Worsening Debts dashes Job Aspiration In Developing Countries

The increase in debt levels compounded by high inflation and rising interest rates have dashed job-seekers’ hopes in developing countries, according to the latest International Labour Organization (ILO) report.

In its new Monitor on the World of Work report, the ILO shows that while in high-income countries, only 8.2 per cent of people willing to work are jobless, that number rises to over 21 per cent in low-income countries.

The UN Organisation said that low-income countries in debt distress are worst affected, with more than one in four people who want to work unable to secure employment.

WIDENING JOB GAP

ILO’s Assistant Director-General for Jobs and Social Protection, Mia Seppo, said that global unemployment was expected to fall below pre-pandemic levels, with a projected rate of 5.3 per cent in 2023, equivalent to 191 million people.

However, low-income countries, especially those in Africa and the Arab region, were unlikely to see such declines in job this year.

It projected global jobs gap in 2023 to stand at 453 million people (or 11.7 per cent1), more than double the level of unemployment. Further, it noted that the jobs gap is much higher among women (14.5 percent) than men (9.8 per cent) are.

Low-income countries face the largest jobs gap rate at 21.5 per cent, while the rate in middle-income countries stands slightly above 11 per cent. High-income countries register the lowest rates, at 8.2 per cent. Low-income countries are the only country income group that has seen a long-term rise in the jobs gap rate, from 19.1 per cent in 2005 to 21.5 per cent in 2023.

In low-income countries that are in debt distress, the job gap is significantly higher than in developing countries at low risk of debt distress, at 25.7 per cent compared with 11 per cent.

AFRICA HIT HARDEST

The UN agency further indicated that Africa’s labour market had been hit the hardest during the pandemic, which explained the slow pace of recovery on the continent.

Unlike wealthy nations, debt distress across the continent and a very limited fiscal and policy space, meant that few countries in Africa could put in place the kind of comprehensive stimulus packages they needed to spur economic recovery, ILO explained.

INADEQUATE SOCIAL PROTECTION

Seppo stressed that without improvement in people’s employment prospects, there would be no sound economic and social recovery. Equally important is investment in welfare safety nets for those who lose their jobs, the ILO senior official insisted, which is often inadequate in low-income countries.

Only 38.6 per cent of older persons in lower middle-income and 23.2 per cent in low-income countries receive an old-age pension. Investing in national social protection systems based on equitable and sustainable financing from taxes and social contributions and complemented by international support where needed, is necessary and will bring economic, social and employment benefits.

According to the agency’s research, boosting social protection and expanding old age pensions would increase gross domestic product (GDP) per capita in low and middle-income countries by almost 15 per cent over a decade.

SOCIAL INVESTMENT BENEFIT

The annual cost of such measures would be around 1.6 per cent of GDP – a “large but not insurmountable” investment. Seppo suggested that a mix of social contributions, taxes and international support could finance the amount.

“There is an economic gain to investing in social protection”, she said.

Seppo also insisted that the need to create fiscal space for social investment in low-income countries “with urgency as part of the ongoing global discussion on the reform of the international financial architecture.”

PREPARE FOR THE FUTURE OF WORK

While the unemployed divide projected by the report was worrisome, it was “not inevitable”, Seppo said, and the right concerted action on jobs and social protection funding could support a recovery and reconstruction, which leaves no one behind.

In calling for improved capacity to develop “coherent, data-informed labour market policies” that protect the most vulnerable, the ILO senior official insisted that these should have an emphasis on upskilling and reskilling the labour force to prepare it for a “greener, more digital world of work”.

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