• ILO world report notes widespread deficits with regard to decent work, highlighting lack of employment access, poor job quality, insufficient pay, major inequalities exacerbated by a myriad of post-pandemic crises

“By the end of 2022, recovery from the Covid-19 crisis was still incomplete and highly uneven across the world, particularly in low- and middle-income countries, and was further hampered by the consequences of the conflict in Ukraine, accelerating climate change, and unprecedented humanitarian challenges. Projections of a slowdown in economic and employment-related growth in 2023 imply that most countries will fall short of a full recovery to pre-pandemic levels in the foreseeable future. Worse still, progress in labour markets is likely to be far too slow in order to reduce the enormous decent work-related deficits that existed prior to, and were exacerbated by, the pandemic.”

This is part of International Labour Organisation (ILO) Director General (DG) Gilbert F. Houngbo’s assessment of the prevailing job market situation. Adding that the lack of access to employment, poor job quality, insufficient pay, and major inequalities are only some of the challenges that undermine social justice, he noted that the globally observed slowdown in productivity growth is likely to make those challenges even more difficult to address. The basis for these remarks was extensively discussed in an ILO flagship report titled “World Employment and Social Outlook Trends 2023”, which is a comprehensive assessment of current decent work deficits and how these have been exacerbated due to multiple, overlapping crises in recent years.

South Asia’s situation

The report discussed a number of employment-related challenges faced by different regions as well as common challenges that arose following the Covid-19 outbreak. It added that global economic pressures resulting from the conflict in Ukraine are expected to worsen public finances and domestic inflation in the South Asia region and that one such extreme example is Sri Lanka.

The report stated that growth projections for the Asia and Pacific region as a whole have been revised downwards and that the region saw a 3.9% growth in 2022 and is expected to see 4.3% in 2023. Adding that the dampened growth projections are put down to the global economic slowdown, rising debt levels and policy overreliance on commodity subsidies, the report said: “An anticipated decline in global demand weighs on the region despite the recovery in exports since the onset of the Covid-19 pandemic. The appreciation of the US dollar over 2022 also exacerbated this. As in other regions, inflation is increasing, particularly owing to high energy and food prices.”

South Asia has seen the strongest growth in the region and some of the highest regional figures in the world, i.e. 6% in 2022 and 5.3% projected for 2023 (as per the International Monetary Fund [IMF]), according to the report.

With regard to the South Asia region’s situation, quoting the IMF, the ILO, and the World Bank (WB), it added: “Exports of services from the sub-region are increasing and are expected to have contributed positively to growth in 2022 and to do so again in 2023. The digital services sector has performed particularly strongly, whereas sectors such as tourism and construction have not recovered to pre-pandemic levels in most of the sub-region. Originally, high growth projections for India have been revised downwards and may be revised further, given deteriorating global conditions and faster-than-anticipated monetary tightening. Household consumption will be held back by the slow recovery of the labour market and by high inflation.”

Noting that global economic pressures resulting from the conflict in Ukraine are expected to worsen public finances and domestic inflation in the sub-region and that one extreme example is Sri Lanka, which is already unable to pay import-related bills, the report said that several countries, such as Bangladesh, rely heavily on exports to Europe. Inequality both between and within countries is growing and the recovery from the pandemic has been deeply uneven. The highest-paid workers are much more likely to have returned to work than are lower-skilled migrant workers, as per the report.

With regard to the labour market trends in Asia and the Pacific, the report said: “Total employment in Asia and the Pacific increased by 30 million from 2021 to 2022. South Asia accounted for the majority (74%) of the resurgence in total employment in 2022 but this was mainly among adults with the recovery being slower for youth. The total working hours per person are still below pre-pandemic levels. In Asia and the Pacific, total working hours in full-time equivalent (FTE) terms are estimated to have been 1,764 million FTE in 2022. This marks a return to 2019 levels and reflects the economic recovery. A greater policy focus on expanding social protection is critical for informal workers and the ability to sustain future economic shocks. Decent work-related deficits characterise employment in the region since economic growth has not been accompanied by corresponding improvements in decent work. Nearly two-thirds (65.6%) of the region’s total employment was in informal employment in 2022. As in other regions, those in informal employment were particularly vulnerable during the pandemic years of 2020 and 2021, given their lack of access to social protection. Thus, many governments in the region sought to expand social assistance during this period, with a view to addressing shortcomings for the long term. Such measures have included extending social protection to informal workers,” the report said, stressing that nevertheless, limited fiscal space may compromise progress in this regard over the medium term.

Policy options

Discussing the policy-related changes that could help improve employment, the job market and related concerns in 2023, the report said that higher productivity growth was possible in the past and that policymakers can therefore focus on areas that are known to have raised productivity growth. Among these areas are a conducive business environment, and public and private investment in production capabilities that enable the development and diffusion of technologies that improve or facilitate sustainable production or the consumption of goods and services and ultimately serve to improve people’s lives. Also, adding that policies that support investment in people, in all forms of human capital, offer the prospect of raising productivity growth to unprecedented higher levels, the report said that such policies would attempt to strategically increase workforce quality through re-education and re-training along a career-long horizon and would also promote better access to the resources that enable people to build up and maintain their own human capital. Creating an environment for sustainable productivity growth is one of the policy options that were discussed, regarding which the report said that the provision of an environment for sustainable businesses is crucial. 

“Productivity improvements ultimately need to be implemented in enterprises, through changes in the working environment and production processes. This means that policymakers may seek to positively change the business environment so that firms have the incentives to make changes that are conducive to increasing productivity. At the highest policy level, governments need to provide a macroeconomic, legal, and institutional framework in which private enterprises can thrive. Such an environment starts with enforceable property rights, anti-corruption laws and competition laws that together allow fair access of economic agents to markets and prevent the creation of monopolies, monopsonies (a market structure in which a single buyer substantially controls the market as the major purchaser of goods and services offered by many would-be sellers), and oligarchies.” 

Adding that the legal and institutional framework should be maintained by independent and effective courts that uphold the rule of law, the report explained that a stable macroeconomic environment requires low inflation and macroeconomic policies to absorb shocks. Per the report, if such a basic framework cannot be maintained, as may be the case in developing countries in particular, it is difficult to create stable markets and to promote sustainable enterprises that have the necessary incentives to enter and operate in these markets in order to create productive employment opportunities.

In addition, it was noted that tax policies are an essential element in achieving inclusive productivity growth, regarding which it was stated that in the current era of digitalisation and robotisation, taxation has become heavily skewed towards burdening labour and that Government taxation should instead find the right balance between reducing inequality and preserving long term productivity and growth.

“Private investment in means of production, including technology, is needed, as well as sufficient investment in public infrastructure such as transportation and digital infrastructure,” the report said, explaining that if only a fraction of the population and enterprises have access to hardware, digital devices, and the internet, the economy experiences a digital divide and that certain groups, likely to be based on demographic characteristics such as gender or income, will have limited or no access to the digital economy. Such a divide can also occur between different geographical regions of an economy, especially between rural and urban areas, and may require targeted policy measures. More generally, care needs to be taken that financial innovation does not elicit new sources of economic instability and volatility.

In addition, the report said that the development, diffusion, implementation, and adoption of new technologies across firms and countries should be promoted and that stronger efforts are needed to support human capital development in the workforce and strong labour market institutions, while adequate unemployment insurance systems are essential to provide jobseekers with the necessary income support and to give them the incentive to find jobs that match their skills and aspirations.

Productivity ecosystems for decent work and just transition are other aspects of policy related options. In this connection, the report said that social dialogue is crucial for buttressing efforts to improve productivity and that this pillar is central to addressing the large productivity differences among individuals and firms as well as the widening gap between productivity growth and wage growth, which disproportionately hurt workers. It claimed that there is also evidence that bolstering the quality of industrial relations at the shop floor level helps to prevent inefficient restructuring, thereby improving firm productivity.

“Special attention should also be given to the role played by policies aiming to reduce the incidence of informal employment. The low productivity of the informal economy is a major drag on aggregate productivity growth and leads to the persistence of poverty,” it added.

Furthermore, the report noted the importance of institutional arrangements to promote productivity and decent work, regarding which it said that skills development and vocational training play a prominent role in the productive upgrading of economies, as does the recognition of professional experience gained on the job and that public spending on general research and development has declined in many countries over the past decade despite its important role in the development of frontier technologies.