International Labour Organization Report: 'Austerity Has Not Produced More Economic Growth'

* U.N. agency blames austerity, tough reforms for crisis

* Says employment not back to pre-crisis levels til 2016

* Estimated 202 mln unemployed in 2012, for 6.1 pct rate

* Warns of risk of social unrest in Africa, Middle East

By Stephanie Nebehay

GENEVA, April 29 (Reuters)

Fiscal austerity and tough labour reforms have failed to create jobs, leading to an "alarming" situation in the global employment market that shows no sign of recovering, the International Labour Organization said on Sunday.

In advanced countries, especially in Europe, employment is not expected to return to pre-crisis levels of 2008 until the end of 2016 -- two years later than it previously predicted -- in line with a slowdown in production.

An estimated 196 million people were unemployed worldwide at the end of last year, forecast to rise to 202 million in 2012 for a rate of 6.1 percent, according to the United Nations agency's annual flagship report, "World of Work Report 2012".

"Austerity has not produced more economic growth," Raymond Torres, director of the ILO Institute for International Labour Studies, told a news briefing.

"The ill-conceived labour market reforms in the short-term cannot work either. These reforms in situations of crisis tend to lead to more job destruction and very little job creation at least in the short-term," said Torres, the report's lead author.

Long-term jobseekers are demoralised and an average of 40 percent of job seekers in their prime (aged 25-49) in advanced countries have been without work for more than a year, the report found.

Youth jobless rates have soared, increasing the risk of social unrest especially in parts of Africa and the Middle East.

The labour market overall has deteriorated over the past six months, with a very significant slowdown in the case of European countries, Torres said. Unemployment is growing in a significant number of countries, including more than two-thirds of European countries over the past year.

"The narrow focus of many Eurozone countries on fiscal austerity is deepening the jobs crisis and could even lead to another recession in Europe," he said.

"In addition, there is less progress happening in other parts of the world, for example the United States, where progress in reducing unemployment seems to be slowing down and this seems to be a trend," he said.

Labour market recovery has also stalled in Japan, the report said. Employment rates have stagnated or "double-dipped" in China, India and Saudi Arabia, while Latin America is healthier, marked by improvements in Argentina, Brazil and Mexico.


"ILL-CONCEIVED REFORMS"

"The report clearly points to the combination of austerity measures with ill-conceived labour market reforms as the real cause for deterioration happening in Europe and little by little spreading to other parts of the world," Torres said.

In Spain, unemployment shot up to 24 percent in the first quarter, its highest level in almost two decades and one of the worst jobless figures in the developed world, according to figures issued last Friday. Standard and Poor's downgraded the government's debt by two notches.

The number of jobless in France rose for the eleventh month in March to hit the highest level since Sept. 1999, according to labour ministry data released on Thursday.

The EU, which generates about a fifth of global output, has struggled to strike a balance between austerity and growth as it seeks to overcome a decade of runaway spending while grappling with recession.

Only six advanced economies have seen employment rates grow since 2007: Austria, Germany, Israel, Luxembourg, Malta and Poland.

The report recommends countries would do better to boost job quality and reinforce institutions, rather than deregulating labour markets.

It also suggests better use of European Structural Funds as well as an increase in minimum wages in European countries "as a way to put a floor on recession in Europe."

"At the ILO we understand that fiscal deficits cannot remain high for long. It is important to have a medium-term fiscal consolidation strategy," Torres said.

"But it is a question of pace and of content of fiscal consolidation. The pace has to be realistic," he said. (Reporting by Stephanie Nebehay; Editing by Sophie Walker)

Comments

[chaparellii]

03:00 PM on 04/30/2012

No business can grow with out investment for growth and you cannot save your way to long term profits. Especially in a world that is changing as fast as this one is right now. Those are facts and why austerity will never work. Like cutting teachers is going to help prepare us for the future? Just stupid, but that what Govt cuts do and the working class all over the industrialized world is paying the price. Makes no sense, Government spending is not what caused the recession in the first in place.

[Rick Blundell]

01:02 PM on 04/30/2012

Viewing austerity cuts as "government spending" makes me think that the government owns all of the money. We cannot fix a debt spiral by implementing more debt, nor can we fix the problem by collecting more in taxes. The reason? tax revenue and government expenditure are not used in the same equation. We do not limit spending or the rate of spending expansion based on revenue now, why would we believe that this would change?

[olephart]

12:35 PM on 04/30/2012

Really??? You mean that reducing spending in an economic system doesn’t increase activity. Who could possibly have predicted that? I thought the whole assumption was that gaining control of governmental spending would give business the confidence to increase investment and growth. I realize it didn’t work in 1930 or 1937 but that is so yesterday. Also, since World War II counter cyclical government spending has reversed each economic downturn but who pays attention to details like that. After all who needs facts when you’ve got sound conservative German economics? If any Nation knows about losing wars and economic collapses it’s Germany.

[StopMakingSense2]

11:53 AM on 04/30/2012

Those who fail to study history are doomed to repeat it! Now you know why conservatives aren't big on book learning! When facts contradict dogma the facts must be fixed!

[Rick Blundell]

01:00 PM on 04/30/2012

You are right. We should employ government to create prosperity.

[Tom Hendricks]

11:45 AM on 04/30/2012

During these changing times, it's important that we keep trying what hasn't worked in the past, continue to block out any new solutions, and wring our hands when that doesn't work OR
Here's an idea that is non political, and non corporate - it requires no money and little sacrifice from any single corporation. It helps solve the jobs problem in one week. It helps the nation and is totally voluntary. http://wp.me/p5S9X-nv
National Hiring Day. This is a day that corporations are encouraged to hire new employees. Corporations are called on to put patriotism first and help their country in hard times. Those corporations that cannot hire, are asked to stop firing for that month.

Republicans should love this because it's outside the government and voluntary. Democrats should love this because it helps those needing jobs. Independents should love it because it helps all with little sacrifice from any one corporation, group, or person. Corporations should love this because with just a hire or two they become part of a collective country wide jump start of the economy.

There has never been a time In American History where hiring people would hurt corporations less, and help the country more.

[empiresentry]

11:52 AM on 04/30/2012

Nice idea. Does this mean you are going to hire a house cleaner for the week, a dog walker, a gardener, pay to have your cloths cleaned, have a cook come in for you, pay a mechanic to do your car repairs instead of yourself?
We are on tight budgets.

[Tom Hendricks]

01:08 PM on 04/30/2012

Apple isn't on a tight budget - sitting on 100 billion. Do you think they can afford one hire? Remember too this is voluntary. If you are a small business having a tough time then just don't fire for a week. Still too much to ask for your country? I don't own a company that has record profits. But if I did I would see this as an opportunity to help the country and in turn that would help me and my business.

1. If companies can send thousands of jobs overseas, they can hire one American on National Hiring Day.
2. If companies can get millions in tax breaks and subsidies from the government, they can help it in return by hiring one American on National Hiring Day.
3. With companies sitting on all time high profits, they can hire one person on National Hiring Day - which by the way, would help them in return.
4. McDonalds hired 60,000 last May in their own National Hiring Day, surely other companies can hire one person on a nationwide National Hiring Day.
5. If Google can make 40 million available for charity, they can hire one person on National Hiring Day.

Dan Froomkin: Even as the nation continues to confront massive unemployment, the nation's biggest companies have been hoarding cash ... non-financial companies are keeping their profits liquid ... to the tune of about $2 trillion.

[Dana1982]

11:35 AM on 04/30/2012

Europeian countries also need to have tax cuts with their austerity programs to spur growth along with removing regulations that harm business.

[olephart]

12:38 PM on 04/30/2012

Oh goody, then they can run trillion dollar deficts and have their financial systems implode just like us.

[wsdave]

11:34 AM on 04/30/2012

"'Austerity Has Not Produced More Economic Growth'"

Of course, neither has spending.

[TheAntiOkie]

12:22 PM on 04/30/2012

Really?  The facts deny your allegation.  It's not as good as we would like but it's better than Europe.

but never ever ever bother being concerned with facts................

[wsdave]

11:23 PM on 04/30/2012

If spending is so great, why is the deficit/debt the highest its EVER been?

One would think that all of that spending would have created a better economy....

[rdimitrir]

11:22 AM on 04/30/2012

The solution is very simple - by making sure that rich pay their fair share we can eliminate budget deficit and create millions of well paid, unionized jobs by investing in the infrastructure, education, green and renewable energy, community development and organizing.

[empiresentry]

11:58 AM on 04/30/2012

That worked well for the Dem party who has kept all the tax loopholes in place, fights anyone who tries to remove them and pretends htey are raising taxes while expanding loopholes. Union jobs? A handful of high paying lush positions with exceptional benefits for a few?
The investment of trillions in education has not moved hte drop out rate and has left us with a trillion dollar student loan bubble that we are already paying for.
Green? Failed. Funding for sydicated best buddies who took the cash and left town after making a nice political party contribution.
Community development and organizing does not create jobs and has no impact on the economy other than move business out of town and force banks to make loans to people who cannot afford the payments.

All you offer is more of the same that has brought us to this moment.

[donmarchi]

09:39 PM on 06/05/2012

Just the opposite. The previous administration got us into two wars that were conveniently kept "off the books" on a separate budget. They jacked up the spending for those wars, having their corporate donors, like Halliburton win no bid contracts to supply the troops with such great deals like gas in the military zone at 18.00 a gallon that you and I paid for with our taxes. At the same time, when this spending was increasing, tax cuts were implemented. Instead of cutting the spending on the wars or examining just how and where our hard earned tax dollars were being spent in the war effort, funding for education was cut and a horrid education policy, No Child Left Behind, was lauded as the great reform we need. I can tell you from teaching Sunday school that I have seen the reading ability of my 4th graders decrease every year as No Child Left Behind was implemented. 30 years of conservatism has gotten us into this mess. It will take more than 4 or even 8 years to claw our way out of it. The electromotive plant in my area did not have a second shift and Saturday shift in 2008...now the parking lot is full of employee cars every night on 2nd shift and on Saturday mornings.

[Trustfunded1]

11:19 AM on 04/30/2012

Italy is so broke it nationalized-seized it's second largest insurer.

Argentina....here comes Italy and there goes economic growth and trust.
http://www.zerohedge.com/news/italy-jumps-nationalization-bandwagon-local-finance-police-seizes-20-second-largest-domestic-in

[olephart]

12:40 PM on 04/30/2012

We were so stupid we let our largest insurer write trillions of dollars worth of non collateralized unregulated CDS and bailed them out when they collasped.

[gerald4]

07:03 PM on 05/01/2012

TARP was really Stupid

[donmarchi]

09:47 PM on 06/05/2012

reminder the first bail out was enthusiastically promoted by the Bush administration and had no strings attached. The second bailout the receivers of the loans have to pay them back

[jsmit]

11:19 AM on 04/30/2012

I cannot speak for every reform in all European countries, but which European country has balanced its budget in the last 5 years? The most egregious (Greece, Protugal, Spain, etc.) have been living beyond their means for generations and the so-called "austerity" that libs lament about hasn't even balanced any budgets. How austere can that be? Spending in most countries (including) the US has increased while implementing "austerity."

Once they get their spending in line with their ability to create value, the se countries will be more likely to get loans and have the private sector invest. Right now their fiscal situations make them very risky.

[olephart]

12:44 PM on 04/30/2012

Which Republican President has presided over a balanced budget in the past 50 years? Which President had the first $100 billion deficit? Which President tripled the National Debt? Which President had the first $2 trillion budget? Which President had the first $3 trillion budget?

[jsmit]

01:07 PM on 04/30/2012

If your point is politicians spend too much money, I wholeheartedly agree!!!

[jsmit]

10:02 AM on 05/01/2012

"Their actions speak louder than words. How much have they offered to cut from defense? It's easy to cut the other guys stuff. "

First, defense is not the "other guy's" stuff, it is for all Americans. Besides, we are talking about Greece and other European countries and I am not sure what their defense spending levels are.

Second, my point remains: libs want the spending spree to continue even though that is what put us in the mess we and European countries are in. It is a strategic and policy approach that I am questioning. We can talk about specific programs, but that will get very detailed for this venue and is not the point of the article.

The bottom line is that spending is the problem and the current "austerity" is not really austerity in the sense that spending is being dramatically increased. In this country the budget deal that led to "austerity" actually showed an INCREASE in spending last year.

[empiresentry]

11:12 AM on 04/30/2012

Governments have reduced purchasing power (inflation tax), raised taxes and raided the public and continue to borrowing from the now and future with overspending and debt. The burden of expensive ever expanding gov has overcome people and business, taking from their pocketbooks. This reduces the amount of money in the public sector to hire and pay wages. Now the time is for catch up by govs who need to pay their bill for all the generous non-austerity spending.
Gov does not create jobs. Gov can create environments conducive to jobs and wages. Taking money out of the private sector to pay for bloated gov spending does not create jobs.
Unemployment should be considered a direct result of the gov sucking funds out of the market and raising prices by overprinting.

[tacevad]

01:36 PM on 04/30/2012

strange that you say government doesn't create jobs. do you happen to work for the government? many do.

[gerald4]

11:11 AM on 04/30/2012

THE FOLLOWING ITEMS ARE THE MAIN REASONS FOR THE LACK OF JOB CREATION and ECONOMIC ACTIVITY GROWTH IN THE USA.

US labor costs many many times as much as Foreign Labor according to the DOL website:

ftp://ftp.bls.gov/pub/special.requests/ForeignLabor/ichccpwsuppt01.txt

The additional US payroll tax cost of Extended Unemployment Benefits, National Healthcare Reform, vacations, holidays, sick pay, and social security costs are also added to US company payroll costs and economically preventing the location of new manufacturing jobs into the USA, and/or preventing the keeping of existing US jobs in the USA.

The increasing cost of compliance with existing and future environmental laws is deterring the creation of any new jobs the USA.

The cost of electrical energy that is generated in the USA in compliance with US EPA regulations was at many times the cost for the same amount (kilowatt hour) of electrical energy in most Asian countries and is still about twice the cost of US electricity

50fen/kwh = $0.078666 USD/kwh compared to $0.13-$0.15 USD/kwh in USA

http://news.xinhuanet.com/english/2009-11/19/content_12492364.htm

These costs are hindering the US businesses that are economically competing for obtaining manufacturing jobs for US citizens in the USA instead of those businesses having to relocate or create those jobs in/to foreign nations as allowed and economically required by US FREE TRADE AGREEMENTS.

[tacevad]

01:38 PM on 04/30/2012

is your solution to go back to company towns where the company pollutes for profits and pays nothing to labor? No thanks

[gerald4]

07:05 PM on 05/01/2012

After Federal Deficit Spending totally destroys the US Economy, that might be the only thing left to feed our families.

I am going to buy a farm and then "Live off of the land".

[emmanuel kalu]

11:10 AM on 04/30/2012

more and more real life evidence continue to pour in that republicans style spending cuts and attack on labor is not producing the necessary result. in this country, we gave tax cut to the rich for jobs, the job were never created. republicans have forces spending cuts in the wrong places, which has lead to a slow down on our growth, and less hiring. republicans labor attacks has destroyed jobs and hampered growth. real life result of republican style reform, which are not working. now europe following the same failed republicans policies with depressing result.
in a time of financial crisis, the govt is the only entity that is able to spend to inject demand and grow. while you are growing, you have to make sure you are spending wisely and removing waste, fraud and abuse to bring down your spending. when your economy is moving along nicely, then you begin to make wise sensible spending cuts. you make reforms that would lead to better job market, better spending and cuts, and better labor pratice.

[Ed Baker]

11:09 AM on 04/30/2012

Perhaps because it's not supposed to produce growth, it's supposed to pay down debt.

[drkazmd65]

11:06 AM on 04/30/2012

Of course austerity measures are not going to produce economic growth,... anybody who expected them to do is is naive, or is already among the wealthy and got to ride above the problems to begin with.

What is the matter with Kansas?
http://en.wikipedia.org/wiki/What's_the_Matter_with_Kansas%3F