Giving Up Job Search During a Recession: The Impact of the Global Financial Crisis on the South African Labour Market

The global financial crisis deeply impacted the South African labour market resulting in the shedding of almost 1 million jobs over 2009 and 2010. Reflecting longer term structural problems, this employment loss translated into a much larger rise in the number of discouraged individuals rather than those defined as 'narrowly' unemployed. Drawing on estimates using the micro-data, this paper shows that this state of non-searching unemployment or discouragement has increased more during the recent crisis for uneducated African males. Moreover, individuals who have given up job search during the recession are statistically different than those who continue searching. At the same time, searching is a transitory state for some of the jobless with considerable movements between the two categories of unemployment. These findings from the first post-Apartheid recession underscore the importance in the South African context of analysing a broad measure of unemployment, which includes discouraged workers. In response to these labour market challenges, the government should further reduce barriers to job search through such measures as training for the low-skilled and transport subsidies, along with other interventions that boost demand and job creation in rural areas.global financial crisis, unemployment, discouraged workers, South Africa

Who Is Hit Hardest during a Financial Crisis? The Vulnerability of Young Men and Women to Unemployment in an Economic Downturn

The current financial and economic crisis has resulted in the worst global recession since World War II. The subsequent destruction of jobs and increased duration of joblessness will ensure that unemployment across the world will continue to rise and stay stubbornly high for some time to come, well after the economy has begun to recover. Beyond this generalization, such downturns have more adverse implications for vulnerable segments of the population such as youth. As presented in this paper, data for both the current and previous financial crises reveals that young people are indeed hit hardest as reflected by rising unemployment rates, which persist long after the economy is growing again. In the wake of the present downturn, young men have been particularly affected, which has been driven by a range of factors including the high proportion of young men in heavily impacted sectors such as construction. In response to this situation, policymakers should utilize targeted crisis interventions that aim to keep youth employed where possible, while also assisting new entrants and those who have lost jobs find employment (or at a minimum stay attached to the labour force), particularly as the economy recovers.unemployment, youth unemployment, financial crisis

What role for labour market policies and institutions in development? Enhancing security in developing countries and emerging economies

This paper examines the potential role of labour market institutions and policies in development. Going beyond the controversial proposition that labour market regulations result in lower job creation and high informality, the paper advocates for a realistic and affordable policy agenda, based on synergies between employment and social policies that promote development. Drawing from the findings of the previous literature and the flexibility-security-efficiency debate, this study examines possible lessons that can be made in the context of emerging economies and developing countries, given the specific characteristics of their labour markets, the lack of fiscal space and inadequate administrative/institutional capacity. The main messages of this paper are that over the medium and long-term, governments together with social partners should promote a coherent labour market and social policy mix for enhancing security, and not only focus on flexibility. Despite the constraints in these countries, some building blocks can be identified to serve as a floor for enhancing negotiated solutions to employment and development challenges.labour flexibility / social security / employment policy / OECD countries / developing countries

The Great Recession of 2008-2009: Causes, Consequences and Policy Responses

Starting in mid-2007, the global financial crisis quickly metamorphosed from the bursting of the housing bubble in the US to the worst recession the world has witnessed for over six decades. Through an in-depth review of the crisis in terms of the causes, consequences and policy responses, this paper identifies four key messages. Firstly, contrary to widely-held perceptions during the boom years before the crisis, the paper underscores that the global economy was by no means as stable as suggested, while at the same time the majority of the world’s poor had benefited insufficiently from stronger economic growth. Secondly, there were complex and interlinked factors behind the emergence of the crisis in 2007, namely loose monetary policy, global imbalances, misperception of risk and lax financial regulation. Thirdly, beyond the aggregate picture of economic collapse and rising unemployment, this paper stresses that the impact of the crisis is rather diverse, reflecting differences in initial conditions, transmission channels and vulnerabilities of economies, along with the role of government policy in mitigating the downturn. Fourthly, while the recovery phase has commenced, a number of risks remain that could derail improvements in economies and hinder efforts to ensure that the recovery is accompanied by job creation. These risks pertain in particular to the challenges of dealing with public debt and continuing global imbalances.global financial crisis, unemployment, macroeconomic policy, labour market policy

The Linkages between FDI and Domestic Investment: Unravelling the Developmental Impact of Foreign Investment

Despite the recent increase in foreign direct investment (FDI) to African countries, these resources have not had a meaningful impact on economic development because of limited effects on domestic factor markets, especially domestic investment and employment. In this context, this study analyses the two-way linkages between FDI and domestic investment in Sub-Saharan Africa. The results suggest that firstly, FDI crowds in domestic investment, and secondly, countries will gain much from measures aimed at improving the domestic investment climate. Moreover, there are alternatives to resource endowments as a means of attracting foreign investment to non-resource rich countries. JEL Categories: E22; F21; F23FDI; private investment; public investment; Africa

The Linkages between FDI and Domestic Investment: Unravelling the Developmental Impact of Foreign Investment in Sub-Saharan Africa

While the recent increase in foreign direct investment (FDI) to African countries is a welcome development, the question remains as to the impact of these resource inflows on economic development. This study posits that a key channel of the impact of FDI on development is through its effects on domestic factor markets, especially domestic investment and employment. In this context, this study analyses the two-way linkages between FDI and domestic investment in Sub-Saharan Africa. The results suggest that firstly, FDI crowds in domestic investment, and secondly, countries will gain much from measures aimed at improving the domestic investment climate. Moreover, there are alternatives to resource endowments as a means of attracting foreign investment to non-resource rich countries.FDI, private investment, public investment, Africa

Diverging trends in unemployment in the United States and Europe: Evidence from Okun’s law and the global financial crisis

The global financial crisis deeply impacted labour markets around the globe, particularly in a number of OECD countries. However, in such cases as the United States, some commentators have argued that the subsequent rise in unemployment has exceeded previous estimates of the elasticity of the unemployment rate with respect to output growth, a statistical relationship known as Okun’s law. In line with the literature on this topic, the estimates of Okun’s coefficients presented in this paper display considerable variation across countries, which captures the heterogeneity in the responsiveness of unemployment to the global financial crisis. In the United States, Canada, Spain and other severely affected economies, the coefficient increased sharply, departing from pre-crisis levels in the 2000s. In other countries where unemployment has remained subdued, namely Germany and the Netherlands, the coefficient has fallen dramatically. While different factors can potentially explain how the crisis has been transmitted to the labour market, the role of labour market institutions is the focus of this paper. In this regard, empirical evidence exploring the relationship between the shift in Okun’s coefficients and such institutions confirms that the responsiveness in the unemployment rate during the Great Recession was lower in countries where workers are afforded greater employment protection (such as Germany).unemployment / employment / employment security / labour legislation / comment / economic recession / OECD countries / USA

Employment trends in Indonesia over 1996-2009: Casualization of the labour market during an era of crises, reforms and recovery

The East Asian financial crisis of 1997-1998 hit Indonesia hard, resulting in a winding back of the substantial economic and social gains made during the previous two decades. However, that crisis did not result in a large fall in employment and a commensurate rise in unemployment; rather, the economic contraction of over 13 per cent was accompanied by considerable transitions within employment,namely, from formal sector to informal and agricultural employment, particularly among women. The years following were characterized by slow growth and weak formal job creation, which has often been attributed to such factors as rigid labour regulations, especially the enactment of the Manpower Law in 2003. The economic and labour market situation in Indonesia only began to consistently improve over the last five years, notably during the boom years leading up to the global financial crisis. During this period, unemployment fell from its 2005 peak and employment increased. When the global financial crisis spread in late 2008 to emerging economies like Indonesia, it was expected that these countries would be severely affected. However, in contrast to the East Asian financial crisis, Indonesia proved to be rather resilient despite the fact that exports collapsed by almost 18 per cent from 2008 to 2009. This paper presents estimates that confirm the milder labour market impact of the most recent crisis. At the same time, the move towards more flexible and less protected forms of employment, as reflected by the increase in casualization, notably among the less-skilled, appear to be part of longer term trends. In this respect, labour market regulations, notably the Manpower Law of 2003, may have contributed to this trend, but the Law alone is not the main problem for employers in Indonesia. Overall, despite the apparent resilience to the global financial crisis, Indonesia continues to face a number of substantial challenges at both the macroeconomic and labour market level.employment / unemployment / labour force participation / employment status / economic recession / economic recovery / trend / Indonesia

Is youth unemployment really the major worry? (AOM)

Youth unemployment is neither the only nor the basic problem of the European labour market. The comparative analysis of unemployment data demonstrates that the unemployment of older people is even more serious. The article proves that the weight of young people in total unemployment has as a tendency been declining in the “inner periphery” of the EU, among them in Central and Eastern European member states (CEECs). The trend is just the opposite in the developed or “core” countries of the Union where youngsters took a higher share in total unemployment in 2012 than 10-12 years ago. In Europe there are millions of young people beyond the active unemployed who do not want to work or think they cannot find a job that fulfils their expectations and refuse to take part in any kind of education or training (NEETs-“Not in Employment, Education or Training”). By estimating the rate of NEETs in the adult population the article claims that the NEETs-phenomenon is not the differentia specifica of the youth. At the end the article details two suggestions for the mitigation of the problem. It concludes that the joblessness in Europe is an old and tendencially worsening problem that cannot be solved by particular policies