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article imageIMF warns social stability at risk if unemployment remains high

By Stephanie Dearing     Sep 15, 2010 in World
Oslo - We should focus on jobs, heads of the International Monetary Fund (IMF) and the International Labour Organization (ILO) urged world leaders Monday as they wrapped up a conference on global unemployment.
The call for government heads to focus on job creation is not a new one, and has been heard since the global financial recession began. But while world leaders have paid lip service to urgings to create employment, job creation has lagged far behind economic recovery. Unemployment affects over 210 million people worldwide, prompting the Director-General of the International Labour Organization, Juan Somavia, to warn Monday “When growth is not fair, it becomes unsustainable. This has been the overriding lesson of the crisis. High levels of employment creation should be a key macroeconomic objective alongside low inflation and sustainable budgets. We need to steer globalization in the right direction. For that we need coherence and balance across policies, as well as coordination and dialogue among institutions and nations."
Meeting in Oslo, Norway for a historic meeting, the Oslo Conference was convened to focus on finding solutions to "... the sharp increase in unemployment and underemployment since the 2008 global financial crisis," said the International Monetary Fund in a press release issued Monday.
Dominique Strauss-Kahn, the Managing Director of the IMF, said “The international community must respond to the very real impact the crisis has had on working people. This gathering has helped to define the steps that must be taken to bring millions back into the workforce. Tackling the jobs crisis is not only critical for a meaningful global economic recovery, but also for social cohesion and peace.”
In a prelude to the conference, IMF Chief Economist Oliver Blanchard said "... Long-term unemployment is alarmingly high: in the U.S. for instance half of the unemployed have been out of work for over six months, something we have not seen since the Great Depression." Blanchard added that the personal cost of unemployment is high for individuals unable to obtain employment. "... From ... studies, we know that the earnings loss from unemployment is persistent. Even 15–20 years after a spell of unemployment, the people who were displaced make on average 20 percent less than comparable workers who kept their jobs. We have to act quickly before unemployment becomes a structural problem.
... Long-term unemployment is particularly costly; it affects a person’s morale and self-confidence and how the person is viewed by others. The odds of finding a job decline the longer a person has been unemployed. In the U.S., a person unemployed for over six months has less than a 1 in 10 chance of finding a job in the coming month. So we have to act quickly before unemployment becomes a structural problem."
What is needed, Blanchard said, are national economic policies that target unemployment.
At the opening of the Oslo Conference, Spanish Prime Minister José Luis Rodríguez Zapatero said "The crisis of unemployment is the worst one facing the world right now."
And if the employment crisis has not been addressed, warned Strauss-Kahn, “... the future of millions of people is at stake. Because the future of our world—prosperity and peace—is at stake.”
In his opening statement, Strauss-Kahn spoke of the damaging effects of the crisis. “Today, as you know, the labor market is in dire straits. The Great Recession has left behind a wasteland of unemployment, and this devastation threatens the livelihood, security, and dignity of millions of people across the world."
Strauss-Kahn went on to list the tremendous costs unemployment has for society, particularly for youth around the world. “The crisis hit them especially hard. We must not underestimate the daunting prospect we face: a lost generation, disconnected from the labor market, with a progressive loss of skills and motivation.
... If you lose your job, you are more likely to suffer from health problems, or even die younger. If you lose your job, your children are likely to do worse in school. If you lose your job, you are less likely to have faith in public institutions and democracy."
The IMF and ILO have agreed to work together on developing policies that will tackle unemployment. The two organizations will "First, ... explore the concept of a social protection floor for people living in poverty and in vulnerable situations, within the context of a medium- to long-term framework of sustainable macroeconomic policies and strategies for development.
• Second, the two institutions will focus on policies to promote employment-creating growth."
As Strauss-Kahn pointed out, “We must not expect that growth alone will automatically create the jobs we need--and set job creation as priority using all the available policy tools. We need to make the financial system an effective support of the real economy. We need to take advantage of the cooperation between the IMF and ILO to boost international cooperation."
Trade unions, governments, academia and business all have representatives attending the Oslo Conference.
More about International monetary fund, Unemployment, Recession, International labour organization
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