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IMF Says Stimulus Necessary to Fix Job Markets in Trouble

Middle East : 14 September 2010

This week the International Monetary Fund called for the richest nations on the globe to step up and initiate spending in an effort to support labor markets that are in “dire” straights.  These troubles could affect entire societies, the IMF says.

Jose Luis Rodriquez Zapatero, the Prime Minister of Spain, said that rising unemployment in Europe could cause a “crisis of confidence.” Zapatero’s remarks were made at a conference put on jointly by the International Labor Organization and the IMF.

The IMF reported that an increasing amount of people are finding it difficult to secure a job for the long term, which then weakens the social structure, presents a risk of disturbance and may even undermine democracy itself.

Dominique Strauss-Kahn, the Managing Director for the IMF, noted that the labor market is in trouble after what is coined the “Great Recession.”  He said that the world has not recovered from the crisis until unemployment rates drop noticeably.  Strauss-Kahn said that both growth and employment need urgent action.

International Labor Organization (ILO) states report that 30 million people worldwide have become unemployed from 2007 until today, with 75 per cent of those living in the developed world.  Another 23 million would have lost their jobs if not for the stimulus packages introduced worldwide.

The IMF feels that it is worth the debt incurred for prolonged financial stimulus packages if they help improve levels of unemployment, since unemployment is more costly for society due to discouragement, loss of lifelong earnings and skilled labor leaving the job market.

Zapatero notes that extended periods of high joblessness could trigger a crisis of confidence in the EU, which is already suffering with large debt and fears for financing in countries such as Greece and Portugal.

He stated that a crisis of attitude, where pessimism and resignation reign and confidence fails, could be disastrous for Europe.  Employee training in Spain is a high priority, given that 20 per cent of the population is unemployed.

George Papanderou, Prime Minister of Greece, stated that new life and breath is needed in the democracies of Europe.

Laszlo Andor, the European Commissioner for Employment and Social Affairs, stated that in regards to unemployment levels, 2010 was the “annus horribilis.”  He also noted that if action was not taken, 2011 could become the same with regards to social cohesion.

As strikes are planned in a collection of EU nations like France, Spain and Greece Juan Somavia, the ILO Director General, admitted it was only natural that trade unions are protesting the loss of jobs in their society, but that it was also their responsibility to become involved in the solutions to maintain stability and improve the situation.

The IMF is now supporting extensions of benefits to the unemployed in an effort to boost morale and keep demand steady.  They are also behind the plans to offer short-term incentives for businesses willing to keep workers on staff at lower pay and shorter hours.

Strauss-Kahn noted that it was important for the IMF to focus on employment and worries over the current global situation, noting it was incorrect to assume the organization only took action by implementing cuts.  Strauss-Kahn said that being jobless reaches farther than just missing a paycheck.

In the developed world the unemployed are in poorer health.  Their children also did not perform as well at school.  In the poorer parts of the world unemployment could lead to violence and even war.

ILO figures forecast that 443 million will be joining the global workforce in the next ten years.  Add that to the 210 million currently unemployed and we will have an entire generation that could be lost without work available.  Somavia prompted government organizations to prolong measures that support and improve the fragility of the job market.

Some disagree.  The United Kingdom’s Secretary of State for Work and Pensions, Iain Duncan Smith, stated that the stimulus packages being put forth at an increasing rate are having less of an effect than ever.

He noted that his government is beginning to think about pulling back.  If the stimulus packages continue the private sectors will be squeezed too tight and be unable to grow.

Paul Holdsworth, Staff Writer, Gulf Jobs Market News
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