Unemployment and inequality both look set to rise because multiple and overlapping economic and political crises are threatening labour market recovery worldwide, according to the latest edition of the ILO Monitor on the World of Work.

The outlook for global labour markets has worsened in recent months and on current trends job vacancies will decline and global employment growth will deteriorate significantly in the final quarter of 2022, according to a new ILO report.

Rising inflation is causing real wages to fall in many countries. This comes on top of significant declines in income during the COVID-19 crisis, which in many countries affected low-income groups most.

The ILO Monitor on the World of Work. 10th edition , finds that worsening labour market conditions are affecting both employment creation and the quality of jobs, pointing out that “there are already data suggesting a sharp labour market slowdown.” Labour market inequalities are likely to increase, contributing to a continued divergence between developed and developing economies.

According to the Monitor, “a set of multiple and overlapping crises, compounded by the Ukraine war and subsequent negative spill over effects, have materialized over 2022 which are deeply impacting the world of work”. The effects are being felt through food and energy inflation, declining real wages, growing inequality, shrinking policy options and higher debt in developing countries. A slowdown in economic growth and aggregate demand will also reduce demand for workers as uncertainty and worsening expectations affect hiring.

“Tackling this deeply worrying global employment situation, and preventing a significant global labour market downturn, will require comprehensive, integrated and balanced policies both nationally and globally,” said ILO Director-General, Gilbert F. Houngbo. “We need the implementation of a broad set of policy tools, including interventions in the prices of public goods; the rechannelling of windfall profits; strengthening income security through social protection; increasing income support; and targeted measures to assist the most vulnerable people and enterprises.”

“We need a strong commitment to initiatives such as the UN Global Accelerator on Jobs and Social Protection , which would help countries create 400 million jobs and extend social protection to the four billion people who are currently unprotected. And a rapid end to the conflict in Ukraine, as demanded in the resolutions of the ILO Governing Body, would further contribute to improving the global employment situation.”

At the beginning of 2022 the number of global hours worked was recovering strongly, notably in higher-skilled occupations and among women. However, this was driven by an increase in informal jobs, jeopardizing the 15-year trend towards formalization. The situation worsened over the course of the year and in the third quarter of 2022 ILO estimates are that the level of hours worked was 1.5 per cent below pre-pandemic levels, amounting to a deficit of 40 million full-time jobs.

Ukraine

In addition to the terrible humanitarian cost, the war in Ukraine  has had a dramatic negative impact on the country’s economy and labour market. The ILO estimates that employment in 2022 will be 15.5 per cent (2.4 million jobs) below the 2021, pre-conflict, level. This projection is not as low as the ILO’s estimate in April 2022, soon after the conflict began, that 4.8 million jobs would be lost . The positive change is a consequence of the reduction in the number of areas of Ukraine under occupation or with active hostilities. However, this partial labour market recovery is modest and highly fragile, the Monitor says.

The large number of internally displaced persons (IDPs) and refugees looking for jobs in Ukraine and elsewhere adds to the challenges and is likely to create downward pressure on wages, the report warns.

The report estimates that 10.4 per cent of the country’s total pre-war workforce are now refugees in other countries. This group of 1.6 million is overwhelmingly women, with many having worked previously in the education, health and social care sectors. A recent survey found that, so far, 28 per cent of the Ukrainian refugees surveyed had found waged or self-employment in their host countries.

The effects of the conflict are being felt in neighbouring countries’ labour markets which could lead to political and labour market destabilization in these countries. Further away, in Central Asia and globally, they are being reflected in higher and more volatile prices and increased food insecurity and poverty.

Coping with multiple crises

The report calls for social dialogue to be used to create the policies necessary to counter the labour market downturn. These should not just react to inflation but focus on the broader implications for employment, enterprises, and poverty. The report warns against excessive policy tightening which could cause “undue damage to jobs and incomes in both advanced and developing countries.”