Depression of globalization: long-term unemployment

Since the 2008 global financial crisis, we have been talking about the negative aspects of globalization more than the positive ones due to ongoing global issues, with the unemployment problem topping these negative facets. According to the "World Employment and Social Outlook Report" of the International Labour Organization (ILO), people that quit their jobs in many countries have to wait longer compared to the period before the 2008 crisis. As stated in the report, which includes data from more than 70 developed and developing countries, long-term unemployment has risen 40 percent compared to 2008 in Spain, the U.K., the U.S., Serbia and Bulgaria. The report reveals serious differences in business markets of countries with similar unemployment rates, noting that unemployed people in developing countries can change jobs faster than those unemployed in developed economies.

If one of the extents of the "long-term unemployment" problem, which is at a sensible level in the world economy, is rooted to distress in global growth, with the other extent linked to the technological transformation in various sectors. Even though Industry 4.0 is mentioned as an important subject, its effects on employment in the long term and on the global scale are not stated or discussed enough. However, long-term unemployment creates severe consequences in terms of socioeconomic and sociopolitical positions. The "newly-rising right wing" in the U.S. and the EU gets serious support from fractions suffering from long-term unemployment. The fact that long-term unemployment has seen a historical high of 2.8 percent in 2013 has caused grave stress. Although this rate has gone down to 1.16 percent as of the end of 2016, it has been followed as a critically important socioeconomic phenomenon in the U.S. economy.

ILO's report published in the end of January 2016 pointed to an expected rise in the global-unemployment rate, which was at the level of 197.1 million as of the end of 2015, in 2016, especially in emerging economies, because of the insufficient global growth. ILO's calculations based on global-growth predictions indicate a rise of 2.3 million in global unemployment in 2016, and an additional rise of 1.1 million in 2017. It was forecasted that the emerging economies will encounter an increase of 2.4 million in unemployment for the end of 2016. This to a great extent reflects the worsening trajectory in the labor markets of raw-material producing and exporting countries in emerging Asian economies, Latin America, and, especially, in Arabic nations and Africa.

Inadequacy in work quality and the EU

Poorness in work quality preserves its place on the agenda worldwide as an emergency. It seems that the decrease in fragile employment, the share of employment for working alone account, of jobs contributing to household tasks and of employment with unknown duration, frequency has slowed down compared to the period before the crisis. It is estimated that people under this scope of employment have reached 1.5 billion, and this number constitutes 46 percent of the total global employment. 70 percent of the workers in both South Asia and sub-Saharan Africa appear to be under fragile employment.

In Europe, more than 10.5 million people have "long-term unemployed" status. Half of this number has been unemployed since last year, two thirds for the last two years. This crisis in employment brings with itself the need for an extensive package of precautions or measures across the European Union. Improvement programs for employment only focus on 20 percent of the long-term unemployed. This ratio is widespread around Europe. The budgets set aside for unemployment are generally spent on public employment. Investments are not performed enough to provide initiatives to employers or to include them in these programs. One of the reasons behind the increasing poverty in Europe since the beginning of the crisis is long-term unemployment.

Message to central banks from Rajan

Raghuram Rajan, who left the governor position at the Reserve Bank of India (RBI) after his three-year term and is now a finance professor at the University of Chicago's Booth School of Business, has stated that the Federal Reserve's (FED) plan to continue contraction in monetary policy will relieve the pressure on other important central banks to maintain their strong monetary incentives. Rajan mentioned that with the FED observing limited space to continue its expansionary policy, and thus commencing hikes in interest rates, the pressure on other central banks to continue expansion will be diminished. Rajan's finding is not a pleasant evaluation for economy circles anticipating a continuance in monetary expansion by the leading central banks for the recovery of global growth.