Creating employment and improving social welfare Monday, 31 May 2010 02:30

The recent global economic crisis has underscored the fact that poverty, employment creation, and inequality of opportunity are challenges faced in all parts of the world. The problems differ widely in nature and severity by economy and society, but these variations do not render the challenges any less significant nor stubborn to the individuals that face them. Nor do they lessen the social strains wherever they are present. Many difficulties are the product of global forces. Many are the result of specific local challenges and particular local choices.

Concurrently, the benefits of globalization are remarkable for those who have the opportunity to enjoy them.

But they often bypass the world’s poorest countries. They also tend to fall much more generously on skilledworkers than unskilled ones, even in the richest countries. The economic interconnectedness among countries implies that employment and poverty-reduction programmes are not isolated national issues. International cooperation is essential.

Importantly, the developing world has experienced tremendous progress over the past decade. The emerging economies of Asia have seen sustained economic gains alongside major improvements in human development, as measured by the Millennium Development Goals (MDGs) and other key international targets. Latin America and the Middle East have seen significant progress, even if more gradual. Sub-Saharan Africa still faces the most trenchant poverty, but it has enjoyed several years of sustained average economic growth, alongside many broader development breakthroughs. Much of this has been underpinned by sound economic management strategies. Much has also been underpinned by innovations in expanding services to previously underserved populations. This chapter segments basic challenges across two main categories of countries:

1) the advanced and emerging economies that must coordinate their national and international efforts; and 2) the low-income and fragile economies where international decisions on policy and resource allocation have a greater proportionate role on domestic programmes. It aims to identify elements of a global strategy that will advance employment, human development, and social stability in all corners of the global community.

Advanced and Emerging Economies, problems to be addressed

The following deep-seated problems need to be addressed with regard to employment, poverty and welfare in advanced and emerging economies:

Finding a socially acceptable growth path will involve creating high quality, secure and inclusive jobs in environmentally sustainable sectors. The policy instruments and institutions are not yet in place to foster international cooperation in this domain. We do not have sufficient international cooperation to ensure that the world community responds flexibly and efficiently to future demands for skill.

Employment policies are often not based on best practice and frequently give rise to poverty traps, while unemployment support often gives rise to unemployment traps. Migration policies often are not based on balanced appraisals of the host and receiving countries’ needs.

The international dimension of education reform, geared to the skill requirement of the 21st century, is largely missing.

Social inclusion is often overlooked in poverty, employment, migration and education policies.

Principles

The actionable proposals in this section are based on a few simple principles.

Since productive employment – particularly skilled employment – is the main route out of poverty, policy incentives for employment creation and skill acquisition are crucial instruments for poverty eradication.

The inequality of earnings is commonly generated by the inequality of human capital. Consequently, economic equality can usually be achieved by compressing the distribution of human capital. Failure to accumulate sufficient human capital is a dominant cause of social exclusion. So an effective way of avoiding social fragmentation is to provide equal opportunities of access to education and training.

Sustainable employment creation cannot be achieved primarily top-down through government employment programmes. Rather, employers and employees need to be incentivized to enter into productive relationships.

The same holds for skills: skill acquisition must be driven by incentives that make education and training worthwhile for individuals and businesses. Nor can earnings equalization be reliably enforced through central edict, such as through minimum wage laws or constraints on executive pay. Stable employment growth and poverty reduction will require the development of policies that promote labour adaptability. The reason is that – divergent growth rates among the advanced and emerging countries, advances in information and telecommunications technologies, the geographic decomposition of business value chains, and changes in the global distribution of human capital and purchasing power – a massive global reallocation of labour is in progress. In this changing world, the adaptability of skills is crucial.

A stable macroeconomic environment is required for employment growth and poverty reduction. Due to the economic and financial interconnectedness of the world economy, macroeconomic stability will require new efforts in global governance, in particular those that encourage the unwinding of global imbalances, combat protectionism and promote financial stability.

The following concrete proposals aim to put these principles into practice to create employment, mitigate poverty and improve social welfare.

Recommendations

The main Global Redesign Initiative (GRI) recommendations – addressing the above problems and following the above principles – can be grouped under a few key categories.

Acquiring Skills

In our globalized world, in which countries create wealth through trade and capital flows, it is generally undesirable to aim for self-sufficiency in skills. As the new information and telecommunication technologies bring individual businesses and employees into more immediate competition, it becomes increasingly important for economic decision-makers to identify their distinct comparative advantages on an increasingly microeconomic level. Doing so involves gaining information about one’s skill requirements, both currently and in the future. The reason it is important to anticipate future skill needs is that it takes time – often many years – for the appropriate skills to be created. Not only is education and training often a lengthy process, but the

Recommendations by the Global Agenda Council on the Skills Gap:

Improve access to information on national and industry supply and on demand for skills and trends in the human capital market to allow cross-border analysis

Such databases should be fed decentrally by employers and employees, and supplemented through centralized forecasts. The results should be publicly available to employers and employees.

Provide transparent information about all policies related to talent mobility

Encourage the establishment of skill recognition mechanisms and their coordination in industries and occupations where talent circulation is likely to create win-win solutions between developed and developing countries

Improve skill recognition and employability by encouraging international recognition and accreditation of teaching institutions, as well as an additional industry certification for academic diplomas.

Initiate a global effort to advance global standards for youth apprenticeship and promote the consideration of apprentice laws in emerging economies.

Promote lifelong learning and reskilling through various age-inclusive measures, including individualized skill accounts and incentives for employers to create jobs that take the needs and abilities of older workers into full account.

These recommendations are aimed at helping people adjust to a changing future. In doing so, it is important for policy-makers to remain aware of the interconnections among people’s skills: the greater the density of skills in a particular geographic region, the easier it becomes to acquire skills there. Thus policies related to talent mobility must be sensitive to the needs of both the source and destination countries, and agreements need to be forged with a view to sharing the benefits from talent mobility fairly between the sending and receiving locations. International coordination will be required for this purpose, drawing on the relevant international organizations (including the International Labour Organization (ILO), International Organization for Migration (IOM), Organisation for Economic Co-operation and Development (OECD), various UN agencies) for policy coordination, educational institutions for background analysis, business organizations for strategic input, development banks for funding, as well as national policy-makers and regulators.

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