Austerity Worsening Dire Labor Markets: ILO
Associate Editor, CNBC
The employment situation across the world is alarming, and there is little sign of recovery any time soon as austerity and spending cuts bite, a report out Monday warned.
The International Labour Organization’s (ILO) “World of Work Report 2012: Better Jobs for a Better Economy,” said that austerity was one of the key causes for a gaping hole in the number of jobs following the economic crisis. It predicts that global unemployment will hit 202 million by the end of the year.
“Aggressive reductions in the public deficit are counter-productive. They affect the economy and jobs, but they don’t lead to significant reductions in the public deficit itself,” Raymond Torres, director at the Institute for International Labour Studies and lead author of the report told CNBC’s “Worldwide Exchange”. The organization is part of the ILO.
He said the lack of any meaningful growth strategy to go along with austerity is worsening the situation.
“The narrow focus of many euro zone countries on fiscal austerity is deepening the jobs crisis, and could even lead to another recession in Europe,” he said.
Across much of Western Europe, unemployment rates have risen as austerity, reforms and spending cuts begin to take hold. Spain, which has been fending off criticism about its ability to meet its budget deficit targets has an unemployment rate of around 24 percent—the highest in the euro zone—and half of all youngsters are out of work.
Youth unemployment has been singled out for particular concern in developed economies which critics argue governments have been slow to deal with. Torres said the effects of austerity were particularly skewed against youth.
“It’s impossible to see massive declines in youth unemployment unless the economy itself starts to recover, because the youth are disproportionately affected by the stagnation and the recession. There are good practices that show that those countries which combine youth study with work experience do better,” he said.
He said a “second chances” program could offer another lifeline to demoralized youth.
Torres argues that the assumption that austerity will lead to improved confidence in markets and make room for more private investment is just “not happening.”
“Confidence is deteriorating. Even rating agencies are continuing to downgrade countries’ public debt in those countries which undergo austerity. Enterprises in uncertain environments prefer not to invest,” he said. “There is no access to credit, and if that continues, there is no recovery in view.”