64.1% of the global population, age 15-74, was ‘active’, i.e. worked or was looking for work in 2011. Their number decreased by 29 million over the four years of the crisis. The activity rate of the cohort under 25 is even smaller (48.7%). Moreover this rate has been declining for many years, since long before the crisis. A ‘neither – nor’ generation (neither studying – nor working’) has emerged and is growing larger.
On the basis of the ILO-definition, the number of unemployed grew by 27 million to 200 million. The rate of unemployment rose from 5.5 to 6% and there is no chance for a decline before 2016. In addition, more than 400 million people will enter the global labour market in the coming decade and, if they are not employed, the number of people without jobs will jump to 600 million. In addition, 900 million workers live with their families below the US$2 per day poverty line, thus requiring improved labour standards.
At present, 3.1 billion people are currently employed, i.e. at a minimum, working a one hour per week wage-job. At the same time, of this number 1.52 billion people are living under so-called ‘vulnerable’ employment conditions, where wages are low and employment terms vague. This means that, according to European norms and values (acceptable wage and safe employment), we can only speak of about 1.58 billion employed persons. This suggests a global unemployment rate of approximately 52%.
The developed countries have the fastest rate of growth in unemployment and their rate of joblessness is and will be higher than in Asia and Latin-America up through the year 2016. The governments of the G20 have saved or created 21 million jobs up through 2010. But the austerity policies have weakened the resources available for employment and economic growth and led to the ‘austerity trap’. In the past decades the polarization of wages and the increase in ‘atypical’ or ‘precarious’ forms of employment have also gained ground in the developed countries and a now massive amount of poverty exists there, albeit to a much lesser extent than in the developing world.
During the crisis, the structural problem of production is manifested as the structural problem of employment or skill and qualifications on the job market. Rising labor skills should make it possible for quick adaptation to the new professional, vocational and organizational requirements. However, the education of this skilled labor force should have begun many long years ago, assuming of course the production was planned. This situation is reflected in the slow but steady growth of the share of long run unemployment, in particular among the low skilled.
In contrast, profits were rising rapidly prior to the crisis in the developed countries. After two years of declining in 2008-2009, the bulk of profits soared again in 2010-2011. The share of employee compensation in GDP, however, has been declining for decades. But the direction of the distribution of new value is even more strongly reflected in the decline of the share of wages relative to net national income.
The profit producing economy sheds live labour continuously. This is required for competitiveness. This means that, in a situation where the employment per unit of production is decreasing because of the competitiveness requirement, if we want employment to increase in the market economy we have to increase production at a continuously growing pace in order to continuously create more and more jobs.
This continuously accelerating dance leads inevitably from time to time to crisis, the depreciation of capital and skills, unemployment, and increasing poverty.
(A longer version of this article will appear in the Institute of World Economics’ Report on World Economics)