China's GDP growth drop affects Asia negatively - Report

by Bandula Dissanayake

Global employment trends

According to an International Labour Organization (ILO) study on global employment trends, the world economy is estimated have grown by 3.1% last year showing a weaker outlook than projected year before.

Growth projections for the next two years would be around 3 percent causing challenges to the world of enterprises and workers. The slowdown in the Chinese economy with the decline of commodity prices, is pushing commodity exporters such as Brazil and Russia into stagnation.

Most affected

The slowing of the global economy pushed the number of unemployed people to 197 million last year while it was 196 million in 2014. An increase of 27 million from the pre-crisis levels. The most affected are Latin America, some of the Asian countries including China and oil exporting countries in the Arab region.

In most of the developed economies, job growth was better than anticipated, mainly in the US, Central and Northern Europe.

Over 46% of total employment amounting to 1.5 billion jobs are vulnerable due to poor job quality and limitations in social protection schemes. Over 70% of the workers are in a vulnerable situation in Southern Asia and Sub Saharan Africa according to the report.

Developed economies had better job creation and employment conditions and are responsible for almost one quarter of global unemployment. Northern, Southern and Western EU countries including Germany and Italy had better and positive situations. The developing and emerging economies will add 4.8 million to global unemployment within the next two years. The global unemployment rate may remain at 5.8 % this year as per the ILO report.

Working poverty

Due to the global economic slowdown last year, global unemployment this year will increase by approximately 2.3 million and will go up by another 1.1 million next year, mostly in developing and emerging economies.

There is a possibility that in emerging economies, the limited growth of the middle class may cause social unrest.

The ILO report says nearly 327 million employed people are in extreme poverty, earning less than USD 1.9 per day whilst 967 million are in moderate or near poverty, earning USD 1.9 to 5.

These low income groups are visible in sub Saharan countries, Malawi, Mozambique, Tanzania, some of the Latin American and Asian countries including Cambodia and Nepal. Lack of productive job opportunities and social protection systems in emerging and developing economies, are creating low-paid jobs which leads to higher working poverty.

Most of these countries have failed in providing a sufficient number of formal jobs for the workforce. Over 50% of the workers in more than half of the countries are in informal jobs with low productivity and low salaries.

Where global employment is concerned almost 46% are in a vulnerable situation, amounting to more than 1.5 billion, having limited access to social protection systems.

There is a considerable gap in inclusiveness of employment. Vulnerable job situation is higher in Asia, Africa and Latin American regions.

Global slowdown

The slowdown in China and their corrective policies are considered to be major factors affecting global economic slowdown. The predictions made by the IMF confirm that the drop in GDP growth in China negatively affects the entire Asian region.

The fact that China is the second largest export destination for Europe, is also creating an adverse situation for those economies. The average annual trade growth figures declined considerably from 2012 onwards.

The drop of commodity prices in the world brought in difficulties for commodity exporters such as Australia, Canada, and Arab countries, Brazil, Chile, Indonesia, Russia, Bolivia and Venezuela. Big time commodity importers such as the EU, India, Thailand, Turkey and US were unable to get the benefit of low commodity prices and to offset the global slowdown.

The decline in long-term capital investment and slowdown in working age population growth in emerging countries, rapidly ageing population in advanced economies are affecting labour supply growth which in turn affects economic growth as well.

Uneven distribution

Growth advantages are not evenly distributed among the population. Incomes of the richest one percent of the population have grown much faster where they own fifty percent of the global wealth, a 44 percent increase from 2009. This situation negatively affects the capital investments.

Gender equality and women empowerment plays a key role in the 2030 agenda for sustainable development. The report says positive signs are visible in the number of women in decent employment and taking further steps to narrow these gaps are considered vital.

The ILO report says that women continue to suffer from occupational segregation, discrimination and hourly work. The ILO report says that over 168 million children between 5 and 17 work as labourers. As far as the gender situation is concerned 50.7% are boys and girls are slightly lower at 49.3 %.

The ILO is calling for a shift in economic and employment policies in the world to eradicate issues faced by various economies.

It is significant to reinforce labour market institutions and guarantee a better social protection system and avoid an increase of unemployment and underemployment and working poverty.

Reference: World Employment and Social Outlook 2016, IMF data

The writer is the Secretary General and CEO of the National Chamber of Commerce of Sri Lanka and holds a BA from the University of Colombo.