May 29, 2006	Monday	Jumadi-ul-Awwal 1, 1427

GLOBAL unemployment and poverty in which the young people have been worst affected in recent years pose a challenge to security and stability of the world.

The trend stands in sharp contrast to the targeted Millennium Development Goals (MDG) which bind governments, “to develop and implement strategies that give young people everywhere a real chance to find decent and productive work”. However, the empirical evidence suggests that the strategies adopted by governments have pushed the number of unemployed youth from 69.5 million in 1993 to 88.2 million in 2003.

What is striking is that according to the International Labour Organisation’s report titled, “ Global Employment Trends for Youth, 2004”, the youth employment rate increased in every region of the world between 1993 and 2003 except industrialised economies. The unemployment rate in Middle East and North Africa and Sub-Saharan Africa which was highest in the world also decreased but marginally between the period.

The trends are set out in the table below:

The unemployment amongst youth increased in the regions in spite of an annual growth rate (between 1993 and 2003) ranging from 8.3 per cent in East Asia, 5.5 in South Asia, 4.4 in South East Asia to 2.6 per cent in Latin America.

The ILO’s report observes that “ the link between youth unemployment and social exclusion has been clearly established; an inability to find a job creates a sense of vulnerability, uselessness and idleness among young people and can heighten the attraction of engaging in illegal activities”. No doubt that crimes, civil strifes, ethnic divide and terrorism witnessed to-day on the globe owe much to youth unemployment.

The youth unemployment in the developing countries can be attributed to structural transformation of their economies carried out over the last two decades, based on the notion that free global market forces will increase growth and reduce unemployment and poverty.

Various research studies, however, refute this theory. The study by Cornia and Kiisi (2001) cited by the UNDP report, 2003 estimate that, “between 1980s and mid-to late 1990s inequality increased in 42 of 73 countries.

In other words, within national boundaries control over assets and resources is increasingly concentrated in the hands of a few people. If sharp increases in inequality persist, they may have dire effects on human development and social stability.

An increase in average per capita income arising out of an increase in national income does not necessarily mean a reduction in unemployment and poverty. The distributional aspect of an increase in the national income cannot be ignored when we talk about unemployment and poverty.

Precisely, it is for this reason that the UNDP report, 2005 suggests adoption of a pro-poor growth strategy by stating that “cross country evidence suggests that greater distributional equity can accelerate growth and that there is no inherent trade-offs between growth and equity.”

In essence, what the UNDP has suggested is a fundamental change in the policies hitherto practised to a more humane macro-economic, trade and social development framework that is directed to job-led economic growth.

During the last two decades, the developing countries were induced by the donors and the international finance agencies to make investment in social sectors development, particularly in education.

However, this assistance was provided for primary and middle-level general education so as to increase literacy amongst the youth. A huge domestic investment made in this type of general education bore no relationship with the requirements of the job market. The result is that a ‘mismatch’ between the demand and supply of labour has created a large force of unemployed youth in the developing countries.

In order to strike a balance, it is essential that an ‘national employment opportunities plan’ in consultation with all stakeholders should be drawn, taking into account the existing shortages in various vocations and the projected demand of the labour force.

The education policy should be then integrated with this employment plan. An ad hoc approach of providing “social safety nets’, in whatever form, cannot offer a long-term solution to the problem.

With an increased level of public expenditure diverted to the social sector, the governments in the developing world found it extremely difficult to make investment in the infrastructure development, especially when they reposed their full trust in the private sector for development in all areas of economic activity. In this scenario, the governments, starved as they were of the resources, could not even fully fund the operation and maintenance cost of the existing infra-structure.

As a result, the supply of the inputs and services provided by the infra-structure sector required by the private sector became scarce and costlier. This raised the cost of production of the goods produced by the private sector, making a number of industries uncompetitive in an environment of an ‘open economy’. This led to closure of industries and throwing the labour-force employed by them into unemployment.

The cottage industries which have a high employment – elasticity and absorb a large number of labour force in the developing countries were also hit hard by the openness of the economy.

The goods produced by the cottage industries could not compete foreign goods in price as well as quality. This forced closure of cottage industries, throwing a large labour force into unemployment.

This labour force could not find employment in export industries for two reasons. Firstly, export industries being capital intensive, small producers could not raise required capital to establish export industries. Secondly, the displaced labour force did not possess the skills needed by the export industries. The resource constraint of governments arising out of a paradigm shift in priorities and an apathy of the donors for financing infrastructure projects not only adversely affected industrial sector but also agricultural sector which engaged a large labour force in the developing countries.

With a fall or stagnancy of public investment in physical infrastructure such as construction of dams, irrigation net-work, farm to market roads, storage facilities, agricultural extension centres, agricultural research and development, the efficiency and productivity of the sector did not show any improvement. As a result, agricultural sector could not absorb the incremental labour force in the rural areas.

The temporary structural dislocations in the economies of the developing countries could not be addressed because the authors of the new world order extolling the theory of the ‘comparative advantage’ in the global economy, became its violators.

Most developing countries enjoyed ‘comparative advantage’ in agriculture, textiles and services. Had the rich countries not provided production and export subsidies to its agriculture and not raised tariff and non-tariff barriers on clothing and textiles and not applied immigration laws on mobility of surplus labour force from developing countries, the problem of unemployment could be alleviated in the developing countries under the new global order.

Unemployment in the third world especially in the young population and its fall-out in the form of crimes, civil strife and terrorism can only be solved by embarking upon the path of a job-led economic growth. If this fundamental change does not take place, the problem of youth unemployment cannot be addressed.