Currently there are nearly one billion self-employed and unpaid family workers in the world, most of them self-employed farmers in developing countries. Excluding agriculture, there are 104 million in developing countries, 1.2 million in Eastern Europe and 28 million in the industrialized market economies. The self-employed represent 48 percent of the workforce in low-income economies (less than $500 per capita GDP) as against only 9 percent in the high income countries (more than $12,000 per capita GDP). Excluding agriculture, the figures are 37 percent versus 6 percent.
This structural pattern of employment cannot be replaced by that prevalent in industrialized nations anytime in the near future. Nor is it necessarily desirable that it should. Self-employed persons and the small firms which they found have enormous potential for rapidly generating large numbers of new jobs and raising productivity to increase incomes, provided the right policy measures are in place to support them. In Italy,22 percent of the non-agricultural workforce is self-employed. In many countries, a large proportion of small enterprises are established by women and employ predominately women. An appropriate mix of policies is needed to actively encourage self-employment, particularly in the informal sector and rural areas. Very often this will involve development of multiple sources of income generation.
Granted that the political will and social commitment are present to provide jobs for all, there is much that can be learned from the successful strategies of other countries. The Newly Industrialized Economies (NIEs) of East Asia present the most recent and relevant set of guidelines for application by other developing countries. Recent achievements in East Asia indicate that there are no inherent obstacles to tremendous increases in productivity and employment generation based on strategies that improve skills, organization, technology and investment. These nations utilized a broad mix of strategies to achieve rapid economic growth and job growth that can be adopted and adapted to the needs of other nations. While broad prescriptions should not be indiscriminately applied to the widely disparate situations confronting different countries, the availability of a number of tested methods does underline the fact that effective and proven policy measures can be formulated to meet the specific needs of each country.
Strategies to Achieve Full Employment
1. Utilize agriculture as an engine: One strategic thrust underlying most of the success stories in job growth has been emphasis on increase of food production with linkage to non-farm rural enterprises. As in early 19th Century England, agriculture was an engine for industrial growth and job creation in post-war Japan, and more recently in S. Korea and Taiwan-China. Crop intensive and labour intensive technologies have been employed by these East Asian nations to achieve increasing levels of labour input and labour productivity per hectare with a high proportion of owner-cultivators,rather than landless labourers. Between 1952 and 1968, land reform in Taiwan increased the number of cultivators five-fold, leading to dramatic increases in output and productivity, a shift to fruits and vegetable crops, and the creation of 133,000 jobs in post harvest and processing activities. These changes in employment led to enhanced rural incomes and purchasing power, growing domestic demand for goods and services, including manufactured goods, and further job growth. The redistribution of assets,coupled with investment in education and training provided a comprehensive framework for rapid growth of private enterprise. Land reform in S. Korea during the early 1950s increased the number of owner cultivators from 50 percent to 94 percent and led to a 4.7 percent annual growth rate in labour intensity per hectare during the period 1954 to 1968. Thailand, which has had the fastest growing economy in recent years, has also attained high rates of production and employment in the rural sector through diversification in agriculture from traditional cultivation of rice and rubber to high-value crops and agro-based industries. Increasing agricultural productivity through improvements in technology, credit and marketing systems and infrastructure must be a critical component of employment strategy in most of Asia and Africa.
2. Promote Small Enterprises: Small enterprises tend to produce more jobs and higher output per employee than larger firms. During the course of its progress toward industrialization, Japan relied heavily on the growth of small rural enterprises with policies crafted to produce effective linkages between smaller and larger firms. Today,63 percent of all private establishments in Japan are unincorporated, with an average workforce of three, and 74 percent of the country's industrial workforce is employed by small and medium size businesses. During the last 13 years, China has achieved the world's highest rates of industrial and agricultural sector growth. Between 1985 and 1991, China created 101 million new jobs, 71 million of them in rural enterprises of which 44 million are collectively or privately owned. This phenomenal growth was made possible by a focus on export-oriented production in labour intensive industries through the promotion of thousands of township and village enterprises supported by close linkages with scientific institutions. These enterprises now represent 16.5 percent of all businesses and employ 22 percent of the workforce. The number of small scale units in India has more than doubled in the last decade and employment in these enterprises has risen by 90 percent, generating 50 percent more new jobs than the organized corporate sector. Lack of technology, training, credit, marketing and distribution channels have been major constraints to the growth of this sector in many countries. Growth of rural industry is strongly spurred by growth in rural demand generated by higher productivity and incomes in agriculture. In China, consumption by the agricultural population has risen 126 percent in real terms since 1978.
The construction industry offers vast scope for employment generation and has often been used as a "lead sector" in combating unemployment in industrialized nations, where it may account for as much as 10 percent of total employment. In rural areas construction provides off-season employment work for farmers and a smooth transition to into rural non-farm enterprises. Programs for construction of low cost housing can be particularly effective for job creation and can be self-financed on a full cost recovery basis.
3. Raise skills to increase productivity: There is a direct relationship between the levels of vocational, technical or professional skills, both quantitative and qualitative, in a society and its level of economic development. A comparative study of the relationship between the quality and quantity of occupational skills available, standards of living and rates of economic growth reveals the crucial role of a wide range of skills in stimulating economic development and fostering growth of employment. Countries grow fastest that anticipate their future skill requirements and systematically train their workers to move to the next higher level.
A high rate of human resource development in the form of education, training, public health and societal participation has helped the E. Asian economies to generate a competitive advantage in export markets and an increased capacity for indigenization of technology, entrepreneurship and innovation. Labour productivity has been increasing in E. Asia by 10 percent a year, half of which is attributed to investment in education and technical skills. Singapore has made systematic upward shifts in labour skills coupled with a stead influx of new technology. Labour productivity in S. Korea rose 11 percent per year between 1963 and 1979, mostly due to investment in education and skills. There was a shortage of 190,000 workers in S. Korea in 1991. Thailand is currently moving from a labour surplus to a labour shortage economy. From 1980 to 1985, investment in education and skills helped raise labour productivity 63 percent. Improving entrepreneurial and management skills can be a powerful stimulus to the survival and growth of enterprises and to job growth.
Absorbing new technology, raising productivity, improving the quality and competitiveness of exports, all depend on the skills of the workforce. In all developing countries, the quantity and quality of skills available among the population trails far behind the level required to maximize growth and job creation. The very low levels of agricultural productivity in many developing countries is indicative of the substantial scope for improving skills for optimum utilization of water, effective use of hybrid seeds and chemicals, proper techniques for planting, harvesting and preservation of crops. In India, for example, average rice yields are only 72 percent of the world average, and 29 percent of the world's highest yielding country; average maize yields are only 42 percent for maize of world average and 17 percent of the world's best; and average wheat yields are 91 percent of the world average, but only 30 percent of the world's highest. Even in countries with elaborate agricultural training and extension networks such as India, most of the training goes to scientists and salaried employees rather than to actual cultivators. Large scale establishment of village farm schools to provide training and demonstration programs to impart higher order skills to the entire farming community can pay rich dividends in terms of higher farm incomes and expanded job opportunities.
The same is true in a very wide range of technical and vocation fields--carpenters, electricians, masons, mechanics, machinists, technicians, word processors, bookkeepers, etc. For every person who passes through the existing institutions and acquires adequate skills, there are ten who are forced to learn by a slow, apprenticeship system that usually results in low levels of skill and low incomes. The scarcity of skilled labour, especially technicians, is most acute in Africa. Experience in India indicates that wherever rapid development occurs, people with these basic skills are in critically short supply. Expansion of existing systems for craftsman, basic industrial, technical and vocational training to establish facilities at the local level in every district cannot only generate many more jobs and meet the existing needs, but also provide the essential skills needed for society to advance more rapidly to the next level of development.
4. Improve distribution to develop untapped markets: Rising incomes within the developing world are expanding domestic markets rapidly. Strategies which focus on increasing productivity and incomes among the rural poor, such as the agriculture driven growth strategies of the NIEs, are especially effective in increasing demand, because a very high proportion of that marginal income is utilized to consume products produced domestically.
The most serious constraint to job growth is not the ultimate size of potential markets, but rather the ability of countries, firms and individual producers to tap them. Typically, in developing countries the organization of marketing is one of the weakest links and greatest barriers to growth. Brazil set up a distribution system for export of citrus fruits and is now the world's largest exporter, with citrus exports valued at $4 billion annually. The promotion of apple distribution throughout India by the state of Himachal Pradesh is an outstanding example of how improved organization can expand the size and efficiency of domestic markets and the employment potentials of an industry. The recent success of the State of Maharashtra, India in promoting grape exports to the European Community illustrates how a tremendous competitive advantage and a lucrative market potential remain unutilized until effective distribution mechanisms are established. In this case, the State government pioneered in creating proper rural infrastructure for cooling, storing and processing produce for export, which has since been replicated by many private sector firms. The ultimate beneficiary is the individual farmer, who despite a substantial expansion in production, still receives for his produce prices which are 50 percent higher than those which prevailed before the new system was introduced.
5. Develop export-oriented markets: A strong focus on labour-intensive export industries enabled Hong Kong, Singapore, S. Korea and Taiwan to attain employment levels where costs of labour became high and the choice of capital substitution toward high-tech industrialization became attractive. Through inflow of technology and capital, export-led growth can create many jobs in a short time. But it needs to be complemented by conscious efforts systematically to raise the level of domestic skills and to native research activities. Indonesia's production in export industries grew at an average annual rate of 43 percent between 1983 and 1990, generating more than one million new jobs in manufacturing, banking, finance, transport and marketing.
Despite growing protectionist sentiment in the West, global markets still offer attractive opportunities for countries that develop competitive advantages coupled with aggressive marketing in specific sectors. The prosperity of East Asia has opened up new markets for less economically developed nations to tap. Trade in manufactures within Asia now exceeds Asia's trade with the USA China's demand for cars has buoyed the South Korean automotive industry when demand fell in the West. The completion of GATT negotiations, which is projected to increase global merchandise trade 10% a year or $270 billion by 2002 and open up agricultural markets in the West to developing countries, will ensure sustained growth of global trade in the 1990s and beyond.
6. Encourage import substitution: Import-substitution-oriented industrialization lost favor when the startling success of the export-oriented countries was compared with those which depended almost exclusively on meeting domestic demand. Nevertheless, Japan's experience has shown that, if properly worked out and sequenced toward export-oriented industrialization, an import substitution strategy focusing on food, energy, and selected manufacturing can be quite successful.
7. Plan for employment: Placing the employment objective high on the national agenda and consciously planning to stimulate growth in employment has been effective in Japan and the NIEs, where various forms of government intervention were employed to protect selected industries and influence prices. Studies of their experience have led the ILO to conclude that "conscious employment planning is a sine qua non" for achieving full employment.
8. Support growth of the service sector: The service sector represents only 25 percent of the labour force in developing countries compared with 80 percent in the USA Contrary to common conception, services can be a major contributor to job growth, even in countries at earlier stages of development. This sector is as amenable to stimulation by government policies as agriculture or manufacturing and it also provides impetus for the growth of these other sectors. Supportive policies have enabled trade, transport and other services to generate more than 50 percent of all jobs in Japan, Hong Kong, S. Korea and Singapore. Services have produced more than half of job growth in many other Asian countries. Informal private service enterprises in commerce, food catering, repair and transport have vast growth potential. In India, for instance, courier and photocopy services proliferated rapidly in the 1980s. As the economy develops, it can support expansion and even acquire a competitive advantage in sophisticated services such as banking, finance, legal, tourism, travel and technical consulting. India's software export industry has become a rapidly growing business, which, if supported with the right policies, can generate hundreds of thousands of new jobs in the 1990s. Research by the ILO indicates that investments in high technology in the service sector can widen the range and increase the quality of the services offered, without constraining job growth. Rapid expansion of education, training and public health, especially rural health, services can also serve as a conscious strategy for employment generation. Private day care centers and nursery schools and computer training institutes are multiplying rapidly in many countries.
9. Reduce the mismatch between supply and demand for skills: Whatever may be the deficiencies of manpower planning programs and government organized training programs, the fact remains that in every developing society there is a significant mismatch between the type and level of skills available and those that are needed to accelerate growth. This is true not only in basic and higher technical areas, but even more so for entrepreneurial, management and organizational skills applicable to all types of economic activity. Building up national skills takes time. Imbalances vary from country to country, with some in surplus where others are in deficit. The export and import of skills is already taking place on a very large scale from developed to developing countries, in the opposite direction and within the developing world. A coordinated international effort to identify key surpluses and shortages can help better meet the needs of both sides. The opening up of the former USSR makes the potential for mutually beneficial skills transfer even greater. Today a broad range of very high level technical personnel are available in Russia and other countries of the CIS that can be utilized to upgrade rapidly key skills in less industrially developed nations. For instance, a group of Russian biotechnologists recently evolved a very cost effective program to transfer the technology and skills needed to institute comprehensive national AIDS detection programs to reduce incidence of the disease in developing countries
10. New Systems and Organization: Much emphasis is placed on the widening gap in technology between North and South, but the gap in the technology of organization is even greater. Creation of new types of systems and organizations can create markets and jobs in many ways. The Dutch system of flower auction cooperatives is so successful that 68 percent of the entire world's exports of cut flowers pass through markets in the Netherlands. The contract system of agricultural production introduced in backward regions of Thailand has enabled small farmers to work closely with private businesses to produce labour-intensive, value-added crops, with technology and marketing provided by the companies. The system has resulted in a rapid rise of farm incomes and job opportunities in the area. India's hire purchase credit system supported rapid proliferation of the country's road transport industry by allowing entrepreneurs to purchase trucks and buses and pay for them out of future earnings. The same mechanism has been applied by the retail trade to promote a dramatic increase in the sale of two-wheelers and white goods by permitting households to finance these assets out of future income. The franchise system has led to a rapid proliferation of new businesses and new jobs in the West in such widely diverse fields as food services, home remodeling, dry cleaning and real estate. Industrial estates, export processing zones, export promotion councils, export insurance, warehouse receipts, quality standards and literally thousands of other organizational innovations have been either created or borrowed by developing countries to accelerate social progress. A comprehensive study of successful systems and institutions that can be transferred and adapted to local conditions will document the enormous untapped potential for stimulating faster development by inventing, imitating and further improving social systems.
11. Raise the educational qualifications of the workforce: A strong commitment to developing people through investing liberally in their education and technical training. The combination of education, skills, entrepreneurship and research to generate a competitive edge has been successfully utilized by S. Korea, Hong Kong and Singapore to move from low-wage labour production to skill-and-entrepreneurship intensive technologies. Improving the quantity and quality of primary education is the single most important element in any long term strategy to achieve full employment. Education increases the ability to absorb new skills and technology.
A distinguishing feature of the East Asian countries has been their emphasis during the early stage of industrialization on primary and secondary education, rather than higher education, on teaching basics to children rather than turning out more university graduates. This strategy increases the productivity of the mass of the workforce, helps promote income equality, consumer spending power and broad support for high growth and pro-business policies. These countries have also been highly successful in extending the same benefits of education to young girls, resulting in a swift decline in fertility rates and a boost to the home instruction that mothers give to their own children. The high quality of rural education is particularly important in countries with large rural populations and has been called the single most important reason for the success of Japan, S. Korea and Taiwan.
Raising minimum educational levels and expanding educational opportunities as rapidly as possible has been a powerful stimulant to job growth. In S. Korea, 95 percent of high school pupils want to go to college and 18 percent of vocational high school pupils want to continue their education. In Singapore, employers must pay the government a levy (up to U.S. $200 per month) for each worker who is not a college graduate and earns less than U.S. $900 per month.
12. Employment-Oriented Education: Educational systems which "manufacture graduates" and thereby create large numbers of educated unemployed, compound the problem rather than alleviate it. The problem is not that too many people receive too much education, but that the education they receive is too little related to the needs of the country and the opportunities for individual achievement. In many former colonies, the educational system still imparts the knowledge and attitudes needed for salaried employment in the former colonial administration, rather than those needed to promote entrepreneurship and economic growth in a market economy. The school curriculum at all levels needs to be substantially reoriented to promote self-employment and entrepreneurship.
13. Broadcast useful information: Information is an unlimited resource and a powerful lever to stimulate development. Information creates employment--information about new technologies, new markets, new products, new laws and new institutions, new systems and organizations. Increasing access to information improves the quality of decision-making at all levels and in all parts of the economy. The spread of reliable, factual information can help entrepreneurs grow their businesses more rapidly, farmers grow more profitable crops more successfully, skilled workers find more attractive employment opportunities, and youth acquire skills that are in greater demand in the economy. Lack of information is one of the characteristic shortcomings of the less developed economies. Establishment of new institutions and new systems to speed and extend the dissemination of practically useful information can act as a powerful catalyst for more rapid social progress.
14. Openness to foreign ideas: Ideas play a significant role in economic growth. An openness to foreign influences and an eagerness for foreign ideas, though not necessarily to foreign investment and ownership, has been a common characteristic of the East Asian success stories that distinguishes them from the poorer performing developing countries. Japan's phenomenal record of industrial growth was supported and stimulated by an extensive market and technology information system organized by MITI.
15. Organization of industrial production: The adoption of an appropriate pattern of industrial organization was cited earlier in this report as an important factor in determining the impact of technology on employment. Italy has demonstrated that the small-scale, decentralized pattern of production can be globally competitive in terms of quality and productivity. Decentralization has the added advantage of promoting geographical dispersion of industry to encourage the growth of small towns as a counter magnet to urban migration and congestion. This pattern has great relevance to the countries of Asia and Latin America. Policy measures covering credit, training, marketing assistance, information and technology transfer and labour legislation designed to encourage small firms are needed.
Many traditional industries in developing countries can benefit from an effective blend of new and traditional technologies. For instance, efforts are underway to deal with the problem of chemical pollution in India's small-scale leather tanning industry by creating collective pollution control systems to serve many small waste generators. Innovative service delivery systems can dramatically increase job creation. Recently, India's Department of Telecommunications introduced a highly successful program to expand public access to telephone and fax machines by promoting operation of long distance telephone and fax services as a self-employment scheme. Organizational innovation is the key to evolving competitive, labour-intensive patterns for growth.
16. Redefine the role of government: The achievements of East Asian countries demonstrate that stable, dynamic, and progressive governments can have an enormous impact on employment. The greater the confidence and faith in the future which government is able to generate in the people, institutions and outside world, the better the economy performs. Strong leadership, stable government and social security have spurred growth in countries such as Singapore and Malaysia.
The fastest growing economies of Asia have shown less respect for the ‘wisdom of the market' than their counterparts in the West. They have not hesitated to ‘tamper' with market forces, or supplement them with a carefully crafted industrial growth strategy based on forecasts of market developments and assessments of industries in which they could develop a comparative advantage in world markets. They have utilized protectionist policies to foster nascent industries as well as export incentives, tax relief and other financial mechanisms to promote growth and competitiveness, but always on a progressively declining scale to ensure that domestic firms would strive for maximum efficiency. At the same time, they have not hesitated to withdraw support from declining industries in order to encourage diversification. S. Korea and Taiwan set their exchange rates to encourage exports and savings and discourage imports and allowed them to be revalued only after amassing considerable reserves. They encouraged transfer of technology predominately through licenses, franchises and market-sharing agreements, rather than through direct foreign equity participation. While prices in the NIEs are nominally set by market forces, government influences key prices through tax rebates, tariffs, duties and subsidies to ensure that they conform to national priorities.
Experience in East Asia, Eastern Europe, and elsewhere testify to the importance of finding a proper balance between government intervention and control on the one hand and the free play of market forces on the other. The collapse of Eastern Europe discredited the role of government for a time, but the chaos that followed after abandonment of centralized planning only reinforced what has been true all along. No government can develop a nation, but government can and must play a constructive role in regulating and guiding the development of market forces to achieve social and economic goals. The myth of free trade and free prices has been marketed by the West as a recipe for others to follow, more than for practice at home. A new role needs to be defined for government, which neither seeks to control and regulate too much nor too little. There is need for a shift from government as the prime mover and owner of the means of production to government as a catalyst, which provides leadership to the society and initiative in educating public opinion, demonstrating, encouraging and supporting new, more desirable activities until they are accepted and take root.
17. Introduce special employment programs for vulnerable populations: The recent abandonment of centralized planning and economic management by former communist nations demonstrates that it is extremely difficult for government to replace market forces as an effective instrument for creating full employment. Nevertheless, as a mechanism to bridge the job gap during a prolonged period of adjustment, government-sponsored programs can be successful in providing gainful employment for the poor while carrying out useful and productive public works programs. India has achieved varying degrees of success with government sponsored self-employment programs such as Integrated Rural Development Program, which reached one-third of the poorest households in 1980-85, and rural works programs, which provided work to 10 percent of the rural unemployed during the same period. The Maharashtra Employment Guarantee Scheme, which provides off-season employment for rural labour, is estimated to provide jobs for between one-sixth and one-third of the rural un- and under-employed.
18. Accelerate commercial transactions: A striking distinction between more and less developed economies is the speed with which commercial transactions, particularly money flows, are carried out. The productivity of any resource is related to the speed or number of times it can be utilized. Typically, in less industrially developed countries, it takes much longer for money to move from an account in one bank to another, for export proceeds to be realized, for government to collect and utilize revenues, or even just to cash a traveller's check. In other words, the average rate of turnover or utilization of money is low, as is the productive utilization of land, human resources, time and other resources. The most economically advanced nations have understood the importance of rapid transactions and have instituted a variety of mechanisms to increase the velocity of financial turnover, e.g. large Western corporations know the value of shifting their funds by wire into higher interest bearing accounts over night and over weekends, domestically or even overseas, to improve cash management. What businesses do to earn higher returns on their capital, nations can also do to better utilize national resources to accelerate economic growth and job creation. Slow government bureaucracies and mountains of regulations are common obstacles to more rapid commercial activity that can have significant negative impact on growth.
Creating ‘jobs for all' is possible for any developing country that is fully committed to the goal and willing to implement a comprehensive mix of strategies to accomplish it. The achievements of the East Asian economies in spurring economic growth in general and growth of employment in particular support this conclusion. In an effort to document the potential impact of a fully committed national effort to accelerate job creation by systematically applying the strategies discussed in this paper, ICPF has drawn up a strategy for generating full-employment in India, a country which is home to 30 percent of the world's poor.
Prosperity 2000 Strategy for India
The potential for accelerating job creation through a mix of the strategies discussed in this report is illustrated by ICPF's work in India. The Commission has evolved a strategy, known as "Prosperity 2000", to achieve full employment in India and raise the entire population above the poverty line by generating additional employment opportunities for 100 million persons in the coming decade.
ICPF's strategy envisions the creation of these new jobs through accelerated development of commercial agriculture, agro-industry and agro-exports. It involves a shift in thinking from production for survival and self-sufficiency to production for maximum profit and prosperity, from focus on meeting minimum needs to emphasis on realizing maximum potentials.
The objective is to utilize the country's competitive advantage in labour-intensive agricultural crops and allied industries to double agricultural production, achieve complete nutritional self-sufficiency within the country, raise rural incomes by Rs 750 billion, and double India's total exports, by generating an additional $15 billion in exports of fruits, vegetables, sugar, fish, silk and cotton textiles.
The 'Prosperity 2000' strategy was presented to the Government of India and formally incorporated in India's Eighth Five Year Plan. The Government, also, decided to establish a specialized agency for implementation of the strategy, called the Small Farmer's Agri-Business Consortium. Preliminary studies are underway in several districts around the country to work out detailed plans for implementation.
The strategy is based on a careful assessment of the growth in market demand for agricultural products within the country--90 percent of the increase in produce is to go for domestic consumption. It seeks to utilize proven technologies that have already been tested or applied within India. Organization of production, processing and marketing has been identified as a critical constraint to the growth of India's agricultural sector. The strategy calls for the establishment of new types of producers' organizations that will combine the productive capacities of small farmers with the management and marketing capabilities of private sector firms and professionally managed cooperatives.
The plan proposes establishment of 2000 Horticulture Estates for production of fruits and vegetables, each estate consisting of 1000 hectares of small, individually-farmed holdings supported by centralized processing, transport and marketing infrastructure needed to assure a ready market and attractive price to the farmer. Intensive inland fish culture will be
carried out on Aquaculture Estates consisting of many small, individually owned and managed ponds, supported by a central technical and marketing infrastructure. Integrated sericulture projects will produce high quality silk for domestic and export markets.
If fully implemented, the program can create 45 million new jobs in agriculture by expanding the irrigated area, shifting to more labour-intensive commercial crops, reclamation of wastelands for forestry and fodder, and increasing subsidiary incomes from animal husbandry. Another 10 million jobs can be created in down-stream, agro-industries located in rural areas--sugar mills, cotton and textile mills, fruit and fish processing units, and in marketing and distribution--thus serving as a counter-magnet to urban migration. Growth of agro-industry will stimulate demand for industrial machinery and services. The multiplier effect of skyrocketing rural demand will stimulate demand in a broad range of consumer industries.
Government has a key role to play in implementation of the strategy, but it is in the role of catalyst and pioneer, rather than owner or manager. The principal role of government is to generate widespread public awareness about the technological and market potentials, to promote the establishment of new types of production and marketing organizations, to facilitate the transfer and adoption of advanced technologies for food processing and distribution, to encourage private initiative, and to establish training institutions to impart new skills to the rural workforce.
Creating new jobs through this strategy proves extremely cost effective and can be accomplished with the country's own financial resources, though foreign firms will find investment in India's agro-industrial sector extremely attractive. The direct cost per job averages Rs 11,000 per farm job and Rs 46,000 per job in agro-industry, compared to an average cost of Rs 2,500,000 per job in the public sector and Rs 250,000 per job in the organized private sector. Implementation of the strategy will require a substantial investment in training of both on-farm and industrial workers to introduce improved methods and raise productivity. But the plan is based on the recognition that enhancing the skills of the nation's rural workforce will take time and must be done incrementally.
At a time when the share of the workforce in agriculture is declining around the world, some may question the wisdom of creating new jobs in the agricultural sector. The strategy takes into account existing realities in the country, one of which is the fact that there is still a vast, underutilized workforce which can be more productively employed on the land. As the program gains momentum and rural incomes rise, the demand for industrial products and services will grow, resulting in a shift to greater farm mechanization and gradual movement of more and more workers to non-farm employment.
Individual Freedom and Social Responsibility
The essential basis for meeting the world's employment needs is the realization that employment is an absolute necessity for survival in modern society and must be recognized as a fundamental right of every human being. This position is justified on practical as well as on humanistic or idealistic grounds, for nothing less than a total commitment to full employment will generate the necessary political will needed to address the employment problem successfully.
The massive migration of people away from a subsistence level existence in agriculture to urban areas and industrial employment in this century has brought about an unprecedented advancement in living standards around the world. But it has also engendered a way of life in which the livelihood of individuals is far more dependent than in the past on external conditions, such as the state of the national and global economy, trade policies, interest and exchange rates, levels of military spending and overall consumer demand. The life style that has created unimagined prosperity for countless millions has also created greater vulnerability for the individual.
In past centuries, society did not accept responsibility for the economic condition of the individual. Government's primary task was national defense. The emerging trend in this century has been for society to assume ever increasing responsibility for the welfare and well-being of all citizens, including their safety, health, and education, as part of a progressive on-going evolution of social development. Even when economists invoke the wisdom of the market, it is no longer based on a denial of collective responsibility for individual welfare, as it may have been in the past. Rather it is based on the premise--a premise that is as questionable economically as it is socially--that the market ‘knows' better than government how to allocate resources for the maximum benefit of all.
We call for accelerating this progressive movement of social development by making it more conscious. What is needed is not another job generation program, but a change in social values that will accelerate the natural and inevitable evolution of society, from one in which labour is regarded as a dispensable resource to one based on fundamental full human rights and the enormous productive potential of the human being. Society has been moving in this direction for several centuries and quite rapidly in recent decades. This shift is not a concession made to the individual because society is now prosperous enough to afford it. It is rather the central lever that has been responsible for the rapid social and economic progress of humanity in this century.
Modern society has become so structured that it leaves less and less freedom for truly independent individual initiative. Today government intervenes in virtually every aspect of society's economic existence, restricting the freedom of the individual to seek his or her own livelihood and determining the type and number of job opportunities available. Employment opportunities are directly linked to government tax rates on capital gains, depreciation , energy taxes, tax on wages and salaries, and minimum wage laws. These directly determine the relative cost of capital and energy intensive versus labour intensive technologies, thus strongly influencing the number of new jobs created. Apart from these direct factors, there is the indirect but powerful impact on employment of policies concerning interest rates, budget deficits, imports and exports, environmental regulations and restrictions, defense spending, immigration, industrial development, investment, licensing of practitioners and zoning laws. Today, a homeowner in New York or Los Angeles cannot add on a room or lay electrical wire in his own house nor can a farmer in South India dig a borewell on his family property, without first obtaining permission from the government. There is a conscious bias in business tax policy in favor of capital investment, rather than job creation. Economic indicators of productivity focus on output per worker, rather than output per unit of capital; but in business decisions, it is the latter which ultimately determines where investments will be made.
The strong susceptibility of labour markets to external factors, such as changes in consumer demand, technology, government policy, union power and even weather, makes it extremely unlikely that they ever arrive at or remain in economic equilibrium between supply and demand. This suggests that government has an important role to play in labour markets if societal welfare is to be maximized. Yet, shielded by the convenient myth of the market, few governments admit or accept full responsibility for ensuring sufficient jobs for all citizens. In most governments employment is everyone's concern, but no one's responsibility. Everything government does has an impact on employment, but the myth prevails that employment is a function of the market economy and is best left to market forces. Few government agencies, apart from the economic ministries, are held accountable for the impact of their actions on jobs. In recognition of this fact, the European Commission has initiated a study to assess the overall impact of government policies on employment.
In the past half century, the Western industrialized nations have established welfare mechanisms to protect their citizens against the worst ravages of unemployment. Yet, the costs of this system to the State have become so high that there is substantial pressure to cut back on these commitments. The costs of unemployment to the individuals and to society are even greater. In the USA, there is an entire generation of people who have never had a job. In the city of Atlanta, Georgia, for example, there are districts in which the long term unemployment rate is over 50 percent. These people have been deprived not only of the economic benefits but also, equally importantly, of the social esteem and psychological satisfaction that gainful employment provides to the individual. This deprivation is directly linked to the rise of crime, violence and drug abuse in the inner cities of America.
The Right to Employment
Regardless of what is or is not embodied in the written constitutions of nations, democratic governments around the world are held morally, if not legally, responsible by their electorates for creating sufficient jobs for all citizens. Since World War II, all governments of the industrially advanced nations have been committed to programs to reduce unemployment. France's constitution explicitly charges the State with ensuring full employment. France employs economic planning in the belief that the difficult and complex problems of employment cannot be separated from other economic and social development problems. Other countries have similar goals to varying degrees. Article 55 of the UN Charter proclaims full employment as one of the primary objectives of the organization.
Our very concept of the rights of the individual and the responsibilities of society is undergoing radical change. Recently UN Secretary General Boutros Boutros-Ghali called for a broader definition of human rights to include economic as well as political rights. "What is the meaning of freedom," he argued, "without food?" Employment must be recognized as a fundamental human right . The problem of unemployment in the advanced industrial nations must be viewed socially, not just economically. The 1993 United Nations Development Program's Human Development Report calls for new concepts of human security that stress the security of people, not only of nations, and the creation of development models that are 'people-centered', markets that are 'people-friendly' based on a 'revolution in our thinking'. The main objective of human development strategies must be to generate productive employment for everyone. Employment should be viewed as a deliberate process of empowerment, not just as a by-product of production.
Government that assures the right to education, indeed compels it, can and must also ensure the right of every person to a job. Governments compel individuals to obtain education and accept the responsibility to provide it. Education is a cultural need, employment is a physical need. Therefore, it should also be a responsibility of government.
Need for a Conscious Initiative
Over the long term, unemployment in the industrialized West is a product of the present structure of these economies--not the actions of developing countries--and it can only be solved by a change of structure. The solution demands a change in values, priorities and policies at countless points. It can only be done by the conscious initiative of government compelled by the expectations and demands of an electorate educated to understand the impact of government on economic life and the scope for increasing employment opportunities in a market economy. If society decides that useful jobs must be created, then they will be created.
Each landmark in social progress is made by a significant change in social attitudes, which is then expressed as a change in structure and policy. The social and political will of nations has to be mobilized to generate employment on a war footing, in the same way that the allied nations mobilized tremendous resources during the world wars. What is needed is a decision by society to be implemented by economists and engineers.
A vision of higher achievement raises expectations and releases people's energy and initiative to achieve it, leading to increasing productivity, demand, and jobs. The society needs a CHALLENGING VISION to mobilize its energies: Education for All, Jobs for All, Abolition of War, Abolition of Poverty--to increase energy, faith and initiative and give new heights for society to conquer.
The type and magnitude of change needed is not unprecedented. President Roosevelt's New Deal for the American people in the 1930s represented a dramatic change of attitude prompted by a severe crisis that revolutionized the role of government and the rights of labour, a change in attitude and behavior that would have been unthinkable a few years earlier. U.S. civil rights legislation in the 1950s and 1960s, giving blacks access to education and jobs was a transition of similar magnitude.
The Indian Government's decision in the mid-1960s to achieve self-sufficiency in food grains at a time when India was highly dependent on foreign foodgrains to stave off famine is an equally compelling proof of what is possible, given that the political commitment is full and genuine. The achievements of India's Green Revolution completely defied the predictions of the FAO experts, who were correct in projecting that under the previous structure foodgrain production would grow by only 10 percent during the decade. But C. Subramaniam changed the system by changing the attitudes and priorities of the government, and by replacing an individual goal of farmers with a collective goal of the nation. As a result, actual foodgrain production rose 50 percent in five years, enabling the country to achieve self-sufficiency.
In an equally dramatic manner, Gorbachev changed the attitudes, structures and assumptions about global security to end the Cold War and transform Soviet society. The environmental movement is addressing very serious global problems by forcing changes in attitudes and priorities and demanding changes in the structure of the world economy. No government can say today that it cannot prevent destruction of the environment. They all say they will do whatever is needed to ensure our collective survival. The same can, and must, be said of jobs, which are essential for the survival and full development of the individual.
Is full employment possible?
Few will argue with the compelling logic or idealism of this view, but many will question the feasibility of practically implementing it. As long as we continue to believe that society is truly helpless to manage job growth, there will be strong resistance to the full employment goal. We must recognize that the present status and functioning of our economies is the result of specific choices that have been made in the past, based on priorities and values that were relevant or dominant at the time, but which we certainly are not obliged to live with indefinitely, and in fact are continuously in the process of discarding in favor of new values and priorities. The rapid adoption of environmentally-friendly policies around the world is proof of how quickly the rules, even economic rules, can change when there is a concerted will for a breakthrough.
In current economic thinking, industrialized nations are presented with two highly desirable goals as mutually-exclusive alternatives. The first alternative is to improve labour efficiencies and reduce labour costs to maintain competitiveness and raise incomes at the expense of generating higher and higher levels of unemployment, which becomes increasingly difficult to sustain socially. The second is to support full employment policies at the expense of competitiveness, which will ultimately lead to loss of competitiveness and loss of jobs. Are competitiveness and full employment really mutually exclusive goals? If it had been so in the past, there would have been no way for today's prosperous nations to have achieved the high levels of growth, competitiveness, incomes and employment which have characterized them over the past several decades.
On the contrary, growth theorists argue that in order to achieve high rates of economic growth, full employment should be consistently maintained over extended periods of time. Creating more jobs not only employs more people, but moves the whole economy toward higher rates of economic growth. Over the past 15 years, governments around the world have placed high priority on controlling inflation, even at the expense of severely slowing economic expansion, because preservation of the purchasing power of those who possessed wealth was accorded higher priority than helping the poor to acquire it. This was done, in spite of substantial evidence that a mildly inflationary economy can spur more rapid economic and job growth and help redistribute income in favor of the less economically advantaged.
Another common conception that undermines commitment to jobs-for-all is the false impression that the total employment available in society is inherently limited by the finite, material needs of the community. Modern economic history is the story of an ever-expanding growth in human needs to match the ever-increasing productive capacities of the post-industrial age. The progression is not merely an infinite horizontal expansion, but rather involves the emergence of higher order, non-material needs for education, health, recreation, entertainment, environmental protection, artistic fulfillment, etc. The entry of women into the workforce has not only expanded the workforce, but also substantially increased the demand for day and house care services, travel, recreation, automobiles and consumer goods. The raising of environmental consciousness has led to a rapid proliferation of new technologies, products and services. Are there really any limits to productive human activity?
"There is a colossal amount of work waiting to be done by human beings--building decent places to live, exploring the universe, making cities less dangerous, teaching one another, raising our children, visiting, comforting, healing, feeding one another, dancing, making music, telling stories, inventing things. and governing ourselves."
Full employment can be achieved by any country that has the will and determination to achieve it. A firm and irrevocable commitment to full employment is the most effective strategy to achieve it. This does not mean that every country can accomplish the goal immediately. Nor does it mean that government should create artificial jobs for all who seek them. Instead, it represents a commitment of the government to reexamine, where necessary alter, the nature of its priorities and policies and the structure of its economic system to make achievement of this goal possible. The magnitude of the task and the prescription will, of course, vary from country to country, but the goal and determination can be shared by all.
All Western countries now suffer from high budget deficits, slow growth, exchange rate instability (floats), and reduced demand, partly due to the decline in defense spending. Economic growth alone at past rates will not be sufficient to generate sufficient employment opportunities for everyone. During the 1970s and 1980s, economic growth averaged 2 percent a year in Western Europe, far exceeding population growth in these countries. Yet, employment creation has been insufficient to meet the growing demand for jobs, including the increasing entry of women into the work force, and unemployment has shown a persistent upward trend. The industrialized-developed economies lack a vision, a plan or dynamic leadership for future growth. The present policy framework, which places great emphasis on deficit reduction as a mechanism to stimulate growth, is open to serious criticism. While it is clear that rising deficits push up interest rates and crowd out productive investments, declining interest rates have not had the opposite effect of stimulating investment and growth in the West. In fact, declining public expenditures has tended to aggravate recessionary factors. Western economic policy-makers are confining themselves to a closed box that limits the options, cuts off the circulation and contact with potential sources of growth.
The employment problem of the industrially advanced nations has already been described earlier. Partly the problem is due to short term factors, primarily the current recession gripping the Western world. Partly, it is due to medium term factors, whose effect will diminish gradually over time, such as the steep fall in GDP and trade among the countries of Eastern Europe after the breakup of Comecom and the USSR, the high costs of German reunification, the impact of sharply reduce military spending in the USA and the former Soviet Union, the strong pressure to reduce budget deficits in the OECD countries, structural adjustment programs in developing countries, and the sudden impact of corporate down-sizing on labour markets in the West. Still other factors can be expected to have a prolonged negative impact on job creation: advances in office and factory automation and the continued movement of jobs to lower wage countries.
We have tried to present data to show that the recent rise in unemployment in the West does not necessarily forebode, and need not necessarily result in, chronically higher rates of unemployment in these countries. This is so for several reasons. First, most of the causal factors are temporary in nature. They exert strong immediate pressure on the economies of the West to restructure in order to increase their flexibility, responsiveness and competitiveness. According to projections by the U.S. Bureau of Labour, job growth in the U.S. will continue at a healthy pace once the economy has adjusted to these pressures. By the year 2005, over 50 percent of all Americans will be employed for the first time in the history of the country, a level which Japan has already crossed.
Recent job growth in the U.S. has been achieved at the cost of growth in incomes, which have risen by less than 1 percent annually in real terms over the past six years. This can be attributed to the slow growth of the U.S. economy after the mid-1980s and to the rapid expansion of the labour force during this period. Growth of the economy is projected to accelerate over the next few years and growth of the work force will slow considerably, diminishing the impact of both of these factors on unemployment and making it likely that real incomes will rise more rapidly than in the recent past. Of greater long term concern are the persistently high rates of chronic unemployment among the poorer sections of the U.S. population, which are structural in nature and will not be addressed by the projected expansion of the job market. Specific programs based on structural changes that are far more than mere remedial steps will have to be introduced, in order to ensure a fair opportunity to today's youth, especially minority youth, to lead economically active lives.
The employment situation in Western Europe is somewhat different. Unemployment has been rising steadily over the past 25 years and, even prior to the onset of the current recession, it was nearly four times higher than in 1970. During the same period, the percentage of the working age population employed has declined from 63 percent of those aged 15-64 to around 59 percent. But, Europeans have made greater gains in income and benefits over the past decade than Americans and have seen a sharper decline in working hours. The combination of these trends has led many to the conclusion that Europe is in the process of pricing itself out of the world labour markets and that continued deterioration in the employment situation can be expected, unless and until structural changes are made in the nature of the European welfare state. In 1991-1992, seven years of employment growth was wiped out in the Netherlands. Unemployment is expected to rise another 15 percent next year, nearing a post-war high level. Jobs are not expected to come back, even when the European economy recovers, unless major structural changes are brought about. A plan, drawn up and presented to the government by an association of Dutch employers, proposes to create 250,000 additional jobs by reducing the social security tax on employers, creating a larger gap between wages and social security payments to the unemployed, and by other steps designed to improve the general business climate. The association concludes that the problem can only be solved by fundamental changes and that talk of full employment is utopian within the present structure.
While there certainly are major differences in the situation in North America and in Europe, and between countries within Europe, there are several common challenges shared by the industrialized Western countries as a group that have an impact on employment:
o slowdown of economic growth
o impact of new labour-saving technologies
o competitive challenge from developing countries
o impact of welfare policies on labour costs, productivity and job creation.
The strategy recommendations are divided into two groups: those that can significantly accelerate job creation in the short and medium term and those that involve more fundamental changes in social attitudes and the structure of the economy.
Initiative in Europe
The feasibility of acting boldly to address the jobs issue is illustrated by two recent initiatives in Europe. The European Community has agreed on the need for a conscious employment strategy based on the realization that the employment problem cannot be resolved by economic growth alone and calling for development of "a more employment-intensive pattern of growth". Emphasis is on altering the incentive structure that determines the relative use of capital and labour; and the way in which a given volume of work, if divided between numbers of jobs and numbers of hours, is measured to make the unemployed more attractive to employers by reducing the costs to companies of employing them, and on programs to facilitate the transition of students from school to work. In June 1993, the European Commission unveiled the outlines of a high-tech draft plan for economic revival and employment generation, which places heavy emphasis on improving education and training of European workers.
In August 1993 in response to rising unemployment, the French Government launched a five-year plan to create more jobs based on reducing taxes on employers and increasing the flexibility of the labour market, but leaving the social security system intact. The plan is intended to reduce the costs of hiring workers, encourage part-time employment and ease rigidities in working practices. It transfers from employers to the government the social security charges for France's lowest paid workers, those earning up to 1.5 times the minimum wage. It includes a proposal to replace the 39-hour working week with an equivalent annual total to improve the flexibility of production within industry and cut overtime payments. Under the plan, part-time workers will be able to increase the number of hours they work while receiving state benefits. The plan maintains protection for the least advantaged by keeping in place the statutory minimum wage.
Near Term Strategies for Full Employment
Granted that the necessary political and social commitment is forthcoming, there are a range of proven strategies which taken in the proper measure and combination can dramatically accelerate job growth and reduce unemployment. Each of these strategies has proven effective in stimulating job growth, though none by itself may be sufficient to solve the problem. No industrialized country can say that it systematically exploits all the potential benefits of the strategies in this list, which should be the highest priority of every Western government .
1. Promote small business: Promotion of entrepreneurship, self-employment and small business development are keys to expanding job creation. All the publicity given to the negative impact of down-sizing by major corporations overlooks the fact that the 500 largest corporations in the USA employ only 6.5 percent of the nation's workforce. A new study forecasts that businesses employing fewer than 20 workers will provide 57 percent of all new jobs in Europe in 1993. There is vast scope for expanding services to support new enterprises. Entrepreneurial and small business incubators have been extremely successful in the USA, where over 400 local facilities have been created to provide work space and shared services as well as technical, financial and marketing expertise to start-up companies. Efforts of this type are particularly needed and can be especially helpful in stimulating new businesses in the inner cities.
2. Reduce business failures: The failure rate of new businesses is extremely high in most industrialized nations. In Italy, roughly 50 percent of all new enterprises fail in the first year. Every year more than 600,000 new businesses are started in the USA, of which at least 40 percent close within the first year, 80 per cent within five years, and 80 percent of the remainder in the subsequent five. This is due in large part to inadequate training in management and marketing, poor access to credit, and absence of supportive tax policies. Expanding programs for management training, small business education and counseling, marketing assistance and financial management can significantly bring down the failure rate and dramatically increase new job opportunities.
3. Redistribute work: Proportionately reducing working hours and salaries can spread the existing work more evenly over more people. Giving people the legal option to chose part-time work would raise the morale and productivity of those who prefer to work less, while creating openings for many who are now without jobs. In the Netherlands, voluntary part-timism has been identified as the biggest single potential for creating new jobs, capable of reducing the country's unemployment by up to 50 percent. Denmark already has in place policies encouraging part-timism. The German car-maker Volkswagen has recently negotiated a four day work week and pay cuts with its workers. Extending vacation time and medical leave in the U.S. nearer to levels which the Europeans enjoy would create many more job openings, but there has been strong resistance to this from those who argue that it would make American labour less competitive. There is evidence to suggest that reduced working time can raise productivity significantly, just as the longer working hours of white collar employees in Japan have long been associated with lower levels of productivity. France made the 39-hour week and five weeks' paid vacation compulsory in 1981, yet its economy grew faster than America's in the latter half of the 1980s. France's Senate has just approved an experimental cut in working week from 39 to 32 hours. In fact, America's refusal prevents other country's from doing so, on the same grounds. Similar arguments were raised against tighter environmental regulations in the 1980s, but society's recognition of a desirable goal forced through the stronger measures.
Work- or job-sharing is not an ultimate answer in itself--it can actually result in greater inefficiencies and reduced employment--but it can have beneficial short term impact, allowing time for longer term measures to have impact. As a minimum, governments should remove the artificial barriers to job-sharing created by employment laws, administrative procedures and trade unions. Social security tax systems should also be modified to remove the in-built bias that increases the taxes of those who hold multiple, part-time jobs, rather than one full-time job. Such constraints limited part-time jobs to around 10 percent of the total in Belgium, France, Italy and Spain compared to around 25 percent in Britain and Denmark.
4. Modify social security payments: In many industrialized nations, the unemployed receive payments nearly equivalent to the statutory minimum wage, leaving little monetary incentive for many to seek full-time work. In the Netherlands, for example, the difference is currently only 10 percent. Changes in the structure of social security payments to increase the difference between minimum wage and maximum payments for the able-but-unemployed will provide greater incentives to job seekers for re-employment. Raising the minimum wage in countries where it is far below average per capita incomes will also help redistribute incomes more equitably. There is initiative in the U.S. to modify the welfare system at the other end of the spectrum, by reducing or eliminating social security payments to retired persons whose total income or wealth is above a certain level. These modifications in the system will improve its efficiency and cost effectiveness.
5. Orient social security programs toward re-employment: For three decades up until the recent recession, Sweden achieved the highest employment rate among OECD countries (averaging above 80 percent of the working age population) and kept unemployment from exceeding 3.5 percent, of which long-term unemployment averaged less than 10 percent. The Swedish system, based on "the passionate belief in full employment" and "the right to work", places the greatest emphasis on active policies to generate work for all, rather than on payments to the unemployed. Job seekers are first offered employment, education or some form of vocational preparedness. Cash support is utilized only when other measures are not successful.
Any person unemployed for six months or more in Sweden is automatically entered a school or work experience program. About one percent of the labour force is engaged in employment training at any one time,70 percent of whom are gainfully employed within six months after training. In recent decades, two-thirds of Swedish social security revenues have gone to retraining, which is the inverse of the proportion in most other Western countries. The USA, for example, spends three times as much on welfare payments as it does on retraining the unemployed. A strictly managed penalty system is applied in Sweden to unemployed persons who refuse three job offers and do not seek retraining. Support is also provided to encourage in-house training of the regular workforce by companies, to improve continuously labour skills. Employability Institutes around the country provide vocational rehabilitation and intensive counseling.
The high costs of welfare programs, the negative incentives they provide to job seekers and the harmful psychological consequences of unemployment can be mitigated by modifying welfare programs to require that the able bodied unemployed work in exchange for welfare payments. The type of work given may be varied depending on both the qualifications and the training needs of the individual, e.g. as assistants in child education, care for children and the elderly, and environmental protection. If properly administered, these program have proved successful in reducing costs, imparting new skills and identifying false welfare claims.
6. Introduce wage controls to maintain competitiveness: For years, Sweden maintained a controlled wage strategy, which kept wage costs low. The system worked for thirty years and ended only after the wage controls broke down and wage differentials increased. Controlled wage policies were successful in the Netherlands during the 1960s, when the country achieved full employment, and again in recent years. There is now growing support within the country for reintroduction of limits on growth of labour costs. Dutch labour unions are seeking guaranteed growth in employment in exchange for reinstitution of a wage freeze.
7. Modify tax policies: The present income tax system discourages job creation. It heavily taxes people for working, which indirectly raises the cost of labour and reduces the number of jobs. At the same time it provides investment and depreciation incentives that encourage industry to shift from labour intensive to capital-intensive modes of production. Much of the shift from labour to capital may not be economically justified, were it not for the in-built bias in the system. Low levels of taxation on the depletion of non-renewable energy and material resources is another distorting influence which makes machine-driven activity more cost effective than it would otherwise be.
8. Promote new types of organizations: A number of cooperatives formed by the long-term unemployed in Europe have successfully provided secure jobs for their members by creating new enterprises and offering training programs, even without outside financial assistance, and have proved more effective than public sector job creation schemes. During six years of operation, over 90 percent of trainees in the EXODO cooperative training program in Spain found employment afterwards. The Atlanta Project is a bold attempt to evolve a new type of organization to address the problems of inner city poverty and unemployment. The inner city has been divided into clusters,in which members of the local community work closely with the staff of major corporations, voluntary agencies, religious groups and government officials to identify and promote productive activities.
9. Improve labour market information systems: Lack of information about job or training opportunities retards re-employment. Sweden operates one of the most extensive and efficient employment services in close cooperation with business. This service is responsible for filling 60 percent of the total job vacancies, which average 25 percent of the workforce every year. The efficiency of this system depends on the active cooperation of businesses in reporting job vacancies. Like Sweden, the USA has made significant advances in making information on jobs and career opportunities accessible to people through national and State- level occupational coordinating committees. The European Community has instituted a system to encourage exchange of information among member States about successful employment strategies, emerging trends and opportunities. This system could be extended to other countries under the OECD or the ILO. Accurate measurement of the mismatch between the supply and demand for skills and educational qualifications in Europe is impeded by the lack of standardized data and accurate reporting of job creation by small businesses. Improving the quality and comparability of data will enhance the capability of governments to act effectively.
10. Intensify Training Programs: Technological development is dramatically speeding up the rate at which old skills become obsolete and new ones are needed. In a number of countries, high levels of unemployment co-exist with shortages of particular skills, reflecting significant mismatches between the supply and demand for skills, for which surprisingly little good data is available in the industrialized economies. Most major corporations in the West have come to realize the tremendous contribution of continuous training in raising the productivity of workers. Studies have found that a 10% increase in expenditure on training can boost productivity by an average of 3 percent over two years and by 30 times the cost of training. Yet, even today, only a relatively small number of companies, which probably employ less than 10 percent of all workers, conduct regular, on-going training programs.
11. School-to-work apprenticeship programs: For those who did not go for higher education, the transition from high school to the workplace can be long and difficult. Germany operates extremely effective apprenticeship programs, covering nearly 70% of teenagers, to equip them fully with employable skills before they enter the workforce. There is growing support for establishment of a national youth apprenticeship training system in the U.S., based on an integration of work-based and school based training, a structured linkage between secondary and post-secondary institutions, awarding of recognized qualifications for occupational skills, and the active participation of employers. Every nation can establish an apprenticeship program that combines classroom schooling with on-the-job skills training for those who do not pursue higher education.
12. Create programs linking demilitarization with urban employment: The military possesses both the expertise and the physical infrastructure for training large numbers of people in a wide range of technical, vocational and social skills. The end of the Cold War and high budget deficits are forcing the USA to close military bases around the country, some of which could be converted into large training centers for instructing and housing urban unemployed youth during an apprenticeship period. The centers could be operated by military teaching staff. This would build upon highly successful existing U.S. Defense Department programs that redeploy soldiers to assist troubled inner city youth.
13. Utilize national service organizations as a training-cum-employment program: National service programs, such as the U.S. Peace Corps and Vista, can be very successful vehicles for providing training and valuable work experience to youth before they enter the labour market. As military service was earlier compulsory in the U.S., and still is in many nations, compulsory service in activities designed to improve education, health, and the environment can be of immense benefit to the country, while slowing the pace of new entrants to the workforce. Rapid demobilization of military personnel puts additional pressure on the workforce and can lead to high levels of discontent among ex-servicemen, who in some non-OECD countries represent a potentially explosive social force. National service programs can also be an effective mechanism for redeploying ex-servicemen in public works programs while equipping them with appropriate skills for civilian employment. Similar programs can be organized for those who retire early, so that the span of active service can continue even after retirement.
14. Matching skills and jobs by reorienting higher education: Colleges and universities respond hesitantly and partially to changing requirements of the job market. There is substantial resistance to the phasing out of older programs and reluctance to give too great prominence to new fields, which may thereby supersede the old in importance. The response of Western higher education to the microelectronics revolution in the 1980s has been vastly inadequate to meet the needs of industry, creating a gap of hundreds of thousands of unfilled jobs in Europe and North America. A system of special incentives can be introduced to increase the responsiveness of educational institutions to the employment needs of the country.
15. Redirect welfare expenses for creating jobs: Pay people to work, rather than not to work. This requires the identification of employment-intensive programs that provide clear benefit to the community without interfering with existing business, such as the U.S. civilian conservation corps that built the U.S. National Parks system in the 1930s. Expanding or upgrading the educational system would be a priority sector. To compensate for the sudden drop in military expenditure and employment, allocate a portion of the savings from defense for an environmental fund to support employment-intensive projects for clean-up and conservation.
Building a Full Employment Economy
Addressing the employment needs of the country and the world in the longer-term requires a willingness to examine freshly and impartially the implicit values and structures of the modern economy that constitute the basis for recent achievements, as well as the barriers to further progress.
16. Re-examine all public policies: Assess the impact of a wide range of public policies and regulations on employment and modify those that can be changed. Require employment assessment of all new policy initiatives prior to adoption.
17. Raise educational standards: Education is the process by which society passes on the accumulated knowledge of its collective past in a concentrated and abridged form to future generations, so that the young can start off with the advantage of the expertise which the previous generation acquired through decades of life experience. Education is the legacy of our forebears to our youth and the single most precious gift we can offer to every citizen. Not until we have exhausted all conceivable steps to make this invaluable resource available to everyone can we dare to say that we have done all we can, and should, do.
Higher education increases productivity, raises personal expectations and consumption, and generates additional jobs in education and elsewhere. Lack of qualifications, inadequate and out-dated skills commonly characterize the long-term unemployed. In W. Europe, it has been estimated that 20-30 percent of the income growth in the period 1970-80 came from improved human capabilities. There is a strong positive correlation between higher education and higher incomes. From 1980 to 1991, the real earnings of full-time workers with college education in the U.S. rose by 9 percent, while the earnings of those who did not complete high school actually fell by 7 percent. Today, earnings for American full-time workers above 25 who are college graduates are more than 50 percent above the earnings of those with only a high school education. The overall employment rate for college graduates is 75 percent versus 48 percent for high school dropouts; and at the height of the recent recession, 3.2 percent of college graduates were unemployed compared to 11.4 percent of high school drop-outs.
Raising the minimum compulsory level of education, as Belgium did in the mid-1980s from 16 years to 18, slows the entrance of young people into the labour market, equips them better for employment and increases the demand for teachers. The Japanese built their highly competitive workforce by raising the educational attainments of the bottom half of its primary and secondary school population. A national commitment to raise the minimum standard, the average level and the quality of education can act as a great medium term stimulus to job creation. Raising the compulsory education by two more years, or doubling the teacher-student ratio in the U.S., could generate several million additional jobs in teaching. Raising the guaranteed standards of health care for the elderly will have a similar impact on job creation.
18. Make income distribution more equitable: The number of jobs available is directly related to patterns of income distribution. The poorest 1.2 billion people receive 1.4 percent of world's income, while the richest 1.2 billion receive 80 percent. This highly skewed distribution results in lower overall demand, growth and jobs. The average wages for production workers in the USA are the lowest they have been since 1967. Eighteen percent of full-time workers do not earn enough to keep a family of four out of poverty, up from 12 percent in 1979. Employment-oriented policies that focus more on job creation and income equality generate greater demand, and thereby have greater impact on economic growth and living standards. e.g. in Japan and other dynamic Asian economies, the ratio between the bottom and top pay is much lower than in the USA A Japanese executive earns 10 times what a worker earns, whereas in the U.S. it is 50 to 100 times. Income redistribution in the industrialized countries requires structural adjustments, similar to those which the West has imposed on developing countries, instead of trying to protect jobs in the North through trade barriers. A 'maximum wage' law can be introduced requiring firms to pay taxes on exorbitant executive compensation.
19. Introduce new systems to build public confidence: The ultimate foundation for every economic system is public confidence in its stability and integrity, which usually expresses as confidence in the government and in the currency. Rising confidence in government, industry, banks, economy and the future leads to increasing investment, greater consumption, and greater initiative. A commitment by government to generate job opportunities for every person will increase consumer confidence, demand, production, jobs and tax revenues. In today's global economy, confidence in national institutions is not sufficient. Every economy is dependent on, and highly vulnerable to, sources of instability from outside, such as the massive capital flows induced by speculators that forced several European countries to devalue their currencies during the past one year. A new system or organization to regulate international capital and labour flows can raise confidence, in the same manner as the Federal Deposit Insurance system saved the U.S. banking system in the 1930s and provide a stable foundation for global expansion.
The problems in the world economy cannot be adequately addressed by individual countries. Many transnational factors determine the effectiveness of domestic policies. Labour cost advantages of countries change substantially with shifts in exchange rates, which have become extremely volatile. Weakened commodity prices, distorted agricultural markets, depressed export markets, rising protectionism, very high real interest rates and sharply reduced levels of international lending, along with massive financial movements between advanced countries and still very high levels of unproductive military expenditure--all constrain effective action by individual countries to achieve full employment. The same is true of migration and refugees movements, which are linked to employment opportunities in both the country of origin and country of immigration.
For centuries, national security has been viewed and approached on a competitive basis between nations, each of which strove to become stronger than its neighbors. Only now is a consensus beginning to emerge that real security for all can only be achieved by cooperation on a global scale. The same is true for employment. The employment problem can only be effectively addressed through international cooperation to create sufficient jobs and acceptable income levels and working conditions for all, not through ever more ruthless competition for a limited number of jobs, that will decrease in number the more intensely we strive after them. This requires a global strategy. There is a need for concerted and coordinated action by the international community to create a stable and equitable environment in which all nations can grow.
20. Need for concerted international cooperation: The G7 can be expanded to G10 or G12 and jointly set up a common investment and employment program. President Clinton's recent call for an international jobs summit can be a first important step toward concerted on-going international cooperation to address the employment issue.
21. Create a Global Employment Model: Presently, we monitor employment and unemployment at the national level, but have no clear idea of what is occurring in the global labour market. A program should be organized under the ILO to construct a global model showing the impact of plant closings, movement of industry to low-wage countries, changing patterns of trade, economic growth, immigration policies, refugee movements and other factors on employment opportunities around the world.
22. Cut Agricultural Subsidies: More than two billion people in developing countries, representing about 35% of the entire world's population, are dependent on agriculture as a primary source of livelihood. This compares to 45 million people in industrialized countries, or less than 1% of the world's population engaged in agriculture. The industrialized nations spend more than $300 billion annually on agricultural subsidies to support their farm population, which is 6.66 times greater that total world overseas development assistance. Agricultural subsidies in the North not only place powerful constraints on exports from developing countries but also directly interfere with the livelihood of one-third of the entire world population. The reduction and eventual elimination of these subsidies, which is contemplated by GATT, represents the single most important step that can be taken to improve the employment opportunities for people in developing countries.
23. Developing Countries as an Engine for Global Job Growth: The single greatest barrier to solving the world's employment problem is the perception that jobs are a zero sum game, in which every gain by one country or part of the world necessarily involves a loss by another. On the contrary, employment is a self-multiplying mechanism. Each additional job creates additional purchasing power and demand that leads to more jobs. That is the concept behind the phenomenal expansion of the world economy in this century.
The pent-up demand generated by the destruction of Europe during World War II, the rapid expansion of population during the baby-boomers' generation, and the explosion of new technologies in the past few decades have generated strong internal demand in the OECD countries, resulting in strong economic growth. The slow growth of population and productivity in more recent years means that these factors cannot be expected to drive further economic expansion at the same rate. In contrast, economists project relatively high rates of growth in many Third World countries. The increase in dollar output in developing countries was actually bigger than that in most economically advanced nations in 1992 and 1993 and this trend is expected to continue in 1994-95. Measured in terms of purchasing power parity, developing countries now represent more than one third of the world economy. Two thirds of the increase in U.S. exports in recent years has gone to the Third World. The rising expectations and upward mobility of millions of people in developing countries represent a vast potential source of demand and higher incomes and jobs for the West. Increasing incomes among the poorest has the greatest multiplier effect on aggregate demand, because even small increments in per capita income can lead to large increases in the number of households with incomes above the threshold for buying consumer goods. Asia alone is expected to generate half the growth in gross world product and world trade during the 1990s. This region will have one billion consumers of televisions, refrigerators and motor vehicles by the year 2000 and a rising appetite for both imported consumer and capital goods. East Asia alone, excluding Japan and China, will spend about $900 billion on infrastructure between 1992 and 2000. During the 1990s, China and India will add 21,000 megawatts of capacity every year and more telephone switching capacity than USA and Japan.
The growth of the Third World economies is the greatest potential engine for economic expansion and job creation in the West. Government policies based on recognition of this fact can considerably improve the climate for development of the Third World and correspondingly stimulate further growth in the West. Freer international trade will generate a flood of cheaper goods from the developing world that will give rise not only to greater purchasing power and higher standards of living for the Western consumer, but also to a "demand boom" for sophisticated Western goods and services to improve their infrastructure and meet the needs of billions of consumers. The vast inequalities in living standards that continue to persist within nations and between the most and least economically developed countries result in an enormous global loss in terms of incomes and jobs. Accelerating the development of poorer nations is the most powerful instrument and the surest guarantee of continued growth of jobs and incomes for everyone in the next century.
24. Promote a change of culture: In the modern world, employment is not only the primary means for ensuring economic survival. It is also a deeply ingrained symbol of social status and the main field for individual accomplishment. Millions of people with no economic compulsion to work feel compelled by social pressure or expectation to remain economically active because society clings to an outmoded set of values. It is not difficult to conceive--especially in view of increasing life-expectancy and the growing number of retired people--of a society in which large numbers of people live very active and constructive lives, furthering their own or other people's education, contributing to society, exploring new fields of knowledge and humanities. The cultural energies of humankind can, and will, eventually gravitate toward other pursuits (and come to look back on the days when everyone had to work and most people wanted to work as part of their less civilized past.) This process can be accelerated through the conscious initiative of governments to educate the public that socially and psychologically useful activity need not be economically remunerated, in much the same way that they have successfully endeavored to change attitudes with regard to smoking.