Wednesday, 19 June 2013

The International Labour Organisation offers Ed the policies for jobs and growth

“Women and men without jobs or livelihoods really don’t care if their economies grow at 3, 5 or 10 per cent a year, if such growth leaves them behind and without protection. They do care whether their leaders and their societies promote policies to provide jobs and justice, bread and dignity, and freedom to voice their needs, their hopes and their dreams” -Juan Somavia

Juan Somavia was the Director-General of the International Labour Organisation (ILO) until 2012. The ILO was founded in 1919, in the wake of a destructive war, to pursue a vision based on the premise that universal, lasting peace can be established only if it is based on social justice. The ILO became the first specialized agency of the UN in 1946.
From the 5th to the 20th of June 2013 the ILO are holding the 102nd International Labour Conference in Geneva. On the agenda are several themes that have been prevalent in the UK media recently and have relevance to the lives of the UK population. These are;
  1. Sustainable development, decent work and green jobs
  2. Employment and social protection in the new demographic context
  3. Social Dialogue
OK so they don’t sound relevant in the bureaucratese in which they are written, however these issues could all have a profound impact on our quality of life. I shall attempt to decipher them for you.
The first of these deals with the two most significant challenges facing humanity in the 21st Century; achieving environmental sustainability and ensuring decent work for all. The ILO report on this topic states that “The shift to a sustainable, greener economy offers major opportunities for social development: (1) the creation of more jobs; (2) improvement in the quality of large numbers of jobs; and (3) social inclusion on a massive scale.”
The report goes onto to say that “an assessment of a broad range of green jobs in the United States, for example, concluded that they compare favourably with non-green jobs in similar sectors in terms of skill levels and wages. Research in China, Germany and Spain has also found the quality of new renewable energy jobs to be good.”
Major investment both in terms of policy and money will therefore only reap rewards; if we are to gain the most from this opportunity then we can’t simply play at building wind-farms.
Long-term policy commitments must be made to ensure that private investment is forthcoming, something not helped by last week’s UK parliamentary vote against a clean power target, which will also affect the motor manufacturing industry.
The demographic context to which the second item refers is the “inevitable and irreversible trend of ‘population ageing’”.
By 2050 there will be an extra 2 billion people globally, but as the birth-rate stabilises and people live longer the number of people over 60 will triple. This change in the ratio of working-age and retired people could result in shortages in labour supply and skills as people retire.
This could result in loss of productivity and innovation and will certainly affect how national governments make provision for social security services.
A report on this by ILO emphasises the importance of having active labour market policies and recognise that “social security systems work best when they are well integrated and co-ordinated with wider social, economic and employment policies”.
A key element of this is getting the young into employment. This is important because not only will the young have to pay tax in the future to support the increasingly aged population but also to ensure intergenerational social cohesion.

Social dialogue is defined in the ILO report as “the term that describes the involvement of workers, employers and governments in decision-making on employment and workplace issues. It includes all types of negotiation, consultation and exchange of information among representatives of these groups on common interests in economic, labour and social policy.”

This is important both in giving people a voice and role to play in shaping their workplaces and by extension wider society but also as a means of achieving social and economic progress. Social dialogue has taken an important role in shaping the workplaces of the UK over the last few decades but the new century has brought new challenges.
Collective bargaining power is now weaker as a result of increased competition from new global markets, increased unemployment and a decline in the proportion of GDP arising from labour intensive industry.
This, combined with a decline in unionisation an increased income inequality, means that new methods of achieving social dialogue must be found. The fact that the unions remain strong in the public sector but are weak in SMEs where the majority of people work results in many people having a negative view of their potential to enable change in the workplace. More must be done to make social dialogue more inclusive.
In addition to these agenda items the ILO has produced several documents that explore how these topics are inter-related and propose policies that would both improve social justice and achieve financial equilibrium for nation-states.
In the World of Work Report 2013 the ILO present the case for a more job-friendly approach to macroeconomic policy.
The report argues that “well-designed and coordinated macroeconomic, employment and social policies can have mutually reinforcing effects.” Both Argentina (in 2001-2002) and Sweden (in 1990s) successfully pursued policies that focused on job protection and creation rather than on fiscal consolidation.
In Sweden in particular this was achieved by the development of a package of labour market policies designed with the specific intention of reducing the risk of long-term unemployment. The flagship policy of this package was a youth employment guarantee.
There are several policy proposals that the World of Work Report present and provides evidence for their beneficial impact on increasing employment and stabilizing the economy. These are;
  1. Public investment for innovation
  2. Investment in and extension of credit to small and medium-sized enterprises (SMEs):
    1. supporting the creation and development of credit mediators to reassess SMEs’ credit requests that have been rejected by banks;
    2. introducing credit guarantees for viable SMEs, in which a percentage of the loan is backed by government support; and
    3. directly earmarking a portion of bank recapitalization funds for the provision of SME credit
  3. Avoiding wage stagnation or deflation traps: A significant proportion of GDP is in domestic consumption, particularly in larger or more developed economies. Therefore attention to employment, wages and other sources of household income is a critical part of a sound macroeconomic policy mix.
Resilience in a Downturn: The power of financial cooperatives is a report that discusses the historical, statistical, conceptual, and policy aspects of financial cooperatives. With particular reference to how cooperatives fare in times of crisis.
The report shows that financial cooperatives have continued to provide banking services to people on low incomes, to stabilize the banking system, to regenerate local economies and, indirectly, to create employment.
The report explains that cooperatives are able to do this because of their unique combination of member ownership, control and benefit. It concludes with a set of policy recommendations for governments, development agencies and other policy-makers, for instance using cooperatives not as “conduits” but as partners in the wider aims of business development, insurance against episodic poverty and decent work.
Ed Miliband has recently given a speech outlining his direction for the Labour party over the next few years. In summary he said that “We all know Labour in 2015 will have less money to spend, because the Tories have failed on the economy. So we are going to take action on the big problems our country faces to control spending:
  • Cut costs by helping the long-term unemployed back to work
  • Make sure jobs are well-paid to reward work, so the state does not face rising subsidies for low pay
  • Get the cost of renting down by ensuring more homes are built – thereby reducing the welfare bill
  • Cap social security spending by focusing on the deep-rooted reasons benefit spending goes up.”
Conservative MPs have predictably derided this speech; however it is a welcome intervention from Ed Miliband and should be welcomed by all who would rather see a Labour led government.
The findings of these ILO reports all generally agree with the view of most Labour supporters and Tory critics that jobs must come before growth and not the other way around. Conservative opinion seems generally to be that only by reducing national expenditure can we afford to invest in education and provide social security. As numerous economic experts have commented however, fiscal consolidation reduces domestic consumption, which reduces GDP.
The major role that governments can take in this approach is in forming policy that encourages private investment. For example long-term clean energy policy that drives investment in manufacturing and development; macroeconomic policy that facilitates lending to SMEs and incentives for youth employment and a housing policy based on using financial co-operatives to invest pension funds in the development of new residential and commercial units for long-term tenancies.

This article first appeared on Labour uncut.

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