Cadmus

Global Prospects for Full Employment

Abstract*

The recent international financial crisis highlights the crucial role of employment in human welfare and social stability. Access to remunerative employment opportunities is essential for economic security in a market-based economic system. As the rise of democracy compelled nations to extend the voting right to all citizens, employment must be recognized as a fundamental human right. In total defiance of conventional wisdom, since 1950 job growth has outpaced the explosive growth of population, the rapid adoption of labor-saving technologies, the manifold expansion of world trade, and the dramatic shift from manual labor to white collar work. In an increasingly globalized labor market, current nation-centric theories and models of employment need to be replaced with a human-centered global perspective complemented by new indicators that recognize the central and essential contribution of employment to human economic welfare. Employment and economy are subsets of society and their growth is driven by the more fundamental process of social development. A vast array of unmet social needs combined with an enormous reservoir of underutilized social resources – technological, scientific, educational, organizational, cultural and psychological – can be harnessed to dramatically expand employment opportunities and achieve full employment on a global basis. This paper examines the theoretical basis, policy issues and strategies required to eradicate unemployment nationally and globally.1. Introduction Mesmerized by the magic of the marketplace and the enormous speed and complex machinery of modern post-industrial economy, we are apt to lose sight of the fact that the most essential function of any economic system is to provide sustainable livelihoods, economic security and maximum welfare to all citizens. We need often to be reminded of what was so apparent and self-evident to economists such as Smith and Ricardo – money, markets, production and growth are merely a means to an end with no essential value other than that of meeting human needs. In Smith’s words, “No society can surely be flourishing and happy, of which the greater part of the members are poor and miserable. It is but equity, besides, that they who feed, cloth and lodge the whole body of the people, should have such a share of the produce of their own labour as to be themselves tolerably well fed, cloathed and lodged.”1 In a world of market economies, access to remunerative employment opportunities is the economic equivalent of the right to vote in democracy and must be universally granted. A rapid, sustainable solution to the global employment challenge is imminently feasible, but it requires a new theoretical perspective and more comprehensive practical strategy. Most of all, it requires a radical change in thinking. Our view must change.

Current pessimism regarding the future of work resembles the prevailing mood in the early 1990s, which resulted from the transition of Eastern Europe to market economies following the end of the Cold War, the economic stresses associated with reunification of Germany, and the enormous growth of the labor force in developing countries. During that period 6 million jobs were lost within the European Union and unemployment averaged 11% in 1994. Nearly 22% of youth (aged 20-24) were unemployed.2 The employment challenge for developing countries seemed ominously greater. A study by the International Commission on Peace & Food in 1991 estimated that India would need to create a phenomenal 10 million jobs annually during the decade to eliminate unemployment and underemployment and absorb new entrants into the labor force.3 The gloom was aggravated by the financial crisis that paralyzed East Asian economies in 1997, leading to negative growth and widespread job losses. Yet, remarkably, by the early years of the new century, more rapid than anticipated economic recovery in Asia and Europe coupled with buoyant growth in developing countries, particularly China and India, gave rise to a more confident long term prognosis.

The world urgently needs a sound theoretical and practical approach for achieving global full employment. Even before the recent international financial crisis wiped out 34 million jobs globally and pushed an additional 65 million people below the $1.25 per day poverty threshold, growth of employment opportunities was insufficient to meet the needs and fulfill the aspirations of a large section of humanity. Today UNDP estimates about 1.75 billion people in the 104 countries it measured live in multidimensional poverty.4 Of greatest concern has been the inability to generate sufficient job opportunities for new entrants to the workforce. Worldwide, youth represent 25% of the global workforce and 40% of the unemployed.5 Labor participation rates for women are still significantly lower than for men. As life expectancy continues to rise, an increasing proportion of the population are able-bodied, experienced people willing and eager for work, but denied the opportunity due to premature retirement or age discrimination. The average unemployment rate among those aged 55-64 in OECD countries declined from 5.3% in 1999 to 4.1% in 2008, then rose following the crisis to 5.7% in 2009.6 Social unrest over raising the retirement age in France and rising rural unrest among the unemployed poor in many developing countries, as discussed in the article by Jasjit Singh, illustrate the critical importance of this issue. These facts provide clear evidence that unregulated market mechanisms are not conducive to full employment or optimal human welfare.

2. Transformation of Society and Work: 1800-2000
Employment as we know it today is a relatively recent phenomenon. The past two centuries broke the pattern of agrarian economy that had been dominant since the dawn of agriculture 10,000 years ago. At the time Wealth of Nations was written, more than four-fifths of humanity were self-employed or engaged in agriculture. The Industrial Revolution ushered in a period of radical transition. England was the first to make that transition. Employment in agriculture fell from 73% in 1800 to 11% of total employment by 1900, at a time when agriculture still represented 40% of total employment in France, Germany and USA, and probably as much as 75% globally. Between 1870 and 1970, agricultural employment in the USA declined from 53% to 4.5% of the workforce, yet all these workers and three times as many additional new entrants to the workforce were absorbed in other types of work. By 2000, agricultural employment had declined to 1.4% of the workforce in USA and UK. Globally, agriculture now employs less than 36% of the workforce, down from 65% just 50 years ago and still declining rapidly.

The 20th century brought radical changes in all aspects of human existence. In 1900, only 13% of the world’s population lived in cities. The urban population rose to 29% in 1950 and reached 50% in 2010, progressively intensifying the competition for salaried jobs. By 2030, 60% of the world’s population will be living in urban areas.7

Technological development during the 20th century has transformed the way work is done, vastly reducing or completely eliminating the need for manual labor in many areas, while creating countless new products and services that provide work opportunities of a less physical nature. Although the Industrial Revolution had its origins a century earlier, over the last 100 years and especially the last 50, the impact of rapid technological development has spread throughout the world. Technology has always been regarded as a mixed blessing. Each new advance has raised resistance from those who fear that machines will progressively eliminate the need and therefore the opportunities for gainful employment in manufacturing.

The 50% increase in world trade as a percentage of global GDP following the end of the Cold War has served as an engine for job growth in both industrially advanced and lower-wage developing countries, but resulted in stressful changes in domestic labor markets.8 The growth of world trade, aggravated by the increasing disparity between wage levels of the richest and poorest nations, raises similar anxieties today. Computerization and outsourcing have recently added to these concerns by enabling large-scale export of some types of service-related jobs as well.

Most significant of all in its impact has been the explosive growth of population after 1950, which has nearly tripled the world’s workforce. Rapid population growth over the last six decades has spawned visions of hundreds of millions of low wage workers in developing countries competing with one another for limited jobs at home and export opportunities abroad. Transformation of the economy, which is at its roots a social transformation fueled by rising aspirations, has irrevocably changed the nature and future of work. Table 1 below depicts the dimensions of that transformation over two centuries:
Adding to these dramatic changes, energy prices have soared more than seven-fold in constant dollars since the mid-1970s, prompting fears that a race for scarce resources imposes impenetrable limits on job growth.58

Rapid technological development combined with explosive population growth, urbanization, globalization of markets and increasingly scarce material resources fuels visions of a future world in which more and more people compete for fewer and fewer jobs. Indeed, it is easy to cite examples in which each of these factors individually and in combination has resulted in job losses or displaced employment opportunities that appear to justify our worst fears. Conventional wisdom and prevailing belief systems strongly support gloomy predictions of a world without work and severe limits to job growth. Therefore, it is essential that we examine the historical record to confirm or reject this prognosis.

Table 1: Transformation of work and society 9

3. Historical Record: 1950 – 2007
Yet, in spite of this multidimensional coincidence of radical changes, the global economy has been remarkably successful in generating employment opportunities to keep pace with rapid and radical evolutionary changes. The history of the 20th century tells a remarkable story that belies these fears and compels us to re-examine underlying assumptions. Figure 1 depicts global changes in population and employment from 1950 to 2007, just prior to the onset of the financial crisis. During this period a mind-boggling 4.2 billion people were added to the world population, a growth of 164% in less than 60 years. During the same period, total global employment increased 175%, rising from 900 million to 3 billion.10,11

In addition to unprecedented job growth, the last half century has also been a period in which the quality of jobs available worldwide has improved dramatically due to the progressive shift from manual work to mental work, indicated by the falling percentage of the world’s work-force employed in low-wage agricultural jobs. Globally, employment in agriculture declined from 65% in 1950 to 35% in 2009.

This broad historical trend maintained its positive momentum right up to the onset of the current recession. From 1994 to 2009, global population increased by 21%, but total global employment grew by an even faster 27%.12 Figure 2 shows that the world added 640 million jobs in 15 years, while the employment-to-population ratio (EPR aged 15+) declined slightly as a result of rising levels of tertiary education.13 The current global economic recession increased both the magnitude and the urgency of the global employment challenge.

Figure 1. Global trends in population and employment 1950-2007

Figure 2. Global Employment and Employment-Population ratio 1994-2009


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