KATHMANDU, MAY 31

Mutually reinforcing crises, including rising debt levels, are disproportionately affecting developing countries, worsening the global employment divide between high-income and low-income countries and widening existing inequalities exacerbated by the COVID-19 pandemic, says a new International Labour Organisation (ILO) report.

While global unemployment in 2023 is expected to fall below pre-pandemic levels - to 191 million, corresponding to a global unemployment rate of 5.3 per cent - estimates show that low-income countries re-main far behind in the recovery process, according to the ILO Monitor on the World of Work – 11th edition.

ILO projects that low-income countries in Africa and Arab region are unlikely to recover to pre-pandemic levels of unemployment this year. For North Africa, unemployment rate in 2023 is projected to be 11.2 per cent (10.9 per cent in 2019); for Sub-Saharan Africa, 6.3 per cent (5.7 in 2019); and for the Arab States 9.3 per cent (8.7 in 2019). Other regions have managed to reduce their rates substantially below pre-crisis levels, with 6.7 per cent in Latin America and the Caribbean (eight per cent in 2019), 6.3 per cent in Northern, Southern and Western Europe (seven per cent in 2019), and 7.8 per cent in central and Western Asia (9.2 per cent in 2019).

WIDENING GAP

Beyond unemployment rates, a new indicator developed by the ILO, the jobs gap, offers a more comprehensive measure of the unmet demand for employment, especially in developing countries. It captures all persons who would like to work but do not have a job.

Variations in the jobs gap point further to a global employment divide. Low-income countries face largest jobs gap rate at 21.5 per cent, while rate in middle-income countries stands slightly above 11 per cent. High-in-come countries register lowest rates, at 8.2 per cent. Furthermore, low-income countries comprise only country income group that has seen a long-term rise in jobs gap rate, from 19.1 per cent in 2005 to 21.5 per cent in 2023.

RISING DEBT LEVELS

For developing countries, rising debt levels add additional challenges, considerably narrowing scope for policy interventions. Financial and fiscal constraints hamper responses to complex threats, which include conflict, natural disasters, and economic crises that tend to reinforce themselves, worsening jobs gap. As per the report, low-income developing countries that are in debt distress are facing a significantly higher jobs gap, reaching 25.7 per cent in 2023, compared with 11 per cent in developing countries at low risk of debt distress.

EXPAND SOCIAL PROTECTION

The report also highlights significant social protection policy gaps in developing countries and provides new evidence that increasing investment would bring large economic, social, and job benefits and narrow the global jobs divide.

It examines basic old-age pensions, especially in lower-middle-income and low-income countries where just 38.6 per cent and 23.2 per cent of older persons receive a pension respectively, compared to 77.5 per cent globally. The report finds that introducing universal basic old-age pensions in developing countries would increase their GDP per capita by 14.8 per cent within 10 years and reduce extreme poverty (share of people who live on less than $2.15 a day) by six percentage points - a drastic reduction from the current rate of 15.5 per cent.

Financing social protection is challenging, but not unattainable, says the report. For developing countries, annual cost of providing old-age pensions at level of national poverty lines would be equivalent to 1.6 per cent of their GDP.

COORDINATED FINANCIAL SUPPORT

The analysis provides a strong case for global financial support for job creation and social protection during a time of multiple crises and shocks, to ensure that recovery and reconstruction will leave no one behind and support long-term structural transformation.

The report stresses the critical importance of creating fiscal space for social investments in low-income countries. This needs to be considered with urgency as part of the current global discussion on the reform of the international financial architecture.

'The findings of this report are a stark reminder of growing global inequalities. Investing in people through jobs and social protection will help narrow the gap between rich and poor nations and people.This is why the ILO is launching a Global Coalition for Social Justice,' said ILO Director-General, Gilbert F Houngbo.

A version of this article appears in the print on June 1, 2023, of The Himalayan Times.