The global deficit in quality jobs and deteriorating economic conditions in a number of regions threatens to undo decades of progress in poverty reduction, warns a new report by the International Labour Organization (ILO). What’s more, relative poverty1 in developed countries is increasing.
Using the latest available data, the ILO’s World Employment and Social Outlook (WESO) 2016 – Transforming jobs to end poverty , finds that over 36 per cent of the emerging and developing world live in poverty – on a daily income of less than US$ 3.10 purchasing power parity (PPP).
The report concludes that the problem of persistent poverty cannot be solved by income transfers alone; more and better jobs are crucial to achieving this goal.
It is estimated that almost a third of the extremely or moderately poor in developing economies have jobs. However, their employment is vulnerable in nature: they are sometimes unpaid, concentrated in low-skilled occupations and, in the absence of social protection, rely almost exclusively on labour income. Among developed countries, more workers have wage and salaried employment, but that does not stop them from falling into poverty.
WESO 2016 finds that the incidence of relative poverty has increased by one percentage point in the European Union, since the start of the crisis.
“Clearly, the Sustainable Development Goal of ending poverty in all its forms everywhere by 2030 is at risk,” said ILO Director-General Guy Ryder. “If we are serious about the 2030 Agenda and want to finally put an end to the scourge of poverty perpetuating across generations, then we must focus on the quality of jobs in all nations.”
“Right now, while 30 per cent of the world is poor, they only hold 2 per cent of the world’s income,” said Raymond Torres, ILO Special Advisor on Social and Economic Issues. “Only through deliberately improving the quality of employment for those who have jobs and creating new decent work will we provide a durable exit from precarious living conditions and improve livelihoods for the working poor and their families.”
The study also finds that high levels of income inequality reduce the impact of economic growth on poverty reduction. “This finding tells us that it is past time to reflect on the responsibility of rich nations and individuals in the perpetuation of poverty. Accepting the status quo is not an option,” says Torres.
Fragile and uneven progress
The ILO estimates on poverty reduction come after a sustained period of global progress, with the share of population living in extreme poverty falling from 46.9 per cent in 1990 to just under 15 per cent among 107 emerging and developing countries. When the moderately poor are considered, the rate has fallen from 67.2 per cent to 36.2 per cent.
But the data demonstrates that progress on poverty has been uneven. Poverty has declined rapidly in middle-income countries, especially in the Asia and Pacific region, but by a much lesser extent in low-income countries, where 47.2 per cent of people remain in extreme poverty. In developed countries poverty has in fact increased in recent years, notably in the European Union.
Further, despite the significant overall progress in reducing extreme poverty, WESO 2016 warns that continued poverty reduction is threatened not only by weak economic growth but by key structural obstacles to quality employment creation.
Recent deterioration of economic prospects in Asia, Latin America and the Arab region and natural resource rich countries has begun to expose the fragility of employment and social progress. In some of these countries income inequality has begun to rise after decades of declines, raising the possibility that progress on poverty might be at risk.
Poverty reduction across sectors within countries has also been uneven. Using the latest data, estimates based on 43 emerging and developing countries show that a quarter of those employed in agriculture were in extreme poverty (nearly two-thirds of all the working extreme poor), compared with just 12 per cent of those employed in industry, and only 7 per cent of those employed in services.
Transforming jobs to end poverty
The WESO 2016 report concludes with a number of recommendations to address the structural challenges to providing quality jobs and a concomitant reduction in poverty. They include:
- Tackle low-productivity traps, which lie at the heart of poverty:
Economic growth, when narrowly-based, goes hand-in-hand with persistently high or rising poverty rates. Policies need to diversify the productive base and tackle low-productivity traps, by i) spurring sustainable enterprises and facilitating transitions from the informal to formal enterprises and employment arrangements, ii) tackling job precariousness, and iii) investing in skills and in lagging sectors, particularly agriculture and rural non-farm economies.
- Strengthen rights at work and enable employer and worker organizations to reach the poor: Individuals should be empowered to refuse unacceptable forms of work, which highlights the importance of international labour standards and social protection floors. Collectively the poor and vulnerable also need a voice to be able to influence national labour policy. Employer and worker organizations therefore need legal protections to enable them to represent the poor.
- Alleviate poverty through well-designed employment and social policies: Governments should draw on the many recent examples of successful employment and social policies, which boost employment prospects of the poor, in both advanced economies and developing countries. In addition, given the high incidence of poverty among children, it is urgent to strengthen targeted schemes that combine education with income support.
- Reinforce governments’ capacity to implement poverty-reducing policies and standards: Poverty is often associated with a low implementation capacity of public administrations. To implement the above policies, an effective labour administration, delivery institutions and social dialogue are essential. Also, to ensure that income support reaches the poor, corruption needs to be tackled.
- Boosting resources and making the rich aware of their responsibility: As many of the policy tools identified require a reorientation of policy priorities and government funds, a progressive tax base and fair tax treatment of large and small enterprises are important in providing funding while improving incentives. This would be an effective way of making the rich aware of the fact that persistent wealth and income inequalities might impede further progress in poverty reduction.
- Involve the ILO in the achievement of Sustainable Development Goals: The evidence shows that decent work is a necessary condition for ending poverty by 2030. The ILO will work to catalyse international cooperation on policies that boost decent work and sustainable enterprises, in close cooperation with the UN, the World Bank and donor countries.