GB.270/ESP/1/1 - Governing Body

ILO is a specialized agency of the United Nations

GB.270/ESP/1/1
270th Session
Geneva, November 1997

Committee on Employment and Social Policy

ESP

FIRST ITEM ON THE AGENDA

Follow-up on the World Summit for Social Development

(a) ACC Task Force on Full employment and
Sustainable Livelihoods: Synthesis Report

1. It will be recalled that, in order to give effect to the commitment towards full employment made at the World Summit for Social Development and at other world summits, the ACC set up a Task Force on Full Employment and Sustainable Livelihoods in 1995, with the ILO as coordinator. The Task Force oversaw the implementation of seven country employment policy reviews, and the ILO prepared a Synthesis Report drawing on their content. The Synthesis Report was presented to the ACC in April 1997. At its March 1997 meeting, the Committee on Employment and Social Policy, due to time constraints, was unable to discuss the paper submitted under the item on its agenda entitled: "Preliminary report on a synthesis of ACC Task Force country employment policy reviews."⁽¹⁾ That paper is not resubmitted, as it was prepared before the completion of the Synthesis Report to which its title refers.⁽²⁾ However, it contained a considerable amount of information on the employment and labour force characteristics of the countries which were the subject of employment policy reviews, discusses their key employment related problems and describes the major policies recommended in order to promote employment and sustainable livelihoods. The present paper provides the salient features and issues contained in the Synthesis Report itself. Although these issues are synthesized on the basis of all the countries reviewed, particular attention is paid in the present paper to the three country employment policy reviews carried out by the ILO in Chile, Hungary and Nepal.⁽³⁾

2. When the Committee discussed the process of country employment policy reviews at its session in November 1996, concern was expressed that the reviews carried out for the ACC Task Force were not able to follow the modalities and procedures earlier agreed within the Committee for the ILO's own country employment policy reviews. Nevertheless, all the country reviews followed, to varying degrees, the framework paper drawn up by the ILO and adopted by the Task Force. This stressed the need for the diagnosis of each country's employment situation to be seen in terms of the following:

(i) national macroeconomic and sectoral policies paying particular attention to employment promotion and job quality, covering such issues as stability, savings, investment and enterprise development;

(ii) labour market policies and institutions operating according to agreed rules and regulations inspired by a system of international standards;

(iii) democratic policy-making, social dialogue and the involvement of civil society;

(iv) the elimination of gender discrimination and child labour and the operation of targeted programmes to assist the employability of the poor and the vulnerable;

(v) the need to adjust to changes in trade and capital flows and migratory movements, and to take measures to maximize the employment effects of these flows.

Major findings and policy issues

3. The seven countries reviewed are at various stages of economic and social development, as revealed by their respective levels of per capita income, unemployment, poverty, nature of job quality and working conditions. Nevertheless, there are several features and issues, albeit in varying extent, that provide a common understanding of policies required for promoting employment and social justice. Some of these features and issues are capitulated as follows.

The degree of labour under-utilization appears to be closely related to the rate of growth of population and labour force, as well as to the structure of the latter. Low level of technology and the absence of key inputs, especially for small farmers, all contribute to low agricultural growth and restrict the sector's ability to generate productive employment and improve livelihoods.
While high rates of population and labour force growth tend to inhibit the employment-generating capacity of an economy, the extent of sustainable employment is effectively determined by the growth process. The country reviews confirm the positive relationship expected between output growth and employment expansion.
With few exceptions, most countries have witnessed slow growth in formal wage employment. In view of the recent shrinkage in public expenditure and the drive towards privatization, public sector employment has also fallen quite significantly. With little growth in employment in large-scale manufacturing and the public sector, most new employment is being generated in small enterprises and the informal sector, where jobs tend to carry poor conditions of work and low pay.
While in several countries job growth has been able to reduce unemployment and poverty, the quality of employment is often unsatisfactory. In the high job growth countries reviewed, concerns have been expressed about relatively low levels of labour protection, limited respect for workers' basic rights, poor conditions of work, gender discrimination and other issues.
Low levels of basic education and skills are a serious constraint on efforts to increase productivity, attain international competitiveness and attract private and foreign investment. This applies to many developing countries as well as the more developed countries. The problems of youth and of educated unemployed people are becoming more serious over time.
The industrialized countries -- both OECD member countries and countries in Central and Eastern Europe -- have their own employment problems. One concerns specifically the reintegration into work of the low-skilled unemployed. The relative position of the low-skilled in the labour market appears to be gradually worsening.
In countries at various stages of economic development women continue to face discrimination in the labour market in terms of employment opportunities, wage rates and conditions of work, as well as in schooling. Despite substantial increases in economic well-being in the high-growth countries, considerable gender inequalities remain in terms of wages and employment.
There is currently much greater awareness of the problems of child labour. At the same time, in several countries, depressed economic conditions have increased the number of working children. Some export sectors (carpets, sports goods) have traditionally relied on child labour, although international pressure is mounting to prevent it.
In some of the countries reviewed, notably Indonesia, issues were raised with regard to the implementation of the ILO Conventions on freedom of association and collective bargaining.

4. The Synthesis Report noted that, in judging the commitment of countries to full employment and sustainable livelihoods, it was necessary to look not only at their official pronouncements, but also at whether the employment objective was consciously considered in the economic policy framework and whether the latter was indeed leading to poverty reduction through generating efficient, remunerative and sustainable employment. It was also important that representatives of civil society should be involved in the formulation of economic policies. This is clearly the spirit in which the Action Plan adopted at the Social Summit for the pursuit of full employment recognized the "centrality of employment in policy formulation" with "the full participation of employers and trade unions and other parts of civil society".⁽⁴⁾

5. In evaluating the employment situation and the corresponding policies of the countries reviewed by the ACC Task Force, the report considered that account needed to be taken of the major economic adjustment which started in the early 1980s, especially in the aftermath of the debt crisis. In most countries, the crisis of growth and unemployment emerged emphatically, requiring a fresh search for approaches to growth and job creation. The economic transition took the form of a reduced role for the State and enhanced private sector participation in job creation. One or more phases of policy reform took place in all the countries reviewed, moving them, especially through trade liberalization, to greater integration into the world economy. It is also striking that, alongside economic transition, important political restructuring also took place: in Hungary the transition was both political and economic, moving away from the principles of a command economy to democratically chosen market principles. Nepal brought in democracy through its new Constitution of 1990. In the same year, Chile reinstated a democratic Government after 18 years of military rule. The report considered that political democratization and economic liberalization, while not sufficient in themselves to produce full employment, have nevertheless ushered in an era of greater transparency in government. Thus, concerns over the quality of employment, the socially excluded, gender discrimination, the use of child and forced labour and job insecurity are given greater weight than before and are constantly echoed in the press and in Parliament by the people's representatives. Such an environment, in principle, can lay the basis for healthy dialogue between the social partners on issues of job promotion, productivity and social protection.

6. The report considered that the key to sustained employment absorption in any economy was above all the maintenance of a high level of demand for labour through the growth of output and the continuous adjustment of economic structures. Constant adjustment is needed in order to increase or maintain efficiency in response to internal and external pressures and to move labour to activities generating higher levels of added value. Generating a high level of efficiency together with economic growth requires an ever higher aggregate level of skills, as well as increased capital and its more efficient use. In addition, at any given level of demand, the extent of labour utilization will depend on labour supply pressures resulting from population growth and migration and the willingness and need to seek work. In order to expand employment, and through it to achieve sustainable livelihoods, a good choice of policies in a number of areas is crucial, as noted in the Task Force's framework and as confirmed in the review exercise. These include --

(i) the achievement of macroeconomic stability and fiscal and monetary balance;

(ii) sectoral policies promoting employment-intensive growth through a market-based incentive structure;

(iii) labour market policies and institutions that encourage the efficient and equitable functioning of the labour market;

(iv) policies for enhancing human resource development;

(v) developing well-targeted programmes for poverty alleviation and combating social exclusion.

To these should be added measures to ensure environmental sustainability, which was identified as an issue in the integrated follow-up on major conferences and which the Task Force determined should receive special attention. Inherent in all these issues is the protection of basic human rights in the areas of freedom of association, equal opportunities and freedom from forced and child labour.

7. The report noted that international competitive pressures have, however, increased anxiety over the risk of job loss and relocation. Such apprehension must be laid to rest if protectionist pressures are to be avoided and industrial peace assured. A fast rate of employment growth to ensure continuing employability, together with the full implementation of core labour standards worldwide, will go a long way to alleviating these concerns.

8. The report devoted a separate chapter to social dialogue and democratic policy-making. It noted that the process of policy-making could be as influential as its substance in creating the conditions for the achievement of full employment and sustainable livelihoods. "Good governance" is a vital component for success in what the Copenhagen Declaration and Programme of Action has termed the "global drive for social progress and development".⁽⁵⁾ A democratic framework implies a policy-making process which is based on universal representation and respect for constitutionally accepted procedures and duly approved laws and practices. This in turn requires transparency in decision-making, the widest possible encouragement of informed public debate, accountability of political leaders and high officials and the acceptance of criticism. Furthermore, a democratic framework implies reliance on individual responsibility and decisions. In consequence, the role of policy-making is often to provide the environment in which individual actors, such as farmers, entrepreneurs and working people, can take the decisions which seem best to them in the light of information generally available. Democratic policy-making, accountability, public criticism and scrutiny, as well as tripartite consultation, are all set out in the report as essential for an employment promotion strategy.

9. The report stressed that another crucial factor in achieving employment goals was political commitment. In this respect it noted that Convention No. 122 included a formal commitment by ratifying governments to maintain machinery to review policies for the promotion of full employment and the results they achieve. A further element of commitment concerns willingness to enter into joint consultation and negotiation with workers' and employers' organizations. It is accepted that pluralistic policy structures may be more successful in developing necessary policy changes, as well as in explaining and justifying them. The report considers that workers' and employers' organizations can contribute fruitfully to the design and implementation of employment policies. The quest for full employment and the participation of workers and employers in shaping employment policy can be mutually reinforcing.

Experience in selected countries

10. In relation to some of the common findings and general policy principles, as set out above, the report provides some country-specific policy conclusions. In the following paragraphs reference is made to the three countries for which the ILO had the responsibility to prepare the employment policy reviews. For Nepal, the ILO review noted that the economy is characterized by very high levels of underemployment and poverty, and that jobs created in organized manufacturing are insufficient to counteract the labour force pressures spilling over from rural areas. This has resulted in low productivity and the creation of low-income urban jobs. Economic reforms have not attracted any significant amount of foreign direct investment and have had little impact on domestic investment. Living conditions in rural areas are usually harsh; fuel and even water are scarce and workers, especially women, have to spend a large part of their day in supplying such basic needs for their households. Both urban and rural working conditions are often unhealthy and unsafe, with little security of employment or job tenure. It is a matter of concern that, despite the very low levels of education of the workforce in general, the unemployment of educated jobseekers is emerging as a critical problem. Other undesirable features of the labour market include some bonded labour in rural areas, and child labour in both agriculture and modern-sector activities. Bonded labour, though a very small percentage of the rural workforce, is unacceptable and requires immediate government action. The current incidence of child labour, as family workers, is quite high in Nepal (9.5 per cent of the employed labour force), although few are wage workers.

11. Although recent stabilization has been successful, there are inherent weaknesses in the economy. Large budget and current account deficits are financed only by a generous flow of concessionary aid. Revenue sources are restricted, and the fiscal deficit is difficult to control. Export earnings are volatile on account of extreme product and market concentration. On the other hand, the dilemma is that Nepal requires very considerable investment in physical infrastructure to help all economic sectors. Its own savings rate is relatively low, so that foreign saving -- either as aid or as investment -- holds the key to employment growth. In Nepal the liberalization of markets and the restoration of macroeconomic stability are necessary but not sufficient conditions to be met before severe structural constraints can be removed. These include the lack of basic infrastructure to support agriculture and industry and the lack of necessary human skills. Future policies must induce major investment in these areas.

12. Nepal also requires vigorous policies on the labour supply side. Policies for the organized labour market, as well as the institutions needed to develop and implement them, are just beginning to unfold (e.g. the Labour Act and Trade Union Act of 1992). These policies and institutions need to be developed further, and support given to strengthen employers' and workers' organizations. In education and employment there are apparently no clear-cut policies for helping women, and the gap between men and women in these respects has been increasing. Nepal has shown its strong commitment to dealing with the problem of child labour, but although some programmes have begun, a coherent strategy is still being worked out. Nepal's programmes for self-employment are generally credit schemes, sometimes with provision for training or information on technology or markets. The Food for Work Programme and other public works programmes provide wage employment. Both self-employment and wage-employment programmes have focused on the poor, with some success, and have created employment for women.

13. The linkages between sectoral growth and the environment are particularly close in Nepal. Both agriculture and tourism are heavily dependent on the preservation of natural resources. There is therefore an urgent need to integrate environmental policies into both overall development and sectoral programmes.

14. Despite Chile's good economic performance overall, which has led to substantial job growth and a reduction in absolute poverty, the distribution of income has hardly changed. Households in the lowest four quintiles (80 per cent of the total) earn less than the national average income for all households. Steps have been taken, however, to improve the situation of the poor through labour-market policies, predominantly through changes in the minimum wage. From 1987 on, as a result of government policy in the first instance, real minimum wages started to increase significantly. By 1990, they had already increased by 20 per cent in real terms, and from then until 1995 they increased by another 30 per cent. Between 1990 and 1993, minimum wages were readjusted as part of a wider agreement between the Government and the employers' and workers' organizations. This was a tripartite exercise which also dealt with macroeconomic stabilization policies in the framework of Chile's return to democracy.

15. One factor contributing to the creation of poor-quality jobs in the Chilean labour market is the practice of "labour-only subcontracting" where a subcontractor supplies workers to a third-party establishment. This has been rising steadily and has created unstable jobs with low wages and levels of occupational safety and health. This is partly because the Labour Code does not precisely define the role of employers and subcontractors towards the workforce that they hire and supply in this way. Many poor-quality jobs are generated by export-led activities, where it should be possible to guarantee a minimum level of social protection. Most jobs in forestry and agriculture are temporary; wages are low in export-led agriculture (some 80 per cent of workers earn around the minimum wage); only one-fifth of wage-earners make payments into the pension funds and only 18 per cent have health insurance coverage. Union membership is low and collective bargaining by temporary workers is virtually unknown. The report noted that Chile is one of the very few Latin American countries yet to ratify the Freedom of Association and Protection of the Right to Organise Convention, 1948 (No. 87) and the Right to Organise and Collective Bargaining Convention, 1949 (No. 98).

16. The report acknowledged that Chile has successfully implemented a process of economic reforms and that there was widespread satisfaction with the macroeconomic setting. However, higher levels of both productivity and conditions of work are essential, while the continued social exclusion of many of the poor is a problem that needs to be addressed. The country faces the difficult challenge of upgrading productivity and improving the functioning of labour markets. Most discussion about the labour conditions necessary for the Chilean economy to compete internationally has focused on labour-market flexibility. In this respect, the Government has proposed changes in labour administration, labour courts, the Labour Code (mainly affecting the provisions on collective bargaining), unemployment insurance and the national training system. Highly conflicting views between employers and workers over the proposed changes had, by late 1996, halted the tripartite dialogue that began in 1990.

17. A major problem in Chile is the weakness of the public education system. A national programme to improve the quality of education is rightly addressing the key problem of unequal access to good-quality schooling, normally associated with the level of household income and social class. This applies particularly to secondary and university education. Training is an essential component of Chile's strategy to become competitive. Chile has very low levels of institutional training. The cost of training can be deducted from taxes (up to 1 per cent of the total wage bill), but only a small fraction -- one-third -- of this is used, and even so, it usually goes to train administrative, professional and managerial staff. The Government has proposed changes in the training system, including wider coverage as well as negotiated agreement between employers and workers on the skills to be instructed.

18. In Hungary, unemployment has been fluctuating around 10-11 per cent, and long-term unemployment has increased steadily to account for more than half of the total. Unemployment is particularly high for young people and among the gypsy community. Equally worrisome have been trends in wages and incomes. In 1990-95, real wages and incomes declined every year except 1994. In 1995, the average real wage was some 20 per cent lower than six years earlier, while average real income per head was down by nearly 14 per cent. At the same time, income differentials have been increasing rapidly. Social expenditure has increased as a percentage of GDP over the past seven years, but its real value has declined. The social protection system has failed to prevent people from falling into poverty, which is estimated to have increased to one-third of the population.

19. In the past two years in Hungary, the objective of policy-making has been to achieve macroeconomic equilibrium. However, the growth of GDP has remained slow, and inflation has persisted. The report felt that this suggested the need for a substantial upgrading of enterprises' technological and innovative capacity. Policies should aim to promote a shift from low value added exports based on relatively cheap labour to higher value added production based on higher quality and advanced technology. This calls, first, for the more active promotion of enterprise restructuring, upgrading productivity, quality and competitiveness and strengthening innovation and investment. The implications for employment should be considered more thoroughly.

20. A special feature of employment promotion is support to small and medium enterprises (SMEs). These have increased rapidly in number in the 1990s, while the share of large enterprises in output and employment has been declining. However, several factors hinder their further strengthening, including high taxes and social security contributions, poor access to capital, various regulations, lack of assets and unfair competition. To increase the job-creating capacity of SMEs and compensate for job losses in large enterprises, action should focus on supporting the growth of existing firms. In this respect, changes in wage policy are desirable and ought to be undertaken through a strengthened tripartite bargaining process. While collective bargaining is well developed at the enterprise level, sectoral collective bargaining has been neglected and should be strengthened. Simultaneously, payment systems more closely related to productivity and economic performance, such as profit-sharing and profit-related pay, should be encouraged.

21. Hungary has developed a wide range of active labour-market programmes. These have recently been oriented towards social groups particularly exposed to unemployment, including young people (mainly school-leavers), long-term jobseekers, workers with disabilities and the gypsy community. Regional labour market institutions have been given more responsibilities, and the involvement of local communities and NGOs in job-creation projects and in programmes for the social integration of disadvantaged groups has been increased. The report considered that this approach could go further. Since older, less skilled persons appear to benefit most from labour-market training, programmes for them should be expanded. In addition, the unemployment compensation system needs reform in order to encourage the active search for employment and early job taking, while still providing reasonable income support.

Policies for promoting employment and
sustainable livelihoods

22. The Synthesis Report ended with some messages for national policy, proposals for international action and comments on the role of the UN agencies. The basic requirements for the establishment of a policy framework at the national level to promote employment generation and sustainable livelihoods include the following:

A sound macroeconomic policy framework needs to be established. Unsustainable imbalances must be reduced and low rates of inflation maintained.
In the light of this requirement, the main lesson arising from an analysis of all the countries reviewed is that achieving continued economic growth of the type that makes good use of the assets that the poor own (i.e. labour), investing in human capital, removing distortions that discriminate against the poor and the unemployed and targeting measures towards the vulnerable and the extremely poor are the proven ways of promoting employment and sustainable livelihoods.
With the high proportion of the labour force still employed in rural areas in many countries, priority has to be given to efforts to expand productive employment in both the farm and rural non-farm sectors.
Small and informal-sector enterprises need greater support and obstacles to their growth need to be removed. The successful experience of small enterprises and of the informal sector in many developing countries has demonstrated that, by interacting and competing with the formal sector, they can be an alternative source of rapid growth.
Especially in the informal sector, concerted action is needed to address issues related to improving the quality of employment. Innovative mechanisms are needed to enhance enterprise performance and improve workers' protection, for which the support of employers' and workers' organizations, as well as NGOs and associations of self-employed and informal sector workers, needs to be enlisted.
The general level of education and of technical competence of the labour force has a vital bearing on increasing productivity, efficiency and international competitiveness. Such skills should be generic and portable across firms, thus easing adaptation and reducing the cost of adjustment.
Managerial capacity needs to be further developed in both the public and private sectors. Without it productivity and competitiveness cannot be increased; through collective bargaining the living standards of the workforce increased.
The role of good governance cannot be overstated. Democratic institutions, universal representation and the acceptance of constitutional practices form the its backbone. In turn they imply a need for transparent decision-making processes and accountability.
Countries must design and formulate clearly a strategy for full employment and sustainable livelihoods, based on social dialogue with the fullest possible degree of national consensus and involvement of civil society, especially employers' and workers' organizations.
In response to the discrimination faced by women, a comprehensive countervailing strategy is needed. To provide more and better jobs for women requires gender-sensitive social policies and other forms of action and support.
Child labour is a widespread and persistent problem. An overall strategy for the progressive elimination of child labour needs to be drawn up, and measures taken to prevent child labour; as a transitional measure towards its elimination, children should be withdrawn from hazardous work.
Special targeted schemes should continue to support the employment and incomes of poorer and vulnerable groups. Even with a general increase in employment and incomes, some groups or regions remain distanced from the dynamics of growth as a result of their lack of assets or weak structural position. Micro-economic measures with a focus on vulnerable groups and areas are thus an integral component of an employment generation and poverty alleviation strategy.
Targeted programmes and policies are also needed to remedy accentuated forms of environmental degradation, as forest encroachment, the cultivation of marginal land and eroding soil.
Liberalization and structural adjustment policies should be pursued to stimulate greater private-sector participation and greater integration into the world economy. The protection of inefficient industries should be removed.
The creation of a global market also prompts fears of growing dislocation and insecurity. The best means of setting these fears at rest is by achieving a high rate of growth of employment and incomes worldwide. It is also imperative that workers should acquire the necessary skills to be able to move quickly between employers and preserve their employability.

International support

23. The section of the report concerning international action covered such issues as the need for the world's major economies to expand their markets and keep them as open as possible to imported goods. It stated that regional trading agreements, such as those of the European Union, NAFTA and MERCOSUR, should be compatible with WTO basic rules on most favoured nation treatment. It mentioned that the situation regarding foreign aid was worrying, since aid from OECD member countries accounted for 0.27 per cent of their GDP in 1995, the lowest percentage ever recorded. It noted that debt levels for many developing countries were still rising, and that those for the so-called HIPCs (heavily indebted poor countries) were a cause for concern. It also noted that growing restriction characterizes global trends in current immigration policy, including the reversal of many measures which earlier facilitated the integration of migrants into the labour markets of receiving countries.

24. In the course of its work on the country reviews, the Task Force also considered a number of related issues and activities, which provided useful input for the review exercise. These included, in particular, an analysis of the impact of globalization and technological change on employment, a theme discussed at a seminar sponsored by UNCTAD; a full discussion on a paper by UNDP on sustainable livelihoods, elaborating on its concept and operational procedures, some of which were subsequently incorporated in the revised framework for the country reviews; and, finally, deliberations on the development of more effective indicators for employment and sustainable livelihoods, on the basis of which the Task Force agreed to incorporate a set of indicators that were later approved by the UN Statistical Commission. The Task Force has also supported a coordinated effort with other ACC task forces to develop improvements in the whole range of social indicators, including the indicators for employment and sustainable livelihoods.

25. The report concluded that the review process had provided good examples of areas where further assistance could be sought from the UN system. In Chile, the preliminary areas identified include an analysis of education and employment, in which UNESCO and the ILO could interact; a study on the impact of unemployment on different sections of the labour force, including young people and women, with the collaboration of the ILO, UNICEF and ECLAC. Following the review in Chile, a series of tripartite seminars is unfolding, with two already held on gender issues and the quality of employment. The reviews' recommendations are being used to strengthen the ILO's country objectives and in ongoing contacts with several agencies. In Hungary and Nepal the governments identified areas for UN support. Of the issues identified for national action, many reflect areas where UN agencies could cooperate to aid action by the government, as well as by different groups in society. In Nepal, the review exercise has led to the initiation of the first labour force survey, being implemented by the ILO and funded by the UNDP. Policies on human resource development, rural employment or support to small and micro enterprises and the informal sector can be supported within a coordinated UN framework, for example, through some of the activities that are currently being envisaged by the ILO and UNDP in Zambia and Mozambique. Finally, the report considered that cooperation between agencies was most effective and meaningful when they drew on their respective comparative advantage in tackling a particular set of issues, and in the process generated additional added value.

Geneva, 14 October 1997.

1. GB.268/ESP/2, Internet: http://www.ilo.org/public/english/20gb/docs/gb268/esp-2.htm.

2. ACC Task Force on Full Employment and Sustainable Livelihoods: Synthesis Report, dated 27 Mar. 1997.

3. The full report in English is available to members on request. It is also available on the Internet on EMPFORM's home pages on the ILO Internet web site at http://www.ilo.org/public/english/60empfor/polemp/prog4.htm. Translations into French and Spanish are being prepared and will be available before the Committee meets in Nov. 1997.

4. Programme of Action of the World Summit for Social Development, para. 47.

5. ibid., para. 29.

Updated by VC. Approved by NdW. Last update: 26 January 2000.