Employment, labour markets, and development Dr Heiner Flassbeck - - PowerPoint PPT Presentation

Launch Lecture of the UNCTAD Trade and Development Report 2010

Employment, labour markets, and development

Dr Heiner Flassbeck

Director, Division on Globalization and Development Strategies, UNCTAD secretariat

Professor Robert Wade

Respondent, LSE

Professor Stuart Corbridge

Chair, LSE

2

TRADE AND DEVELOPMENT TRADE AND DEVELOPMENT REPORT, 2010 REPORT, 2010

London London 13 September 2010 13 September 2010

Employment, Globalization and Development Employment, Globalization and Development

EMBARGO EMBARGO

The contents of this Report must not be quoted or summarized The contents of this Report must not be quoted or summarized in the print, broadcast or electronic media before in the print, broadcast or electronic media before

14 September 2010 17:00 hours GMT 14 September 2010 17:00 hours GMT

3

After the crisis: an uneven and After the crisis: an uneven and fragile recovery fragile recovery

4

Global economic recovery remains fragile Global economic recovery remains fragile

World output growth, 2004 to 2010 (forecast) World output growth, 2004 to 2010 (forecast)

Histogramms from Table 1.1

• 8.0
• 6.0
• 4.0
• 2.0

0.0 2.0 4.0 6.0 8.0 10.0 World Developed countries South-East Europe and CIS Developing countries 1991–2003 2004 2005 2006 2007 2008 2009 2010

5

Financial rescue packages prevented the Financial rescue packages prevented the collapse of financial markets collapse of financial markets

GDP growth in developed economies, 2004 to 2010 (forecast) GDP growth in developed economies, 2004 to 2010 (forecast)

Histogramms from Table 1.1

• 6.0
• 5.0
• 4.0
• 3.0
• 2.0
• 1.0

0.0 1.0 2.0 3.0 4.0 5.0 Japan United States European Union (EU-27) 1991–2003 2004 2005 2006 2007 2008 2009 2010

6

Global recovery and rebalancing: current Global recovery and rebalancing: current situation and prospects situation and prospects

• Developing countries at the vanguard of a potential

Developing countries at the vanguard of a potential recovery recovery

• China, most decisive in fuelling domestic demand through

China, most decisive in fuelling domestic demand through stimulus measures stimulus measures

• China, and to a lesser extent India and Brazil, are leading

China, and to a lesser extent India and Brazil, are leading the recovery, not only in their respective regions but also the recovery, not only in their respective regions but also in the world in the world

• Renewed of risk appetite and widening interest rate

Renewed of risk appetite and widening interest rate differentials in favour of emerging economies could differentials in favour of emerging economies could generate upward pressure on their exchange rates and generate upward pressure on their exchange rates and may require currency market intervention may require currency market intervention

7

The recovery in developed countries The recovery in developed countries resembles pre resembles pre-

• crisis patterns

crisis patterns

Current Current-

• account balance, fiscal balance and real GDP growth,

account balance, fiscal balance and real GDP growth, 2005 2005-

• 2010

2010

8

The recovery in developed countries The recovery in developed countries resembles pre resembles pre-

• crisis patterns

crisis patterns

Current Current-

• account balance, fiscal balance and real GDP growth,

account balance, fiscal balance and real GDP growth, 2005 2005-

• 2010

2010

9

• Chart 1.6

A weakening of global coordination and A weakening of global coordination and

• f the G
• f the G-
• 20 process

20 process

Real effective exchange rate, Jan 2003 Real effective exchange rate, Jan 2003 -

• May 2010

May 2010

10

Deflation Deflation in in Japan Japan for the for the past past 20 20 years years

Japan: National Disposable Income Billions USD

50000 100000 150000 200000 250000 300000 350000 400000 450000 1 9 6 1 9 6 3 1 9 6 6 1 9 6 9 1 9 7 2 1 9 7 5 1 9 7 8 1 9 8 1 1 9 8 4 1 9 8 7 1 9 9 1 9 9 3 1 9 9 6 1 9 9 9 2 2 2 5 2 8 Real National Disposable Income Yen 2005 50000 100000 150000 200000 250000 300000 350000 400000 450000 National Disposable Income Real National Disposable Income National Disposable Income

11

Deflation looming in USA Deflation looming in USA

USA: National Disposable Income Billions USD

2000 4000 6000 8000 10000 12000 14000 1 9 6 1 9 6 3 1 9 6 6 1 9 6 9 1 9 7 2 1 9 7 5 1 9 7 8 1 9 8 1 1 9 8 4 1 9 8 7 1 9 9 1 9 9 3 1 9 9 6 1 9 9 9 2 2 2 5 2 8 Real National Disposable Income USD 2005 2000 4000 6000 8000 10000 12000 14000 National Disposable Income Real National Disposable Income National Disposable Income

12

Macroeconomic aspects of job Macroeconomic aspects of job creation and unemployment creation and unemployment

13

Macroeconomic Macroeconomic trends are trends are key key to to employment employment

• Chart 3.3

Chart 3.3

Growth Growth of

• f employment

employment and real GDP in and real GDP in developed developed countries, 1970 countries, 1970-

• 2009

2009

14

Macroeconomic Macroeconomic trends are trends are key key to to employment employment

• Chart 3.3

Chart 3.3

Growth Growth of

• f employment

employment and real GDP in and real GDP in developing developing countries, 1970 countries, 1970-

• 2009

2009

15

Neglected role of domestic demand growth Neglected role of domestic demand growth for employment creation for employment creation

• High rates of unemployment are often attributed to

High rates of unemployment are often attributed to rigidities in the labour market but there is no empirical rigidities in the labour market but there is no empirical foundation for this proposition foundation for this proposition

• Employment creation is closely associated with output

Employment creation is closely associated with output growth and fixed capital formation growth and fixed capital formation

• Due to strong global competition and an increasing

Due to strong global competition and an increasing reliance on external demand, there is a tendency to reliance on external demand, there is a tendency to keep labour costs as low as possible keep labour costs as low as possible

• If wages grow at a slower rate than productivity, the

If wages grow at a slower rate than productivity, the supply potential may end up growing faster than supply potential may end up growing faster than domestic demand, thereby discouraging innovation domestic demand, thereby discouraging innovation and productive investment and productive investment

16

Declining trend of the share of wages in Declining trend of the share of wages in national income national income

• Chart 5.1

Chart 5.1

Share Share of compensation of

• f compensation of employees

employees in national in national income income, , selected selected country country groups, 1980 groups, 1980 -

• 2008

2008

17

Controlling inflation more effectively through Controlling inflation more effectively through an incomes policy an incomes policy

• Chart 5.3

Chart 5.3

Annual Annual growth growth rates of unit labour rates of unit labour costs costs and inflation rates, 1970 and inflation rates, 1970-

• 2008

2008

18

Controlling inflation more effectively through Controlling inflation more effectively through an incomes policy an incomes policy

• Chart 5.3

Chart 5.3

Annual Annual growth growth rates of unit labour rates of unit labour costs costs and inflation rates, 1970 and inflation rates, 1970-

• 2008

2008

19

Experiences Experiences with with heterodox heterodox policies policies

• Chart 5.2

Chart 5.2

Real Real interest interest rates and real GDP rates and real GDP growth growth rates, rates, selected selected countries countries Africa Africa, , 1990 1990-

• 2009

2009

20

Experiences Experiences with with heterodox heterodox policies policies

• Chart 5.2

Chart 5.2

Real Real interest interest rates and real GDP rates and real GDP growth growth rates, rates, selected selected countries countries Asia Asia, , 1990 1990-

• 2009

2009

21

Experiences Experiences with with heterodox heterodox policies policies

• Chart 5.2

Chart 5.2

Real Real interest interest rates and real GDP rates and real GDP growth growth rates, rates, selected selected countries countries Asia Asia, , 1990 1990-

• 2009

2009

22

The The link link between between wages wages and and employment employment France and Germany France and Germany compared compared

• Box 3.1

Box 3.1

Labour Labour productivity productivity, real , real wages wages and unit labour and unit labour costs costs, , 1999 1999-

• 2009

2009

23

The The link link between between wages wages and and employment employment France and Germany France and Germany compared compared

• Box 3.1

Box 3.1

Private Private consumption consumption and exports in France and Germany, and exports in France and Germany, 1999 1999-

• 2009

2009

24

Institution building and public sector Institution building and public sector involvement in creating a wage involvement in creating a wage-

• employment

employment nexus nexus

• Institution building would facilitate a productivity

Institution building would facilitate a productivity-

• led growth

led growth

• f labour income and foster employment creation and
• f labour income and foster employment creation and

poverty reduction poverty reduction

• Trade unions should not only represent workers interests

Trade unions should not only represent workers interests but also contribute to growth dynamics and but also contribute to growth dynamics and macroeconomic stability macroeconomic stability

• Tripartite arrangements and economic policy focusing on

Tripartite arrangements and economic policy focusing on directing investment into fixed capital help to achieve a directing investment into fixed capital help to achieve a steady increase in domestic demand steady increase in domestic demand

• Productivity

Productivity-

• enhancing and income

enhancing and income-

• protection measures in

protection measures in agriculture and the informal sector strengthen the capacity agriculture and the informal sector strengthen the capacity

• f small
• f small-
• scale entrepreneurs and stimulate domestic

scale entrepreneurs and stimulate domestic demand demand

25

A virtuous circle A virtuous circle for employment creation for employment creation

• Chart

Chart

26

The external dimension The external dimension

• A strategy of employment generation based on an

A strategy of employment generation based on an expansion of domestic demand in line with productivity expansion of domestic demand in line with productivity growth is more likely to succeed with a favourable and growth is more likely to succeed with a favourable and coherent international policy framework coherent international policy framework

• Central banks can pursue an investment

Central banks can pursue an investment-

• friendly

friendly monetary policy when currency misalignment and volatility monetary policy when currency misalignment and volatility are minimized are minimized

• An appropriate multilateral framework for exchange rate

An appropriate multilateral framework for exchange rate management is needed to prevent large current management is needed to prevent large current-

• account

account imbalances imbalances

• In the absence of effective multilateral arrangements for

In the absence of effective multilateral arrangements for exchange rate management, capital exchange rate management, capital-

• account management

account management techniques can improve autonomy in macroeconomic techniques can improve autonomy in macroeconomic policy policy-

• making

making

Launch Lecture of the UNCTAD Trade and Development Report 2010

Employment, labour markets, and development

Dr Heiner Flassbeck

Director, Division on Globalization and Development Strategies, UNCTAD secretariat

Professor Robert Wade

Respondent, LSE

Professor Stuart Corbridge

Chair, LSE