ILO: Poor quality employment a major challenge

A majority of the 3.3 billion people employed globally in 2018 experienced a lack of material well-being, economic security, equal opportunities or scope for human development, the International Labour Organisation (ILO) has found.

In its latest World Employment and Social Outlook report released last week, the ILO pointed out that being in employment does not always guarantee a decent living.

"Many workers find themselves having to take up unattractive jobs that tend to be informal and are characterized by low pay and little or no access to social protection and rights at work."

Significantly, 360 million people in 2018 were contributing family workers and 1.1 billion worked on their own account, often in subsistence activities that are pursued because of an absence of job opportunities in the formal sector and/or the lack of a social protection system.

Overall, 2 billion workers were in informal employment in 2016, accounting for 61 per cent of the world's workforce.

The poor quality of many jobs also manifests itself in the fact that, in 2018, more than one quarter of workers in low- and middle-income countries were living in extreme or moderate poverty, said the ILO.

On a positive note, said ILO, the incidence of working poverty has decreased greatly over the past three decades, especially in middle-income countries.

In low-income countries, however, the pace of poverty reduction is not expected to keep up with employment growth, so that the actual number of working poor in these countries is projected to rise.

The ILO report highlighted the persistence of a number of major deficits in decent work. At the current rate of progress, ILO said, attaining the goal of decent work for all, as set out in the Sustainable Development Goals (SDGs), especially Goal No. 8, seems unrealistic for many countries.

"SDG 8 is not just about full employment but the quality of that employment," said Deborah Greenfield, the ILO Deputy Director-General for Policy.

"Equality and decent work are two of the pillars underpinning sustainable development," she added.

"Being in employment does not always guarantee a decent living," said Damian Grimshaw, the ILO Director of Research.

"For instance, a full 700 million people are living in extreme or moderate poverty despite having employment," he added.

According to the ILO report, in 2018, the global working age-population, comprising women and men aged 15 years or older, was 5.7 billion. Out of these, 3.3 billion people, or 58.4 per cent, were in employment, and 172 million were unemployed.

Both these groups taken together constitute the global labour force, which therefore stood at 3.5 billion in 2018, implying a labour force participation rate of 61.4 per cent.

The remaining 2.2 billion people (38.6 per cent) of working age were outside the labour force, including those engaged in education and unpaid care work and those in retirement.

Within this group, 140 million were in the potential labour force (i.e. people who are looking for a job but are not available to take up employment, or who are available but are not looking for a job).

"Paid work is a key driver of material well-being, economic security, equality of opportunity and human development; however, advances in these areas still elude a majority of workers across the world. Being in employment does not always guarantee a decent living," said the ILO.

A considerable proportion of the world's working-age population is at risk of poverty, and employment in such cases is a matter of individuals trying to meet their basic living needs and those of their families.

Indeed, many workers find themselves having to take up vulnerable jobs, especially in the informal economy, which are typically associated with low pay and little or no access to social protection and rights at work.

Some 360 million people, or 11 per cent of the employed, are contributing family workers who lack effective access to social protection and income security, and whose employment status is categorized as informal by definition.

An additional 1.1 billion people, or 34 per cent of the global working-age population, work on their own account.

"Although own-account work can serve as a springboard to entrepreneurship, a large proportion of such work involves subsistence activities that are pursued because of the absence of job opportunities in the formal sector or the lack of a social protection system," said the ILO.

In fact, 85 per cent of own-account workers operate in the informal economy.

The ILO also found that just over half (52 per cent) of global workers are wage and salaried employees.

This type of employment is often associated with better working conditions and greater income security, though that is not necessarily true in many parts of the world, as evidenced by the fact that 40 per cent of such jobs are informal.

Overall, a staggering 2 billion workers are in informal employment, accounting for three in five (61 per cent) of the world's workforce. Many informal workers, moreover, are among the 55 per cent of the global population who do not enjoy any social protection.

The poor quality of many jobs also manifests itself in the fact that, in 2018, more than one quarter of workers in low- and middle-income countries were living in extreme or moderate poverty (i.e. on less than US$3.20 per day in purchasing power parity (PPP) terms).

According to the report, the average annual growth of the global working-age population has decreased from 1.9 per cent in the period 1990-95 to 1.3 per cent in the period 2013-18; it is projected to fall even further, to 1.1 per cent, by 2030.

This slowdown is reflected in a declining labour force growth, with the latter rate falling from 1.8 per cent in 1992 to below 1 per cent in 2018 and beyond.

Employment growth has also decreased over the same period, from an average of 1.5 per cent in the 1990s to below 1 per cent in 2018.

Projected GDP growth is highest in low- and lower-middle-income countries.

However, the significant expansion in employment expected to take place in low-income countries between 2018 and 2020 means that labour productivity growth in these countries is likely to be fairly low during that period, averaging 2.3 per cent a year, compared with 4.2 per cent in middle-income countries.

"Such modest productivity growth suggests that instead of catching up with countries in the higher income group, low-income countries are falling behind in their efforts to raise living standards and reduce poverty for all," said the ILO.

It noted that around 61 per cent of the world's working-age population participates in the labour market, either by being actually employed or by searching for employment while being available for work.

This participation rate has been declining on average by between 0.1 and 0.2 percentage points per year over the past 25 years, with the steepest drop occurring in the aftermath of the global financial crisis of 2008.

The global labour force participation rate for young people aged 15 to 24 declined significantly between 1993 and 2018, falling by 15 percentage points to reach 42 per cent at the end of that period.

This trend can be ascribed mainly to the rising rate of educational enrolment among young people. Globally, the gross enrolment ratio in secondary education rose from 55 per cent in 1993 to 77 per cent in 2017; in tertiary education, it increased from 14 per cent to 38 per cent over the same period.

In 2018, the youth labour force participation rate was highest, at 57 per cent, in low-income countries; the lowest value (36 per cent) was observed in lower-middle-income countries.

In upper-middle-income countries, the youth participation rate has declined by more than 20 percentage points since 1993, reaching 44 per cent in 2018, a level similar to that recorded in high-income countries (45 per cent).

However, the gross enrolment ratio in tertiary education in upper-middle-income countries (52 per cent in 2017) is still significantly lower than in high-income countries (77 per cent).

Some factors driving declining labour force participation rates, such as rising educational enrolment rates, greater opportunities to retire and a higher life expectancy, are positive for the people that benefit from these.

However, the projected trends in labour force growth also create new challenges regarding the organization of work and the distribution of resources, the ILO underlined.

First and foremost, existing pension systems will be strained to keep older people out of poverty. Second, a rising dependency ratio raises labour demand in specific sectors such as the care sector, accelerating structural transformation.

Third, an increasingly ageing labour force challenges workers' ability to keep up with the pace of innovation and structural changes in the labour market.

The ILO report noted that informal employment is the reality for the majority of workers worldwide. Thus, in 2016, 2 billion workers, or 61 per cent of the global labour force, were pursuing economic activities that were either not covered at all, or were insufficiently covered, by formal arrangements in law or in practice.

Significantly, informal workers are much more likely to live in conditions of poverty than formal workers.

"It is important to note, though, that formality is no guarantee of escaping poverty, and that informal workers are not confined to being poor," said ILO.

Globally, the rate of informality is actually higher among men (63 per cent) than among women (58 per cent).

However, women are more likely than men to be in informal employment in low- and lower-middle-income countries. By contrast, men are more frequently in informal employment in upper-middle- and high-income countries.

Informality is especially widespread among own-account workers, with 85 per cent of them working under such arrangements.

The workers and economic units engaged in informal own-account work, and also the businesses of informal employers, tend to lack legal recognition. Moreover, they often fail to comply with fiscal obligations and face serious difficulties in entering into commercial contracts and gaining access to financial resources, markets or property.

As for wage and salaried workers, 40 per cent of them have informal jobs, which means that their employment relationships are, in law or in practice, not subject to national labour legislation, income taxation, social protection or entitlement to certain employment benefits.

Slightly more than half of workers worldwide, including both formal and informal workers, were wage and salaried employees in 2018; the proportion is similar among both women and men.

Over the next five years, the share of wage and salaried employees is projected to increase by around 0.5 percentage points.

The apparent gender equality in this category of workers, however, masks large disparities between countries at different income levels, said the ILO.

First, the share of wage and salaried employment is larger in the higher income level countries: in low-income countries it averages 19 per cent, compared with 87 per cent in high-income countries.

Second, women are less likely than men to be in this type of employment in low-income countries; the situation is reversed in high-income countries.

The share of wage and salaried employment is expected to increase the most in middle-income countries.

Significantly, in upper-middle-income countries the female share is projected to increase to a greater extent than the male share over the next five years, with gains of 2.2 and 1.5 percentage points for women and men, respectively.

Despite the improvements that have taken place, working conditions continue to be unsatisfactory for a large part of the global workforce, said the ILO.

Globally, 1.5 billion people are estimated to be own-account and contributing family workers, which renders them especially vulnerable to the problems associated with informality.

Furthermore, the pace of progress is too slow in low-income countries to lead to a significant reduction in the shares of these two vulnerable groups: it is projected that in 2023 as many as 80 per cent of workers in such countries will still be own-account or contributing family workers.

The report also found that the share of agriculture in total employment is shrinking across all country income groups.

Globally, it has declined from 44 per cent in 1991 to 28 per cent in 2018, with the largest contribution to this decline being attributable to middle-income countries.

In low-income countries, 63 per cent of workers were still employed in the agricultural sector in 2018, down by just 8 percentage points since 1991.

The share of the manufacturing sector is decreasing at the global level - a trend that is driven by high-income countries. The sectors in which expansion can be observed are the construction sector, non-market services and, most importantly, market services.

At the global level, services already accounted for just under half of total employment in 2018, said the ILO, adding that this share is expected to continue to rise.

A situation of extreme or moderate poverty (i.e. having to live on less than US$3.20 per day in PPP terms) was the reality for almost 700 million workers in low- and middle-income countries in 2018. This means that one in four persons in employment in these countries lived in conditions of poverty.

Nevertheless, enormous progress has been made since 1993, when two in three workers (altogether 1.3 billion workers) were still living in extreme or moderate poverty.

It is expected that there will be further progress in the years to come, with the number of working poor decreasing by a further 55 million by 2023.

The rate of decline, however, is slowing down gradually, mainly because the low share of working poor in upper-middle-income countries cannot decline much further.

Working poverty rates are declining rapidly in middle-income countries.

Upper-middle-income countries experienced decreases in extreme and moderate working poverty rates of more than 2 percentage points per year between 1993 and 2018.

This speed of decline obviously cannot continue, since by 2018 working poverty had fallen to 5.3 per cent, said the ILO.

The consistently high economic growth achieved by China since 1993 has contributed significantly to reducing the share and overall number of working poor in the group of low- and middle-income countries.

By contrast, the absolute number of working poor is rising in sub-Saharan Africa despite the declining working poverty rate there.

Lower-middle-income countries still accounted for the largest number of workers in extreme and moderate poverty (432 million) in 2018, but this number is projected to decrease by 54 million by 2023: one in three workers in these countries would then be living in poverty.

Working poverty is widespread in low-income countries, where in 2018 almost 40 per cent of workers, or 116 million, were living in extreme poverty; an additional 27.5 per cent, or 81 million, were living in moderate poverty.

Although the working poverty rate in these countries is falling overall, the absolute number of workers in extreme and moderate poverty is projected to increase by 15 million by 2023 because the rate of creation of decently paying jobs will not be able to keep up with the rapid growth in the number of jobseekers.

In 2018, the global unemployment rate was estimated to stand at 5.0 per cent: it had therefore descended again to the level of 2008 and was significantly below the average of 5.4 per cent for the period since 2000.

"It is remarkable, though, that whereas it took only one year for the global unemployment rate to jump from 5.0 per cent in 2008 to 5.6 per cent in 2009, the recovery to the original value has taken a full nine years," the ILO pointed out.

The global unemployment rate is expected to remain essentially unchanged over the next few years, in line with projections pointing to stable global economic growth.

However, said ILO, there is considerable uncertainty around the unemployment rate forecasts, which has to do with economic, financial and geopolitical risks.

The probability of experiencing unemployment rates by 2020 that are similar to the level of 2009 is more than 5 per cent.

In fact, there are already signs that the world economic outlook is deteriorating, as evidenced by the IMF's downward revision of growth estimates.

According to ILO estimates, the IMF's latest projections of economic growth (published in October 2018) suggest that there will be an additional 2 million unemployed people by 2020 compared with the more optimistic scenario presented in April 2018.

In 2018, an estimated 172 million people were unemployed. This number is projected to increase slightly in the coming years as the labour force expands, said the ILO.

By Kanaga Raja.

Source: SUNS - South North Development Monitor, #8848 Monday 18 February 2019.