2 0 1 2 C W S S u m m i t Dambisa Moyo 16 May 2012 London
Table of Contents I Global Labour Market Picture II Six Labour Market Drivers III The Challenges Ahead 2
Global unemployment (millions) Unemployment rate (%) Global Unemployment High For Foreseeable Future 200 170 175 197 196 196 202 207 209 210 210 6.4 6.2 150 6 5.8 100 5.6 50 5.4 5.2 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Total unemployment (millions) Unemployment Rate (%) 5 Source: ILO, Global Employment Outlook, April 2012 3
Youth Unemployment Young People Are 3x as Likely to be Unemployed as Adults 75 MILLION Unemployed Youth Age 15-24 There is unfortunately little hope for a substantial improvement in near-term employment prospects for young people. ~International Labour Organization Source: ILO, Global Employment Trends 2012 4
Mexico Canada Canada Turkey Finland United States United Kingdom OECD Japan Spain France Germany Greece Italy Ireland Slovak Republic Jan-08 Jun-08 Nov-08 Apr-09 Sep-09 Feb-10 Jul-10 Dec-10 May-11 Oct-11 Mar-12 Unemployment is Lasting Longer Share of unemployed people spending at least 12 months in unemployment Mean number of weeks unemployed in the United States 70 45 60 50 40 30 20 10 0 1 14 14 24 24 31 32 34 39 42 42 48 51 53 59 66 40 35 30 25 20 15 Source: OECD, Going for Growth 2012; Bureau of Labor Statistics 5
The Working Poor 900 million working for less than US$2/day working for less than US$1.25/day 456 million Source: ILO, Global Employment Trends 2012 6
Employment Growth and Productivity Emerging Markets Are Winners in Employment and Productivity Growth 2002-2007 Average Annual Employment Growth 2008-2011 2012-2013 2014-2016 2002-2007 Average Annual Labour Productivity Growth 2008-2011 2012-2013 2014-2016 World 1.8 1.1 1.4 1.3 2.5 1.6 2.6 3.2 Developed economies 1.0-0.3 0.4 0.6 1.4 0.5 1.5 2.0 East Asia 1.2 0.6 0.6 0.3 8.6 7.8 7.5 8.1 South Asia 2.2 1.0 2.0 1.9 5.4 6.1 4.8 5.4 Africa 3.1 2.8 3.0 3.0 2.5 1.5 3.2 1.9 Source: ILO, Global Employment Trends 2012 7
Six Key Factors Driving Labour Markets
Six Key Factors Driving Labour Markets Unfavorable Demographics Rebalancing From East to West Pension Dynamics and Skyrocketing Healthcare Costs Robotics and Technology Poor and Slipping Education Standards Evolving Policy Environment 9
(1) Unfavorable Demographics 100 90 80 70 60 50 40 30 20 10 0 18 17 13 8 7 5 3 66 66 67 72 15 17 20 19 Euro Area 68 25 64 31 53 42 UK US China Brazil India Africa Age 0-14 Age 15-64 Age 65+ Labour Participation (millions) Age Dependency Ratio (old)* Euro Area 159.6 28 UK 29.5 25 US 147.1 20 China 799.8 11 Brazil 101.6 10 India 472.6 8 Africa 340.4 6 * Proportion of dependents age 65+ per 100 members of the working age population (15-64) Source: ILO, Global Employment Trends 2012 10
(2) Pension Dynamics and Skyrocketing Healthcare Costs Significant Unfunded Liabilities United States Around 70% of government spending will go toward Social Security, Medicare, and Medicaid by 2040 The number of Americans with Alzheimer s will increase from 5.1 million in 2010 to 13.5 million in 2050. The cost of care of sufferers will reach US$1 trillion. According to McKinsey, health costs will represent 100% of U.S. GDP by 2065 United Kingdom 70% of health- and social-care costs are due to people with long-term conditions The cost of treating diabetes and heart disease will almost double by 2050, reaching 10 billion GBP per year. The IMF calculates that rising pension costs between 2010 and 2050 will increase public debt from 76% to 135% of GDP. Source: US GAO; IMF; McKinsey & Company; Alzheimer s Association; Sir John Oldham 11
(3) Poor and Slipping Education More Demand For Skilled Workers USA Job Growth by Category 2003-2009, millions Interaction Contextual, complex -0.7 4.8 Transaction routinized, automated USA By 2020 short 1.5 million workers with college degrees; surplus of 6 million without high school diplomas France -2.7 Production Raw materials to finished goods short 2.3 million workers with college degrees; surplus of 2.2 million without them Source: McKinsey & Company, Help Wanted, 2012 12
Median Weekly Earnings Unemployment Rate Percent of Workforce An Increasing Demand For Skilled Workers But Skilled Levels are Slipping USA unemployment and wage rates OECD employment 1800 1600 1400 1200 1000 800 600 400 200 0 451 638 797 768 1053 1263 1665 1551 16 14 12 10 8 6 4 2 0 100 90 80 70 60 50 40 30 20 10 0 23 41 36 32 44 24 1995 2010 Primary and lower secondary Upper secondary Median weekly earnings Unemployment rate Tertiary Source: Bureau of Labor Statistics, OECD 13
OECD Education Performance Poor Results in the US and Western Europe Portugal Slovenia Finland Japan United Kingdom Norway Ireland New Zealand Switzerland Israel Korea Iceland Hungary Denmark Poland Germany Czech Republic OECD Slovak Republic Italy Canada United States Spain Sweden Luxembourg Chile China Mexico Turkey Secondary School Graduation Rate OECD, 82% USA, 76% #21 UK, 92% #5 China (Shanghai) Korea Finland Canada New Zealand Japan Australia Netherlands Belgium Norway Switzerland Estonia Iceland Poland United States Liechtenstein Germany Sweden France Ireland Denmark Taiwan United Kingdom Hungary OECD Portugal Italy Slovenia Greece Spain Czech Republic Slovak Republic Israel Luxembourg Austria Turkey Chile Mexico PISA Reading USA, 500 #15 UK, 494 #23 OECD, 493 30 40 50 60 70 80 90 100 Source: OECD 2009 400 420 440 460 480 500 520 540 560 580 600 14
OECD Education Performance Poor Results in the US and Western Europe China (Shanghai) Korea Taiwan Finland Liechtenstein Switzerland Japan Canada Netherlands New Zealand Belgium Australia Germany Estonia Iceland Denmark Slovenia Norway Slovak Republic France Austria OECD Poland Sweden Czech Republic United Kingdom Hungary Luxembourg Portugal Ireland United States Spain Italy Greece Israel Turkey Chile Mexico PISA Math OECD, 496 UK, 492 #25 USA, 487 #30 China (Shanghai) Finland Japan Korea New Zealand Canada Estonia Australia Netherlands Taiwan Germany Liechtenstein Switzerland United Kingdom Slovenia Ireland Poland Belgium Hungary United States OECD Czech Republic Norway Denmark Iceland Sweden Austria Portugal France Slovak Republic Italy Spain Luxembourg Greece Israel Turkey Chile Mexico PISA Science UK, 514 #14 USA, 502 #20 OECD, 501 400 420 440 460 480 500 520 540 560 580 600 Source: OECD 2009 400 420 440 460 480 500 520 540 560 580 600 15
These educational gaps impose on the United States the economic equivalent of a permanent national recession. McKinsey Global Institute, 2009
(4) Rebalancing from East to West China (i) increasing worker pay - Average hourly wage for urban migrants up 28% in 2011 (ii) decreasing labour supply USA (i) energy costs down - natural gas @ $2 (ii) lower labour costs due to manufacturing collapse China s Position As % of US Levels 1998 2003 2009 Natural Gas Prices $/MMus, Henry Hub Input Cost Shares as a Percent of US Manufacturing Output 1987 2008 value added per person compensation per person relative unit labour cost 6.1 10.1 12.1 2.5 3.6 8.2 40.6 35.9 67.5 labour 35 26 materials 30 33 services 16 17 capital 15 20 energy 4 4 Source: Dragonomics, BLS, EIA, Cewlowski and Colub 2011 17
Labour s Reduced Importance Will The Declining Labour Cost Bring Jobs Back? Declining labour share of manufacturing sector output Labour costs 6.6% of ipad retail value Source: BLS, The Compensation Productivity Gap, 2011; Economist 2012 18
Can Tech Gains Explain Lack of Job Growth? No Net Job Creation in the Last Decade in the US US Spending on Payrolls and Equipment, 2009-2-011 Source: Wall Street Journal 2011 19
(5) Robotics and Technology Will Robots Replace Human Labour? Germany 250 China 2010 105 (auto industry) Global Average 50 China 2006 37 (auto industry) Source: International Federation of Robotics Statistical Department 2011 20
Percent of Workforce (6) Evolving Policy Environment Risks of Increased Government Intervention Temporary Workers (2011) 30 25 20 15 10 5 25.3 22.2 18.4 14.7 14.1 13.4 11.6 9.9 8.8 8 6.2 0 Temporary Employment Protection Source: OECD, Going for Growth, 2012; Eurostat From low (0) to high (5) 21
Iceland Norway United States Belgium France Turkey Japan Luxembourg Netherlands EU Canada Mexico Germany Poland Czech Republic Spain United Kingdom Switzerland Hungary Italy New Zealand Denmark Sweden Portugal Korea Ireland Greece Slovak Republic Austria Australia Finland Adoption Rate Weak Policy Implementation Adoption of OECD s Labour Productivity Recommendations, 2007-11 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0.0 OECD Average Source: OECD, Going for Growth, 2012 22
The Challenges Ahead
Our Policy Challenge A Call to Action In the Next Decade, Create 600 Million New Jobs 200 million for the currently unemployed 400 million to prevent increased unemployment Source: ILO, Global Employment Trends, 2012 24
Persistent Policy Concerns in Labour Markets Four Factors Culminating in Risk of Government Intervention (1) Lack of Aggregate Demand - Voluntary quits down 33% in USA since financial crisis (2) Risks of Hysteresis - Discouraging further government action (3) Rising Male Unemployment - 1 in 4 U.S. males age 25-54 is unemployed or out of labour force - 6.4 million young people globally have dropped out of market (4) Sticky Unemployment Rates - Skills mismatch: 4 million vacant jobs in the EU Source: BLS; Staffing Industry Analysts Meddling in the Labour Markets 25
Government is A Major Employer 7 of the 10 Largest Employers are Governments United States Department of Defense People s Liberation Army, China Walmart McDonald s National Health Service (England) Chinese National Petroleum Corporation State Grid Corporation of China Indian Railways Indian Armed Forces Hon Hai Precision Industry (Foxconn) 3.2 million 2.3 million 2.1 million 1.9 million 1.7 million 1.6 million 1.5 million 1.4 million 1.3 million 1.2 million Source: BBC 2012 26
Better Government Wages Attract Workers $8,000 Higher on Average in the United States Source: Chris Edwards; BLS 27
The Rise of Naked Protectionism Trade Tariffs and Quotas to Protect Workers Trade Restrictions EU documented protectionist policies between 2010 and 2011 28
Weakening Currency To Remain Competitive Economies that issue reserve currencies are managing international liquidity without a sense of the collective good. This wave of unilateral, competitive devaluations creates a vicious cycle that leads to trade and exchange rate protectionism. ~Brazilian President Dilma Rousseff Financial Times, September 21, 2011 Western protectionist measures cast a dark shadow over world economic recovery ~Chinese premier Wen Jiabao October 14, 2011 29
Some Policy Options And Their Effects on Growth and Equity An increase in Employment rate Earnings equality GDP per capita Tertiary education graduation rate? + + Secondary education graduation rate? + + Equality in education? + + Minimum wage?/- +? Unionization? +? Collective wage agreements -? - Employment protection legislation (EPL)?/- + - EPL gap between temporary and regular work - - - Duration of unemployment benefits - + - Product market regulation -?/+ - Integration of immigrants + + + Anti-discrimination initiatives + + + Female labour force participation + + + Source: OECD, Going for Growth 2012 30