75824 Joint Synthesis Report International Labour Organisation /WORLD BANK Inventory of Policy Responses to the Financial and Economic Crisis SWITZERLAND Joint Synthesis Report International Labour Organisation/WORLD BANK Inventory of Policy Responses to the Financial and Economic Crisis This report was published to communicate the results of International Labour Organisation/World Bank’s Inventory of Policy Responses to the Financial and Economic Crisis. It documents the results of the inventory and aims at presenting it to the development community with the least possible delay. The findings, interpretations, and conclusions expressed herein are those of the authors, and do not necessarily reflect the views of the International Bank for Reconstruction and Development / The World Bank and/or the International Labour Organisation, its members or affiliated organizations, or those of the Executive Directors of The World Bank/the International Labour Organisation or the governments they represent. The World Bank and the International Labour Organisation do not guarantee the accuracy of the data included in this work. The authors attest that the paper represents original work. The designations employed in this report, which are in conformity with United Nations practice, and the presentation of material therein do not imply the expression of any opinion whatsoever on the part of the ILO or WB concerning the legal status of any country, area or territory or of its authorities, or concerning the delimitation of its frontiers. The responsibility for opinions expressed in studies and other contributions rests solely with their authors, and publication in any format does not constitute an endorsement by the ILO or the WB of the opinions expressed in them. Reference to names of firms and commercial products and processes does not imply their endorsement by the ILO or the WB, and any failure to mention a particular firm, commercial product or process is not a sign of disapproval. Users can freely reproduce and/or translate the content for non-commercial purposes, without having to request prior permission. For more information, please contact the Social Protection Advisory Service, The World Bank, 1818 H Street, N.W., Room G7-803, Washington, DC 20433 USA. Telephone: (202 458-5267, Fax: (202) 614-0471, E-mail: socialprotection@worldbank.org or visit us on-line at www.worldbank.org/sp — or at the ILO: The Employment Sector, International Labour Office, 1211 Geneva 22, Switzerland, E-mail: EDEMPDOC@ilo.org or on-line at www.ilo.org/employment International Labour Office, Geneva, APRIL 2012 The World Bank, Washington, DC APRIL 2012 Table of Contents 01. Introduction  1 02. Macroeconomic and Sector Policies   5 03. Policies to Generate Labour Demand   13 04. Programmes to Facilitate Job Matching and Preserve Skills   21 05. Building Social Protection Systems and Protecting People    27 06. Minimum Wages  33 07. Social Dialogue during the Crisis   35 08. Labour Standards During the Crisis   39 09. Looking Ahead  43 10. Annexes  47 iii Foreword At its Summit in London in April 2009, the G20 with funding from Austria, Germany, Korea, Norway, and requested the International Labour Office (ILO), Switzerland for the World Bank. Both the inventory of “working with other relevant organizations, to assess the policy responses to the crisis that is presented here, and actions taken and those required for the future.�1 The ILO the corresponding database that is being made public, are responded to this request by preparing an inventory and the results of this joint effort. initial assessment of employment and social protection measures taken in 54 countries across all regions and This Policy Inventory has been conceived as both a income groups.2 This survey was presented at the G20 learning exercise and a didactic one. The impact of Leaders’ Summit in Pittsburgh in September 2009. It was the various government interventions during the crisis one of the first attempts to assess and compare national remains unknown, and there are many questions regarding responses to the crisis, and was considered to be much the design and implementation of macroeconomic needed. and sectoral policies, active labour market and social protection programs, the practice of social dialogue, and In addition, faced with the prospect of a prolonged the enforcement of international labour standards. In this global increase in unemployment, poverty, and inequality environment of uncertainty, a database with an inventory and continued distress for enterprises, in June 2009 the of policies enacted during the height of the financial International Labour Conference, with the participation crisis, the years 2008–2010, offers a tremendous analytic of government, employers’, and workers’ delegates from tool to learn more about what policies countries relied the ILO’s member States unanimously adopted a “Global on, what interventions appear to be more successful, and Jobs Pact� with a portfolio of key crisis response policies, what the implications are for the design of policy packages including a specific objective to reduce the time lag to deal with future downturns. It is a didactic exercise as between economic recovery and employment recovery. it allows for cross-country comparisons on a large scale, with a sample of 77 countries significantly affected by the In early 2010, the ILO and the World Bank (WB) decided crisis, representing 89% of global GDP and 86% of the to join forces to conduct a survey of policy responses to the crisis, based on the structure of the Global Jobs Pact. The Swiss State Secretariat for Economic Affairs 1 G20 Leaders’ Statement (London), April 2009. (SECO) offered financial support for this project, directly 2 Protecting people, promoting jobs: An ILO report to the G20 to the ILO, and through the Multi Donor Trust Fund Leaders’ Summit, Pittsburgh, 24–25 September 2009, International on “Labor Markets, Job Creation, and Economic Growth� Labour Office, Geneva, September 2009. v global labour force. The database therefore captures the and specific analyses. The richness and scope of the most significant policies, in breadth, often in complexity, database offers great potential for further analysis. It is our level of expenditures, and, where discernable, coverage. hope that this modest overview is significantly enriched The large country sample permits derivation of policy in the near future by a widespread use of the database. comparisons across a large and diverse set of economic, social, and policy settings. The elaboration of the database and this report was carried out by competent and hard working teams in The objective of this report is not to engage in an in- both institutions, the ILO and the World Bank, which we depth analysis of the database, but rather to present the had the pleasure of supervising. database and to provide an initial and general overview of the policy responses to the crisis. In making the database We thank the Swiss State Secretariat for Economic Affairs available to the public and the wider communities of (SECO), and the Multi Donor Trust Fund on Labour academics and policy makers, the ILO and the World Markets, Job Creation, and Economic Growth financed Bank would like to invite interested parties, both by the Austrian, German, Norwegian, Korean, and Swiss individuals and organizations, to engage in more detailed governments for their enthusiastic support to this project. Arup Banerji José Manuel Salazar-Xirinachs Director, Social Protection and Labor Executive Director The World Bank Employment Sector, ILO vi Acknowledgement This report was drafted by a joint team of the International Labour Office (ILO) and the World Bank, including Moazam Mahmood and Catherine Saget from the International Labour Office, and David Robalino, Friederike Rother and David Newhouse from the World Bank. viii 1 Introduction 3 The 2008-09 global financial crisis had a significant The impact of the crisis on employment has been deep, impact on the world economy, after having spread and with no appreciable recovery, particularly in the from the sub-prime market in the United States to the developed countries. Table 2 shows that between 2007 worldwide financial system. Growth in gross domestic and 2009—at the height of the crisis—an estimated 27 product (GDP) decelerated significantly in all regions and million jobs were lost globally. Half of these jobs were some countries had to weather deep recessions. One of lost in the advanced economies, five million in East Asia, the most visible consequences of the crisis was a marked three million in Latin America and the Caribbean, and rise in unemployment and a slowdown in the growth one million in South Asia. The global unemployment of earnings. In developing countries, substantial declines rate rose from 5.5 percent in 2007 to 6.2 percent in 2009. in employment were often accompanied by increased The hardest hit were the advanced economies, where the poverty, hunger, and malnutrition. unemployment rate rose from 5.8 percent to 8.3 percent over this period, but other regions suffered as well. In The crisis hit the advanced economies the hardest (see Central and Eastern Europe, the unemployment rate Tables 1 and 2), contracting GDP by 3.9 percent over rose from 8.4 percent to 10.2 percent; in East Asia the 2009, along with Central and Eastern Europe whose unemployment rate increased from 3.8 percent to 4.3 GDP contracted by 5.9 percent over 2009, followed percent; and in Latin America and the Caribbean, the by Latin America and the Caribbean whose GDP unemployment rate rose from 7 percent to 7.7 percent.4 contracted by -1.7 percent over 2009. The economies of Asia, Africa, and the Middle East did not contract, but Two other indicators of labour market distress, among their trend growth rates of GDP were brought down others, have been particularly telling. The rate of youth significantly over 2009. GDP growth in East Asia came down from double digits in 2007 to 7 percent in 2009; South-East Asia and the Pacific GDP growth decreased 3 The findings of this report and of the inventory were presented from 7 percent to 2 percent over this period; South Asian during the Spring meetings in Washington on 20 April 2012, growth rates declined from 9 percent to 6.2 percent; as well as at an information session of the International Labour GDP growth in Sub-Saharan Africa came down from 7 Conference of the International Labour Organisation on 12 percent in 2007 to 3 percent in 2009; in North Africa June 2012. They are also being published and expanded in more detailed reports by the ILO and the World Bank. GDP growth rates fell from 6 percent to 3.5 percent over this period; and in the Middle East, GDP growth came 4 ILO: Global Employment Trends (Geneva, 2012). down from 7 percent in 2007 to 2 percent in 2009. 1 unemployment rose globally from 11.7 percent in 2007 to met the demographic challenge imperfectly in terms of 12.8 percent in 2009, the advanced economies being hit job quality and with an unemployment gap of about 177 particularly hard, where this rate jumped from 12.5 percent million, which is the increase in employment that would to 17.3 percent over this period.There was also a significant be needed to reach full employment at the global level. discouraged-worker effect, where the employment-to- It is clear that the long-run unemployment gap of 177 population ratio went down globally from 61.2 percent to million could not be eliminated through pre-crisis GDP 60.3 percent between 2007 and 2009 (from 73.6 percent to growth rates of approximately 4 percent to 5 percent per 72.6 percent for men; from 48.9 percent to 48.1 percent for annum. women).The decrease was more dramatic for the advanced economies, where it dropped from 57.1 percent to 55.5 The drop in GDP growth and employment growth percent (from 65.2 percent to 62.5 percent for men; from below pre-crisis trends created an additional jobs gap of 49.5 percent to 48.9 percent for women). 27 million, shown as the gap between current projections of post-crisis employment growth (orange line) and pre- Policy responses led to a recovery in GDP growth but crisis projections of employment growth (middle purple not a significant increase in jobs. The world saw an line). Recovery in GDP growth towards the pre-crisis unprecedented widespread policy response to the crisis. trends has been facilitated by policy.This has also enabled While there has been recovery, albeit faltering, in GDP recovery in employment growth to about 1.8 percent growth, the jobs gap of 27 million created by the crisis has per annum, to approximate pre-crisis levels, which meets persisted. The reason for the persistence of the jobs gap the annual demographic challenge of creating 40 million is seen in Figure 1. Demographic labour force growth, new jobs. But, as before, this rate of employment growth shown by the upper black line in the figure, annually will not succeed in filling the large unemployment adds approximately 40 million new entrants into the gaps, neither the 177 million long-run gap nor the 27 global labour market. Pre-crisis GDP growth, with an million new jobs crisis gap. Hence, there is a clear need approximate range of 4 percent to 5 percent per annum for designing policies to raise the rate of employment over the last decade, gave an employment growth rate of growth above pre-crisis levels, initially to fill in the jobs 1.6 percent per annum, shown by the lower orange line crisis gap of 27 million, and later to tackle the longer-run up to 2008 in the figure.This rate of employment growth challenge of filling in the larger gap of 177 million. Table 1: Annual Real GDP Growth Rates (%) Region 2007 2008 2009 2010 2011p 2012p 2013p 2014p 2015p 2016p WORLD 5.4 2.8 –0.7 5.1 4.0 3.5 4.4 4.6 4.8 4.9 Developed Economies and 2.7 0.1 –3.9 2.6 1.4 1.1 2.0 2.4 2.5 2.5 European Union Central and South-Eastern 7.8 4.3 –5.9 5.3 4.9 3.7 4.0 4.1 4.0 4.0 Europe (non-EU) and CIS East Asia 12.1 7.8 7.1 9.8 8.7 7.7 8.8 8.4 8.6 8.8 South-East Asia and the Pacific 6.7 4.5 1.6 7.6 5.1 5.2 5.8 6.0 6.0 6.0 South Asia 9.4 5.9 6.2 9.2 7.0 6.6 7.6 7.9 7.7 7.9 Latin America and the 5.8 4.3 –1.7 6.1 4.4 3.7 4.0 4.0 4.0 4.2 Caribbean Middle East 7.1 4.4 2.2 4.4 5.0 3.7 4.1 4.4 4.5 4.5 North Africa 5.8 5.1 3.5 4.4 2.1 3.1 4.3 5.0 6.0 6.3 Sub-Saharan Africa 7.1 5.6 2.8 5.4 5.1 5.6 5.5 5.4 5.2 5.3 Source: 2012 ILO Calculations based on ILO – Trends Econometric Models, October 2011, and on IMF, World Economic Outlook, September 2011. 2 JOINT SYNTHESIS REPORT 2012 Table 2: Unemployment (millions) Region 2007 2008 2009 2010 2011p 2012p 2013p 2014p 2015p 2016p WORLD 170.7 176.4 197.7 197.3 197.3 201.2 204.3 205.7 206.6 207.8 Developed Economies and European Union 29.1 30.8 42.5 44.7 43.5 44.3 44.4 43.5 42.2 41.2 European Union (27) USA Central and South-Eastern Europe 14.5 14.7 18.1 17.0 15.5 15.6 15.7 15.6 15.6 15.7 (non-EU) and CIS East Asia 31.6 35.8 36.7 35.6 35.5 36.0 36.3 36.4 36.6 36.7 South-East Asia and the Pacific 16.1 15.7 15.5 14.7 14.6 14.9 15.2 15.4 15.6 15.8 South Asia 23.6 23.3 24.5 25.0 25.0 25.5 26.2 26.7 27.2 27.7 Latin America and the Caribbean 18.4 17.9 21.2 20.2 20.5 21.0 21.5 22.0 22.4 22.7 Middle East 6.4 6.6 6.6 6.7 7.1 7.4 7.7 7.9 8.1 8.2 North Africa 6.6 6.4 6.5 6.7 7.9 8.1 8.3 8.4 8.4 8.4 Sub-Saharan Africa 24.5 25.2 26.0 26.7 27.6 28.3 29.0 29.8 30.6 31.4 Source: ILO-Trends econometrics Models, October 2011. Figure 1: GDP Growth and Employment Growth 3700 Global labour force and employment (millions) 3600 3500 3400 3300 3200 3100 3000 2900 Observed and projected employment (2002–07 average annual growth rate of 1.8%) 2800 2006 2007 2008 2009 2010 2011p 2012p 2013p 2014p 2015p 2016p 2017p 2018p 2019p 2020p Jobs crisis gap Pre-crisis Labour force (deviation from the pre-crisis trend) employment trend (2002–07 average annual growth rate 1.6%) Source: 2012 ILO Calculations based on ILO, Trends Econometric Models, October 2011, and on IMF, World Economic Outlook, September 2011, January 2012. Governments everywhere have been searching for viable can limit the adverse implications for employment and responses to limit the economic and social costs of the household income, and that can contribute to reignite crisis. Two questions have taken centre stage. First, what growth and poverty alleviation in developing countries? are the likely labour market policies and instruments that Second, what are the lessons learned from previous 3 crisis episodes and the policy responses to provide a development levels.The database is organized around seven guide to policy makers? The Policy Inventory and the categories of policies: macroeconomic policies, measures accompanying database of policy responses can offer to increase labour demand, active labour market policy, clarity and direction to those searching for answers to unemployment benefits, other social protection measures, these two questions. social dialogue, and labour standards (see Annex 2). The objectives of the survey of policy responses to This report presents an overview of general findings from the crisis were threefold: (i) to establish a broad-based this unique ILO/WB database. The report only uses a inventory of policy measures for a large and more fraction of this large and rich database and should be seen representative sample of countries, which resulted in a as an invitation for researchers and practitioners to use final sample of 77 countries being surveyed; (ii) to give the data for more in-depth research, which can be helpful a quantitative dimension to the inventory; and (iii) to for policy makers in identifying effective approaches to store the information in a searchable and user-friendly maintain and promote employment, while protecting database to be released publicly for the use of policy living standards during times of crisis. Specifically, practitioners, researchers, governments, and the public the report reviews 62 distinct policies pertaining to in general. The 23 countries added to the initial ILO employment and social protection, social dialogue, and inventory were chosen on the basis of joint priorities labour standards in 55 low-income and middle-income among the donors’ priorities, the ILO, and the WB. countries and 22 high-income countries. Information for the database was collected over the period mid-2008 to mid-2010. The goal of this report is to take stock of policy responses during the recent economic and financial crisis and The web-based ILO/WB policy inventory has been suggest areas where policy-makers should focus to built as a user-focused platform to facilitate interaction improve their capacity to respond to future shocks. It between interested stakeholders, including ministries, begins with an overview of macroeconomic and sector social partners, the private sector, implementing agencies, policies (Section 2). Then the report turns to an analysis private corporate partnerships, individuals, and NGOs. of labour market policies to promote labor demand It can be accessed at www.ilo.org/crisis-inventory as (Section 3), programmes to facilitate job matching and well as through the Jobs Knowledge Platform at www. preserve skills (Section 4), social protection (Section 5), jobsknowledge.org. minimum wages (Section 6), social dialogue (Section 7), and international labor standards (Section 8). The last The 77 countries included in the database (see Annex section summarizes key findings and proposes an agenda 1) are meant to represent all regions and a range of for future work. 4 2 Macroeconomic and Sectoral Policies Macroeconomic Policies 2. The policy budgets, across the whole sample of countries, which would be indicative of feasibility and policy space to implement specific policies. If the Great Depression sparked the formalization of 3. Policy budgets by country. macroeconomic policy, the current Global Financial and Economic Crisis is writing the next chapter. Had there been There are two major types of macroeconomic policies a policy inventory for the Great Depression, providing the that were used as responses to the financial crisis: fiscal opportunity to observe the range of policies followed, the policies and monetary policies.The findings generated by range of countries implementing these policies, and the the policy inventory provide broad information on the range of the impact, formalization of lessons learned in the policies adopted in these two areas. form of macroeconomic theory would have taken place more easily and more consistently by being able to see the larger picture. This then should be the modest goal of this Fiscal Policies policy inventory—to try to capture the whole, the global The first major finding regarding the use of fiscal policies macro practices across 77 countries, to aid formalization of is that a fiscal stimulus was undertaken by a majority of macroeconomic practice and theory. What is not covered the 77 countries surveyed; only a minority of countries adequately by the policy inventory at the macro level is impact, adopted fiscal austerity policies. The overwhelming for which a more detailed follow-up study is recommended. reliance of the countries surveyed on fiscal stimulus does not seem to have been affected by the level of their As a result of the need for a truly global view of the country’s income. Around 86 percent of high-income problem, this survey has observed the entire sample countries in the sample used a fiscal stimulus, while 84 of countries, dividing the sample into two categories: percent of low- and middle-income countries in the high-income countries, and low- and middle-income sample also used a fiscal stimulus (Figure 2). countries. Three particularly important factors in the policy inventory can be used to analyze the policy The second major finding from the survey is that the responses utilized during the crisis years: predominant form of fiscal stimulus in a majority of countries was an expenditure increase. However, Figure 2 1. Country incidence or use of the range of different shows that high-income countries relied more on tax policies, which would be indicative of aspirations and cuts (59 percent of the sample of high-income countries), preferences towards specific policies. followed by expenditure increases, at 36 percent of the 5 Figure 2: Number of Countries Adopting Fiscal Policies (%) 71% 59% 49% 36% 14% 11% 9% 5% Tax cuts Expenditure Tax Expenditure Tax cuts Expenditure Tax Expenditure increase increase cuts increase increase cuts 84% 13% 86% 27% Fiscal stimulus Fiscal austerity Fiscal stimulus Fiscal austerity Low-and middle-income countries (55 countries) High-income countries (22 countries) Source: Based on full sample of 77 countries of ILO/WB inventory of policy responses to crisis. sample. Low- and middle-income countries relied more The third important finding from the survey reveals that, on expenditure increases (71 percent of the sample of while budgets must be treated as approximate orders of low- and middle-income countries) followed by tax cuts, magnitude, fiscal stimulus across the adopting countries at 49 percent of the sample. verged on US$5.5 trillion in terms of purchasing power parity (PPP).5 The three largest economies in the world, In implementing austerity measures, an approximately equal the United States, Japan, and China, all beset by the crisis, proportion of high-income countries used expenditure cuts (9 percent) and tax increases (14 percent), while more low- and middle-income countries relied on expenditure cuts 5 Purchasing power parity conversion factor is taken from World (11 percent) rather than tax increases (5 percent). Development Indicators/World Bank. Figure 3: Budget Allocated for Fiscal Policies in Billions of US Dollars at PPP (%) Low- and middle- income countries High-income countries Fiscal stimulus Fiscal stimulus 99.83% 99.35% Fiscal austerity Fiscal austerity 0.17% 0.65% Source: Based on full sample of 77 countries of ILO/WB inventory of policy responses to crisis. 6 JOINT SYNTHESIS REPORT 2012 Figure 4: Budget Allocated for Fiscal Policies by Country in US$ Billions at PPP 1,600 0 Fiscal stimulus budge in US$ billions at PPP) Fiscal austerity budget in US$ billions at PPP) 1,400 –2 1,200 –4 1,000 800 –6 600 –8 400 –10 200 0 –12 Australia Bahrain Brazil Cambodia Canada Chile China Egypt France Gemany India Japan Kazakhstan Kenya Republic of Korea Malaysia Mexico Nigeria Panama Paraguay Peru Philippines Poland Romania Russia Rwanda Saudi Arabia Senegal Spain Sweden Switzerland Thailand Turkey UKraine United Kingdom United States Vietnam Fiscal stimulus Fiscal austerity Source: Based on full sample of 77 countries of ILO/WB inventory of policy responses to crisis. undertook the three largest fiscal stimulus programmes, The notion of QE took a strong hold through the of above US$1 trillion (at PPP) each (Figure 4). United States’ first and second rounds of policy response, during the European Central Bank’s (ECB) buying of bonds when faced with weaker growth in Europe, and Monetary policies with the Swiss pegging of the Swiss franc to the euro. Monetary policy became a good deal more complex in this crisis.The severity of the crisis entailed not only the The major instruments of conventional monetary use of conventional monetary policy6 to bring down policy include setting interest rates, setting exchange interest rates and facilitate access to credit, to complement rates, and expanding credit. The major mechanisms of fiscal policy, but also the use of unconventional monetary unconventional monetary policy include credit easing, policy7 where the term structure of interest rates in the quantitative easing, and support to specific institutions. capital markets was brought down and kept down, and Unconventional QE takes the form of open market money supply further eased. This largely took the form purchases of high-quality securities, notably treasury of quantitative easing (QE), whereby the central banks securities, government-sponsored enterprise debt essentially bought bonds from the public by printing money. The effect of the central banks buying bonds on the domestic economy is twofold: the increased demand 6 Loisel, Olivier, and Jean-Stéphane Mésonnier. “Unconventional for bonds raises their price and lowers their yield, thus Monetary Policy Measures in response to the crisis.� Banque de reducing the cost of borrowing in the capital markets; France. April 2009. www.banque-france.fr/publications/current_ and buying bonds from the public increases the money issues.htm (accessed June 2011). supply held by the public. There is a third effect on the 7 Bernanke, Ben S, Reinhart Vincent, and Brian P Sack. Monetary global economy: as the domestic interest rates drop, the Policy Alternatives at the Zero Bound: An Empirical Assessment. domestic currency depreciates against global currencies. Washington D.C., September 2004. 7 and mortgage-backed securities. Unconventional Sectoral Policies support for specific institutions provides financing to systematically important institutions.8 It may take Sectoral policies were critical in this financial and several forms: stepping in with public purchase of economic crisis precisely because the crisis originated troubled assets, providing asset guarantees, capitalizing in the financial sector, which required unprecedented bad banks, and promoting efforts to reduce preventable public support. The balance sheet crisis transmitted into foreclosures. a credit crunch, which then affected the real economy through declining demand for exports, consumption, There are five main findings from the policy inventory and output in general. As such, the crisis spread from the regarding the use of monetary policy in combating the financial sector to the real sectors of the economy, some fiscal crisis. First, the majority of countries surveyed of which also called for and received a degree of support. followed countercyclical monetary policy to offset the The policy inventory allows for a clear evaluation of the impact of the crisis. A small proportion also carried sectoral support provided by countries. out cyclical monetary policy, complementing their countercyclical monetary policy. Very few countries Several findings are revealed from the policy inventory carried out only cyclical monetary policy. This finding regarding the use of sectoral policies to mitigate is affected by income status, with Figure 5 showing that the effects of the crisis. First, in terms of country a smaller proportion, 9 percent, of the sample’s high- priorities for particular sectors, most countries appear income countries adopted cyclical policies, while a higher to have supported exports, followed by agriculture, proportion, 24 percent, of low- and middle- income manufacturing, construction, finance, and then countries adopted cyclical policies. infrastructure in the form of communications and utilities. As Figure 7 shows, the largest number of high- Second, of the countries using countercyclical monetary income countries prioritized exports, followed by policy, a majority relied on conventional monetary manufacturing and then finance. The largest number of policy instruments, although a significant proportion low- and middle-income countries prioritized exports, also used complementary unconventional monetary followed by agriculture and manufacturing. policy instruments. Figure 6 shows that this finding is also affected by income status, with a lower proportion, However, the second finding from the policy inventory 33 percent, of low- and middle-income countries using is that actual budget allocations reversed these sectoral unconventional monetary instruments, and a higher priorities. Of a total sectoral budget of approximately proportion, 55 percent, of high-income countries using US$2.4 trillion for the 77 countries in the sample, the such unconventional measures. financial sector received half, with manufacturing coming in a very weak second with about US$240 billion, Third, the budgets repeat this trend, with Figure 6 showing followed in turn by education with US$127 billion that high-income countries had almost 70 percent of their (ILO/WB database of inventory of policy responses to monetary policy budget going towards unconventional the crisis). Neither exports nor infrastructure received monetary policy, compared to 37 percent for low- and significant support in terms of their budget shares across middle-income countries. these countries. Fourth, the specific instruments countries relied on Third, the budgetary allocations varied clearly with most for conventional monetary policy were credit income status, as Figure 8 shows. The high-income expansion and interest rate cuts, as seen in Figure 5, countries allocated most of their budgets to the financial while for unconventional monetary policy the most important policy instruments were QE and support for specific institutions. 8 Bernanke, Ben S. “The Federal Reserve’s Balance Sheet. Speech at the Federal Reserve bank of Richmond 2009 Credit Markets Fifth, cyclical monetary policy largely relied on the Symposium, Charlotte, North Carolina.� Board of Governors of the conventional instruments of credit contraction and Federal Reserve System. 3 April 2009. http://www.federalreserve. interest rate hikes, as seen in Figure 5. gov/monetarypolicy/bst.htm (accessed June 2011). 8 JOINT SYNTHESIS REPORT 2012 Figure 5: Number of Countries Adopting Monetary Policies (%) 64% 64% 56% 49% 41% 27% 18% 18% 16% 18% 11% 9% 7% 9% 9% 9% 2% 2% 5% 5% 0% 0% Interest rate Exchange rate Credit expansion Credit easing Quantitative easing Support for specific institutions Regulatory reforms Interest rate Exchange rate Credit contraction Interest rate Exchange rate Credit expansion Credit easing Quantitative easing Support for specific institutions Regulatory reforms Interest rate Exchange rate Credit contraction 71% 33% 9% 24% 82% 55% 5% 9% Conventional Unconventional Conventional Conventional Unconventional Conventional International support e.g. IMF International support e.g. IMF monetary policies monetary policies monetary policies monetary policies monetary policies monetary policies 91% 9% 95% 9% Counter-cyclical Pro-cyclical Counter-cyclical Pro-cyclical Source: Based on full sample of 77 countries of ILO/WB inventory of policy responses to crisis. Figure 6: Budget Allocated for Monetary Policies in US$ Billions at PPP (%) 35.1% 36.2% 33.6% 30.0% 27.5% 15.4% 9.8% 8.5% 0.0% 0.0% 1.2% 0.0% 0.0% 0.8% 1.6% 0.01% 0.0% 0.0% 0.4% 0.0% 0.002% 0.0% Interest rate Exchange rate Credit expansion Credit easing Quantitative easing Support for specific institutions Regulatory reforms Interest rate Issuing bonds Exchange rate Interest rate Exchange rate Credit expansion Credit easing Quantitative easing Support for specific institutions Regulatory reforms Interest rate Issuing bonds Exchange rate 44.9% 37.3% 15.4% 2.4% 30.0% 69.6% 0.4% 0% Conventional Unconventional Conventional Conventional Unconventional Conventional International support e.g. IMF International support e.g. IMF monetary policies monetary policies monetary policies monetary policies monetary policies monetary policies 97% 3% 99.99% 0% Counter-cyclical Pro-cyclical Counter-cyclical Pro-cyclical Source: Based on full sample of 77 countries of ILO/WB inventory of policy responses to crisis. 9 Figure 7: Number of Countries Adopting Sectoral Policies (%) 51% 47% 45% 36% 33% 27% 27% 23% 20% 16% 14% 14% 14% 14% 14% 14% 11% 11% 9% 9% 9% 9% 9% 5% 5% 5% 5% 5% 4% 4% 2% 0% Low-and middle-income countries High-income countries Agriculture & fisheries Manufacturing Real estate Not classificable Transport, storage and communication Financial intermediation Construction Mining and quarrying Hotels and restaurants Education Wholesales and retail, repair of motor vehicles, motorcycles and personal and household goods Electricity, gas and water supply Public adm. and defense Health and social work Various measures Exports Source: Based on full sample of 77 countries of ILO/WB inventory of policy responses to crisis. Figure 8: Budget Allocated for Sectoral Policies in US$ Billions at PPP (%) 63% 22% 20% 20% 9% 8% 7% 5% 8% 2% 5% 4% 5% 3% 4% 5% 0% 0% 2% 1% 2% 0% 1% 0% 1% 0% 0% 1% 3% 1% 0% 0% Low-and middle-income countries High-income countries Agriculture & fisheries Manufacturing Real estate Not classificable Transport, storage and communication Financial întermediation Construction Mining and quarrying Hotels and restaurants Education Wholesales and retail, repair of motor vehicles, motorcycles and personal and household goods Electricity, gas and water supply Public adm. and defense Health and social work Various measures Exports Source: Based on full sample of 77 countries of ILO/WB inventory of policy responses to crisis. 10 JOINT SYNTHESIS REPORT 2012 sector, while the low- and middle-income countries with a budget of US$1.3 trillion PPP, followed by US$480 allocated their largest budget shares for manufacturing. billion PPP for Ireland, US$46 billion for Canada, US$26 Of the US$1.9 trillion PPP sectoral budget for high- billion for Germany, and US$25 billion for Spain. The income countries, US$1.2 trillion, almost two- thirds low- and middle-income country budget allocation of went to the financial sector.This financial bailout dwarfed US$520 billion in PPP terms is largely accounted for by other sectoral support in the high-income countries, the US$360 billion PPP for Mexico and US$93 billion for next highest level of support being an 8 percent share the Russian Federation. for health, followed by 7 percent for manufacturing, a 5 percent share each for education and real estate, 4 There has been considerable debate on the bailouts percent for transport, and 3 percent each for agriculture offered to Wall Street compared to those for Main Street. and infrastructure. On the face of it, the causality seems chronological. In high-income countries, the financial crisis came first and This was not the pattern of sectoral support in the low- appears to have pre-empted most of the sectoral bailout and middle-income countries. Their sectoral budget of budgets. When the financial crisis was transmitted to the US$520 billion had the largest allocation for support real economy, the budgetary space had been considerably to manufacturing with a 22 percent share, followed by reduced. The financial and economic crisis transmitted agriculture with a 9 percent share, a 5 percent share each from the high-income countries to the low- and middle- for finance and construction, and a 4 percent share for income countries through declining demand for exports, infrastructure. declining capital flows, and declining credit. The result was that in low- and middle-income countries the crisis Fourth, the large sectoral support budgets are largely hit the real economy immediately, which may explain concentrated in a few countries in Figure 9. The high- why sectoral support policy in these countries was income country budget allocation of US$1.9 trillion in focused more on their real sectors, such as manufacturing PPP terms is largely accounted for by the United States and agriculture. Figure 9: Budget Allocated for Sectoral Policies by Country in US$ Billions at PPP (%) 30 1,400 25 1,200 Budget in US$ billions at PPP 1,000 20 800 15 600 10 400 5 200 0 0 Argentina Australia Brazil Colombia Costa Rica Czech Republic France Germany Ghana Italy Latvia Malaysia Netherlands Nigeria Philippines Poland Rwanda Senegal Spain Switzerland Thailand Trinidad and Tobago Canada Ireland Mexico Russia United States Source: Based on full sample of 77 countries of ILO/WB inventory of policy responses to crisis. 11 3 Policies to Generate Labour Demand Most countries adopted policies to support the creation wage subsidy used in times of crisis avoids loss of income of new jobs as well as the protection of existing jobs. and consumption at the micro level, and subsequent loss These measures focused on assisting small and medium- of aggregate demand at the macro level. sized enterprises (SMEs) and entrepreneurs by facilitating access to credit, giving preferential treatment to public Policy budgets narrow the range of effective policy use tenders, or reducing taxes. Other policies included wage (Figure 11). For high-income countries, the largest share subsidies, work-sharing arrangements, and public work of their budget, 56 percent, went towards enhancing credit, programmes.We will focus on the latter three after a brief followed by 19 percent for direct job creation, 13 percent overview of labour demand policies applied worldwide. for support for SMEs, and 9 percent for subsidizing employers to retain jobs. For low- and middle-income The largest number of both high-income and low- and countries, the highest share of their budget, more than middle-income countries relied on five main measures two-thirds, went towards direct job creation, another 15 for generating labour demand: direct job creation, percent of their budget went towards employers’ subsidies improving access to credit, subsidies to employers to to retain existing jobs, while 13 percent went towards maintain existing jobs, measures to support SMEs, and enhancing credit. lowering non-wage labour costs (see Figure 10). Figure 12 further shows that the high-income countries The most outstanding finding from the entire range of with the largest budgets for generating labour demand— policies used is that the smallest number of countries Canada, Germany, Japan, the Netherlands, Saudi Arabia, used wage reduction across both income categories, Spain, the United Kingdom, and the United States— high-income and low- and middle-income countries. primarily relied on two policies: enhancing credit and Among the 22 high-income countries surveyed, only direct job creation. The low- and middle-income two used wage cuts to raise demand for labour. Among countries with the largest budgets—India, Mexico, the 55 low- and middle-income countries surveyed, only Malaysia and Vietnam—primarily relied on direct job three used wage cuts to raise labour demand; however, creation, while Thailand relied on enhancing credit.Wage they relied on subsidizing wages to save or create jobs. subsidies for employers to retain existing jobs, popularized The difference between the two policies—of cutting by the short-work scheme in Germany (Kurzarbeit), was or subsidizing wages—is that for a wage cut, at a micro actually used with significantly large budgets in Australia, level, workers’ consumption and welfare falls, which at Canada, Germany, Japan, Mexico, the United Kingdom, a macro level lowers aggregate demand. In contrast, the and the United States. 13 Figure 10: Number of Countries Adopting Labour Demand Policies (%) 91% 91% 80% 77% 77% 65% 58% 59% 59% 55% 55% 49% 44% 42% 40% 16% 9% 5% Low-and middle-income countries High-income countries Subsidies for job creation Payment facilities Subsidies to employers maintaining existing jobs Lowering non-wage labor cost and other tax reductions Supportive regulatory environment Direct job creation and employment incentives Credit facilities/access to credit guarantee Special measures for SME’s Reduction of wages Source: Based on full sample of 77 countries of ILO/WB inventory of policy responses to crisis. Figure 11: Budget Allocated for Labour Demand Policies in US$ Billions at PPP (%) Low- and middle- income countries High-income countries Reduction of wages Supportive regulatory Subsidies to 0.29% environment employers Special 0.86% Special measures for SME’s Direct job creation and Lowering non-wage maintaining 3.04% Supportive regulatory measures labor cost and existing jobs for SME’s employment incentives Subsidies for environment 18.56% job creation other tax 14.54% 12.68% 1.14% 0.54% reductions Reduction 0.46% of wages Credit facilities/ Direct job creation and 0% Credit facilities/access access employment incentives to credit guarantee Subsidies to to credit 66.95% 56.12% employers guarantee maintaining 12.97 existing jobs Subsidies for job creation 9.42% 0.61% Lowering non-wage labor cost and other tax reductions 0.93% Source: Based on full sample of 77 countries of ILO/WB inventory of policy responses to crisis. Wage Subsidies reductions in social security contributions, or income tax credits. They can be targeted at vulnerable workers Wage subsidies come in different forms, pursuing different or be provided across the board and, as demonstrated but related objectives. Subsidies can be given to employers during the crisis, they can focus on those already to stimulate demand or to provide incentives for re- employed or only on new employees. In response to employment.They can take the form of direct transfers, the crisis, wage subsidies were given as direct transfers 14 JOINT SYNTHESIS REPORT 2012 Figure 12: Budget Allocated for Labour Demand Policies by Country in US$ Billions at PPP 75 600 70 65 500 60 Budget in US$ billions at PPP 55 50 400 45 40 300 35 30 25 200 20 15 100 10 5 0 0 Australia Bahrain Bangladesh Chile Costa Rica Egypt Estonia France Germany Ghana Hungary India Indonesia Ireland Italy Kazakhstan Kenya Latvia Malaysia Nigeria Pakistan Peru Philippines Poland Republic of Korea Romania Russia Saudi Arabia Senegal Serbia Spain Thailand Turkey United Kingdom Vietnam Canada Japan Mexico Netherlands United States Subsidies for job creation Credit facilities/Access to credit guarantee Reduction of wages Special measures for SME’s Payment facilities Subsidies to employers who maintain existing jobs Direct job creation Lowering non-wage labor cost and other tax reductions Supportive regulatory environment for sustainable enterprise Source: Based on full sample of 77 countries of ILO/WB inventory of policy responses to crisis. or applied through reductions in social security employer contributions to the unemployment insurance contributions. system. Spain reduced employer social contributions for the first two years of employment for unemployed Between 2008 and 2009, many countries, particularly in people with children who transit to full-time permanent Europe, adopted wage subsidies, mainly through reductions contracts, and also implemented a reduction in social in social security contributions, and often targeted at small security contributions for youth or disabled workers who enterprises or disadvantaged groups. Out of 77 countries start a business as self-employed. A different approach was in the inventory, 24 countries decreased their social taken in the United Kingdom, where companies received security contributions during the crisis, including ten on £2,500 for hiring workers who were unemployed for a permanent basis (Bulgaria, Colombia, Czech Republic, more than six months. Across the board, hiring subsidies Germany, Hungary, Macedonia, Poland, Spain, Sweden, were set to be phased out in early 2011. and Turkey), and the rest on a temporary basis (between five months and twenty-four months). For 13 countries (Bulgaria, Canada, Czech Republic, Estonia, Germany, Hungary, Latvia, Macedonia, Mexico, France, for instance, reduced employer social security Peru, Sweden,Thailand, and Turkey), the decrease in social contributions for firms with less than ten employees security contributions was across the board, e.g. for all hiring new low-wage workers in 2009.The reduction was employees or all newly hired employees. For 11 countries, the largest for workers hired at the minimum wage and the decrease was targeted towards long-term jobseekers declined as the wage increased up to 1.6 times the minimum (Romania, Spain, Sweden, the United States), SMEs wage. In Germany, there was a reduction of employee and (Colombia, France, Poland, Spain), youth (Spain, Sweden), 15 older workers (Italy, Spain), specific sectors (textiles in Figure 13: Cuts in Social Security Contributions Cambodia), specific enterprises (China), jobseekers with family responsibilities (Spain), or low-paid workers (Czech 35 Republic). For eight countries (Bulgaria, Colombia, 30 Czech Republic, Germany, Hungary, Macedonia, Poland, and Turkey), the decrease in social security contributions 25 was both permanent and untargeted. 20 In Latin America, Chile introduced a new Youth 15 Employment Subsidy in January 2009.This programme 10 offered a subsidy equal to 30 percent of the annual salary of those individuals aged 18–24 years who 5 finished secondary education, were working in a formal 0 position, and earned less than 360,000 Chilean pesos Africa America Asia Europe Total (US$600) per year.9 In Colombia, wage subsidies were broader and took the form of a payroll tax holiday for Untargeted Targeted new SMEs. Temporary Permanent Source: 71 measures taken by 24 countries. Note: All cuts are either 9 This Law also includes extensions to maternity benefits and permanent/temporary or targeted/untargeted. additional leave associated to training activities. The Turkish Model of Supporting Employment through Reduced Social Security Contributions – Box 1:  A Case Study Thanks to a decade of sound macroeconomic poli- regions. These cuts have been offset through public cies and reforms,Turkey weathered the global financial transfers to social security institutions. crisis better than many other countries in emerging Europe. While output was hit hard, with GDP con- In an effort to encourage the hiring and retention of tracting by 4.7 per cent in 2009 and the unemployment women and youth (aged 18–29 years), the employer rate soaring to 14 per cent, the recovery was strong. share of social security contributions for women and By early 2011, the unemployment rate was back to its youth recruited between May 2008 and May 2010 pre-crisis level, falling to 10.8 per cent in March 2011. has been covered for a period of five years by the In addition to stability-oriented macroeconomic pol- Unemployment Insurance Fund (UIF). Starting at icy, targeted measures to reduce non-wage labour costs 100 per cent during the first year, the subsidy gradu- introduced from 2008 have encouraged the recruit- ally decreases to 20 per cent in the fifth year. In order ment of workers, increased employment outside agri- to benefit, the employer must have recruited women culture, and helped reduce informality. These govern- and youth who were registered as unemployed for at ment measures have included: a general reduction least six months prior to their hiring. This measure of social security contributions; targeted reductions appears to have had a rapid impact: 61,615 new jobs for hiring youth, women, and the long-term unem- were created in 2009, including 31,482 for women, ployed; reductions for workers involved in training and 63,230 were created in 2010, including 33,395 and research and development; and significant social for women. The cost was 81 million Turkish lira (38 security and corporate and value-added tax (VAT) million euros) in 2009 and 137 million Turkish lira reductions for enterprises investing in less-developed (63.4 million euros) in 2010. (continued on next page) 16 JOINT SYNTHESIS REPORT 2012 Box 1 (continued) In addition, employer social security contributions for compared with 2008. Furthermore, the Turkish Govern- all new employees who were unemployed for at least ment set incentives for less-developed regions. Employer three months prior to their hiring were also covered by social security contribution cuts were first offered in the UIF for a period of six months, as long as the addi- 2004 to enterprises in the textile, clothing and leather tional worker represented an increase to the enterprise’s sectors in developed regions that were willing to shift workforce level as of April 2009. In 2009, 64,505 work- activities to less-developed regions. Since 2007, these ers benefited from this programme, rising to 76,144 in regional incentives have been available in all sectors and 2010. Social security contributions for employees hired no longer require transfer of activities from more-devel- while receiving unemployment insurance payments are oped regions. Originally planned to be phased out in also paid by the UIF for the remaining months of their 2009, these measures were extended in 2010 in response benefit period. Again, in order to be eligible for the to the crisis. In this scheme, social security contributions subsidy, new hires must have represented an increase in for current and newly recruited workers are covered by the recipient enterprise’s workforce as of April 2009. the State for an average of five years, while corporate tax is reduced from 20 per cent to 5 per cent for five Several other new social security reduction incentive years. Interest rates on loans are also subsidized and busi- programmes to increase employment have also been nesses receive VAT and customs duty exemptions for the implemented with new conditions and benefit periods procurement of machinery and equipment. The exact for the employer that vary between six and 54 months duration of social security exemptions depends on the depending on the age, status and qualifications of the level of regional development: two years in “first cate- employee. gory� underdeveloped regions, increasing to seven years in “fourth category� regions. A total of 626,649 workers Furthermore, employers who provide vocational educa- were employed under these regional incentives in 2009, tion to their staff benefit from lower social security con- 722,891 in 2010, and 730,000 in the first two months of tributions, and employers who hire workers in the fields 2011 (17 per cent of total manufacturing employment of technology and research and development are reim- in Turkey). The total cost for the central budget was 741 bursed half of their social security contributions for five million Turkish lira (322 million euros) in 2009 and 926 years. In February 2011, 21,647 research workers were million Turkish lira (402 million euros) in 2010. A more employed under this scheme, an increase of 150 per cent precise impact evaluation on employment is needed. Source: This is based on the ILO contribution in the joint publication ILO, OECD: Turkey G20 Country Brief (2011), itself based on the inventory of policy responses to the crisis. http://www.ilo.org/public/libdoc/jobcrisis/download/g20_2011/turkey_supporting_employment_through_reduced_social_security_contributions_web.pdf Work-sharing Arrangements layoffs; a corresponding (pro-rata) reduction in earnings (total wages); the provision of wage supplements to Work-sharing is a reduction of working time intended affected workers to “cushion� the effects of temporary to spread a reduced volume of work over the same (or reductions in earnings; the establishment of specific similar) number of workers in order to avoid layoffs. time limits on the period of work sharing to minimize In times of economic crisis, work-sharing measures potential deadweight and displacement effects; and the not only help to avoid mass layoffs, they also allow creation of links between work-sharing programmes businesses to retain their workforces, thus minimizing and training activities.10 firing and (re)hiring costs, preserving functioning plants, and bolstering staff morale. Work-sharing programmes and measures typically include five key elements: the reduction of working hours for all workers in a company See: ILO TRAVAIL Policy Brief No. 1, 2009; Messenger and 10 or a specific work unit within a company, in lieu of Rodríguez, ILO TRAVAIL Policy Brief No. 2, 2010 17 In Europe and Japan, take-up rates of beneficiaries for up to 12 months based on agreements with employers increased rapidly, with the highest rates in Italy (3.3 not to dismiss workers outright but rather to adjust work percent), Germany (3.2 percent), and Japan (2.7 schedules. A different approach was used in Costa Rica, percent). The design of the programmes, notably in the where the reduction in the number of work hours was areas of eligibility conditions, type and level of support, not conditional on a reduction in hourly wages. In financing mechanisms, and duration varied considerably. Colombia and Mexico, shorter work schedules were In a few countries, support was only available for complemented by subsidized training. In all cases, the reductions of daily working time spread over the focus was on formal firms, but there is little information entire week. Most European countries offered financial about implementation arrangements or even the number support for both reduced weekly hours and temporary of workers who benefited from the programmes. lay-offs (e.g. France, and Spain—from those covered in the inventory). In France, Germany, and Italy, employees received payments through their employer (partly or fully subsidized by the government); in other countries, Public Works Programmes such as Ireland, Spain, and the United Kingdom, public compensation for non-worked hours was paid directly Public works programmes involve direct job creation to employees by the unemployment insurance scheme. through public works/publicly funded projects such as Despite this financial support, take-up rates of work- workfare programmes to build infrastructure. Programmes sharing were sometimes low during the crisis, such as to create jobs for low-income/unskilled workers through in Spain. A small number of countries, including the public works are quite common in low- and middle- Netherlands, made it compulsory for workers in short- income countries, and proved to be important tools in time work to participate in training. However, training mitigating the impacts of the recent financial crisis. They was not compulsory in the majority of countries, can alleviate unemployment or short-term poverty by including Germany, Japan, and Switzerland. creating temporary jobs and can help disadvantaged, poor and long-term unemployed workers to regain contact In Latin America, the main work-sharing arrangements were with the labour market. Governments can manage implemented in Argentina, Colombia, Costa Rica, Mexico, and these projects directly or contract them to non-profit Uruguay.Argentina reactivated the Programa de Recuperacion organizations or private businesses. On the positive side, Activa that had been designed during the 2002 crisis.This these programmes can lead to the production of public was a monthly wage supplement provided to employees goods/services and develop basic physical or social Box 2: Work-sharing Arrangements with Part Time-Unemployment Benefits The Netherlands introduced the extended opportu- significantly contributed to limiting the rise in unem- nity for part-time unemployment benefits on 1 April ployment. This scheme stopped in July 2011, as the 2009. Employers are given the opportunity to reduce impact of the crisis eased. the number of working hours by a maximum of 50 per cent, during which period the employees receive Poland introduced unemployment benefits for work- unemployment benefit for the hours not worked. ers whose hours have been reduced. This applies to The obligations in the Unemployment Benefits Act the reduction of up to half of the full working time regarding reintegration back to work and the period and no longer than six months in enterprises with of notice do not apply. The scheme initially is applied temporary financial troubles. Funding comes from a for a maximum of three months after initial applica- Guaranteed Employee Benefits Fund and may rise tion, although it can be extended twice, for six months to a maximum of 70 per cent of the unemployment at the maximum each time. More than 100,000 work- benefit. The objective is preservation of existing jobs. ers took advantage of the shorter working hours and This measure was included in an “anti-crisis package� part-time unemployment benefit. These arrangements that was created as a result of social dialogue. 18 JOINT SYNTHESIS REPORT 2012 infrastructure; indeed, in many cases, this, rather than job employment on a rotational basis, and it was subsequently creation, is the main objective. These programmes can expanded to more workers and larger areas. Finally, also be effective short-term safety nets. On the negative one of South Africa’s responses to a severe contraction side, it is often observed that the long-term labour market in employment growth (-4.2 percentage points) was impact of these programmes is insignificant and, in some expanding its public works programme (EPWM). countries, there is a stigma attached to public works jobs that may decrease the employability of participants over Countries that tried to implement these programmes from the long run. scratch were unable to do so in a timely manner. A good example is the Temporary Income Support Program (PATI) Countries that were able to deploy public works during the crisis in El Salvador. PATI’s design was innovative in several already had the systems to do so in place. This was the case, respects. The programme guaranteed a minimum level for instance, of Mexico’s Temporary Works Program (TWP), of income to poor urban families and provided labour which was extended in 2009 to provide employment market experience at the municipal level. In contrast opportunities to an estimated 250,000 workers (0.5 with traditional income support programmes, PATI percent of the labour force) for a period ranging funded the participation of individuals working on between four and six months at a salary of twice the projects submitted by municipalities, with emphasis on minimum wage. In Europe and central Asia, two large- social services provision. It also comprised an innovative scale interventions were implemented in Kazakhstan and training component that aimed to enhance beneficiaries’ Turkey. In Kazakhstan, where the growth rates of output technical skills and their labour market “soft skills.� The and employment contracted by 7.8 and 2.2 percentage Government expected to target youth aged 16–24 years points, respectively, public works focused on construction living in urban areas as well as female household heads. and maintenance of piped water, electricity and gas, Unfortunately, the programme entered into operation sewage facilities, highways and local roads, schools, only in March 2011, two years after the emergence of hospitals, and other socially important facilities.11 Similar the crisis and therefore had little effect on mitigating the programmes were also implemented in Africa. Kenya effects of the downturn. launched the Kazi Kwa Vijana (KKV) programme in April 2009, aiming to employ youth in rural and urban areas through labour intensive public works implemented 11 The strategy also includes creating up to 63,100 “social jobs� (up by different line ministries. Botswana introduced the to six months, with a wage subsidy of 50 per cent of wage costs) Ipelegeng programme in July 2008 to create temporary plus 34,400 fully subsidized jobs for six months for graduates. 19 4 Programmes to Facilitate Job Matching and Preserve Skills Supply-side measures used in response to the crisis to services being used by 53 percent of the sampled facilitate job matching and preserve skills include public countries, training for the employed being used by 49 employment services (PESs) and training interventions. percent, and training for the unemployed being used High-income countries relied predominantly on public by 58 percent. Additionally, low- and middle-income employment services, with 82 percent of the sample, and countries relied almost equally on general training for training for both the employed, with another 82 percent youth, with 44 percent of the sampled countries, and of the sample, and the unemployed, with 77 percent of training for unemployed and disadvantaged youth, with the sample. Low- and middle-income countries also 35 percent of the sample (Figure 14). relied on these three measures, with public employment Figure 14: Number of Countries Adopting Active Labour Market Policies (%) 82% 82% 77% 58% 53% 49% 44% 45% 35% 32% 11% 9% 9% 5% Low-and middle-income countries High-income countries PES & administration Training for employed Training for unemployed Measures for unemployed and disadvantaged youth General youth training measures Vocational rehabilitation Work for disabled Source: Based on full sample of 77 countries of ILO/WB inventory of policy responses to crisis. 21 Figure 15: Budget Allocated for Active Labour Market Policies in US$ Billions at PPP (%) Low- and middle- income countries High-income countries Vocational Work for Training for rehabilitation disabled employed 0% 0% 18% Training for unemployed Training for Measures for PES & adm. unemployed 43% 31% unemployed and 44% disadvantaged PES & adm. youth Work for 15% 16% disabled Training for General youth 1% employed training measures General youth 20% Vocational 6% training measures Measures for unemployed 2% rehabilitation and disadvantaged youth 1% 3% Source: Based on full sample of 77 countries of ILO/WB inventory of policy responses to crisis. The budgets in Figure 15 change the ranking of the however, high caseloads resulted in a reduction in the policies. High-income countries prioritized training for numbers of jobseekers being placed in both 2008 and the unemployed with 44 percent of the budget, followed 2009, with the largest percentage decline in placements by training for the employed with 18 percent of the in the Republic of Korea (-33.1 percent) and Australia budget, targeted unemployed youth with 16 percent (-20.4 percent). of the budget, and public employment services with 15 percent of the budget. Low- and middle-income Several countries significantly increased the funding of countries prioritized public employment services with “traditional� employment programmes provided through the public 43 percent of the budget, followed by training for the employment services (see Table 3). Judging from the number unemployed and the employed with, respectively, 31 of beneficiaries, the most popular programmes tended to percent and 20 percent of the budget, and very little be career counselling and professional orientation, job- going to target youth. search assistance, and training (see below). Latvia, for example, increased the number of beneficiaries of job The country budgets for supply-side measures that stand search assistance and counselling programmes from 65,300 out are those for the United States with approximately beneficiaries in 2008 to 171,800 in 2009, and Kazakhstan US$14 billion in PPP terms, Italy with US$10 billion, from 130,000 to 250,000, respectively. Chile with US$9 billion, Mexico with US$8 billion, Turkey with US$5 billion, and France with US$3 billion To serve more beneficiaries, several countries increased (Figure 16). the number of staff in the PESs relative to 2008.13 Other countries, instead, reallocated functions, putting more Most high-income countries responded to the surge in the staff to work as front-liners (e.g. Bulgaria, Latvia, and number of jobseekers by increasing PESs staff levels. Over Moldova). In general, however, the estimated number the past three years, the increase in Germany, Hungary, of beneficiaries of employment services remained low. and Japan has been around ten percent.12 Austria has allocated additional PESs resources to provide job- search assistance to youth. People with short-term 12 See OECD, 2010. “Employment Outlook 2010: Moving beyond contracts benefited from additional resources in France. the Jobs Crisis.� Organization for Economic Co-operation and Several countries have also expanded the role of private Development, Paris employment services to provide supplementary capacity For example, in Estonia the number of staff increased from 352 to 13 (e.g. France, Italy, and the Republic of Korea). In general, 455 in 2009, and in the Russian Federation from 36,400 to 42,300. 22 JOINT SYNTHESIS REPORT 2012 Figure 16: Budget Allocated for Active Labour Market Policies by Country in US$ Billions at PPP 16 14 Budget in US$ billions at PPP 12 10 8 6 4 2 0 Australia Bahrain Canada Chile Colombia Czech Republic Egypt France Germany Hungary India Ireland Italy Kazakhstan Kenya Latvia Malaysia Mexico Netherlands Pakistan Panama Poland Republic of Korea Spain Sweden Thailand Turkey United Kingdom United States Source: Based on full sample of 77 countries of ILO/WB inventory of policy responses to crisis. Among countries where data are available, the share intermediation, and job-searching. This was the case, for of participants in employment services compared to instance, in Argentina, Chile, Peru, and Mexico. As an the annual stock of registered unemployed was the example, Mexico allocated additional budget funds to the highest in Kazakhstan and Montenegro, at around 25 National Unemployment Service to extend hours and percent. In the other countries, this share was less than improve services. 5 percent.14 In Latin America, at least four countries resorted to policies to support job-searching. In most cases, the intervention Preserving Skills through Training consisted of reinforcing the core functions of public employment offices, including counselling, Training measures are complementary to public employment services, providing individuals with training and skill certificates required by employers. Budgets for Employment Services in Table 3:  The most frequently used training policies following Selected ECA Countries (% of GDP) the crisis included measures providing vocational training, life-skills coaching, language training, and Country 2008 2009 skills training for vulnerable groups such as young Estonia 0.04 0.12 people (see Box 3). Latvia 0.06 0.24 Bulgaria 0.04 0.39 In European countries, training programmes played a prominent role, focusing on the unemployed (often youth) and workers who Montenegro 0.39 0.50 Armenia 0.03 0.02 Source: National PESs; GDP data are from the International Monetary Fund (IMF), World Economic Outlook Database, April 2010. Note: GDP 14 Annual stock of registered unemployed: the number of registered estimates for Bosnia and Herzegovina, Croatia, Montenegro, and by the PES unemployed at the beginning of the year plus inflow of Slovenia are for 2009. the newly registered unemployed during the year. 23 would have been laid off. Some countries, such as Germany providing incentives to preserve jobs. Chile’s ambitious and Sweden, expanded existing training programmes fiscal stimulus plan also included provisions giving tax by up to 36 percent of the labour force. Training credits to firms that carry out training activities with programmes were often part of employment services their workers. and were provided by accredited providers as well as the companies themselves. In such cases, the employment In Africa and Asia, it was more common to observe service paid full social security contributions and training programmes operating outside traditional technical costs. In addition, as discussed above, some of the work- vocational education training (TVET), on-the-job sharing arrangements, such as the one in Germany, training (OJT), and employment services. A good were conditional on training. In Latvia, for instance, the example can be found in Mauritius. In May 2010, the number of participants in training programmes increased Government announced that its National Employment from 8,600 in 2008 to 29,200 in 2009, and in the Russian Foundation would run a “Work cum Training� Federation, from 248,000 to 453,000. It is important to scheme. The programme targeted companies in the note that in some countries the private sector was actively manufacturing and tourism sectors that had been involved in the provision of labour market services, facing a reduction in their turnover and encouraged including training, as an integral part of PES reform.This them to send their employees for training instead of reduced the pressure on public budgets and provided laying them off. Training was provided for up to two a wider array of options for a diverse range of clients. days per week up to a maximum period of 18 months. By 2009, according to the national PES, there were 51 The authorities expected to prevent some 6,000 private employment agencies registered in Slovenia, 63 employees from being laid off while at the same time in Latvia, 531 in Bulgaria, 2,176 in the Czech Republic, improving their skills.15 and over 2,800 in Poland. Another relevant project was implemented in Thailand to train Support to training programmes was also very common in the unemployed. The so-called Tonkla Archeep (Career Latin America, although traditional services seem to have Sprout) intensive vocational training program aimed received priority relative to the more innovative programmes. to train 500,000 unemployed, soon-to-be unemployed, Colombia, for instance, doubled the number of training and new graduates. The program offered one month of slots through employment offices and training institutes, targeting youth in the 16–26 age range. Chile, Costa Rica and Mexico introduced training programmes 15 S. Cazes, S.Verick and C. Heuer: “Labour market policies in times for workers in enterprises affected by the crisis while of crisis,� Employment Working Paper No. 35 (Geneva, ILO, 2009). Interventions with a Focus on Specific Groups Box 3:  Interventions focused on young people the matching between demand and supply of labour Countries adopted public employment services, training, (Japan, the Netherlands, Peru, Saudi Arabia, and the and employment subsidy measures targeting youth in United Kingdom). In addition to vocational training order to deal with high unemployment rates following and skill certificates, which were also popular among the the crisis. The majority of countries adopted youth training measures, a number of other training programmes measures. Around 58 percent of the countries in the were adopted specifically targeting unemployed youth. policy inventory adopted at least one kind of youth For example, a number of paid and unpaid internships measure, including 53 percent of countries in Africa, and apprenticeships became available in Armenia, Cape America, and Asia; 67 percent of countries in the Middle Verde, Columbia, Ecuador, Kenya, the Republic of Korea, East; and 70 percent of countries in Europe.a Rwanda, Jamaica, the Netherlands, Switzerland, and Turkey. The public employment services offered job-search The above training measures not only targeted youth in assistance, counselling, and guidance in order to improve general, but also focused on employment of disadvantaged (continued on next page) 24 JOINT SYNTHESIS REPORT 2012 Box 3 (continued) youth (France, Nigeria, Senegal, and the United States). Most policy measures reported in the inventory were More specifically, in the United States two programmes implemented in high-income and middle-income were adopted for disadvantaged youth. The American countries. In addition, high-income countries had a Recovery and Reinvestment Act of 2009 provided wider portfolio of policy options, as can be seen from US$250 million for the Job Corps programme, seeking the “Europe� column in the table. For low- and middle- to improve the educational achievements of the students income countries, only six out of a possible eleven and increase participation of graduates in employment African countries reported youth employment measures, and education. Furthermore, the Youth Build programme focusing on three types of measures: vocational training, devoted an additional US$50 million for the training of support to entrepreneurship, and direct job creation. high school drop-outs and individuals who had been in Regarding budgets, the additional spending on youth the juvenile justice system. employment policies in 2008-09 with respect to pre- crisis levels represented on average 0.4 percent of GDP Employment subsidies, start-up incentives, and direct in the five African countries for which data are available.c job-creation measures were also carried out. Subsidies These policies could give valuable social protection were offered to employers in order to promote formal for vulnerable youth by offering public works and employment of individuals (Chile, China, Estonia, internships. Hungary, India, Italy, Latvia, and the Republic of Korea). Several countries, including Senegal and Spain, also Not all interventions were targeted exclusively at youth. supported start-up incentives in order to increase self- One in five of the programmes were open to persons of employment of youth. However, direct job creation for all ages or to other targeted groups. youth was a less popular measure during the crisis. Measures with a focus on disability Overall, 47 countries reported on support to youth During the crisis, a few countries, 12 percent of those during the period 2008-09, representing a total of 97 in the policy inventory, increased their spending on policy interventions. Documented interventions in the the integration and rehabilitation of disabled people. joint ILO/WB inventory sought to: (i) increase the labour For example, Peru and South Africa generated jobs for demand for youth through employment incentives, people with disabilities. Japan improved the integra- direct job creation, and support to entrepreneurship; tion of disabled workers by offering special services and (ii) strengthen the employability of youth through for those workers. Latvia increased employment sub- training, practical experience at the workplace, and a sidies for disabled individuals, and Estonia provided comprehensive approach for difficult-to-place youth. special training for the rehabilitation and integration Based on this typology, ten types of measures came out of disabled workers. of the inventory, to which social protection for youth was also added. This includes, for example, a food and accommodation allowance for unemployed youth in a Note that here the discussion is only regarding the number of coun- Cambodia. tries. These policies differ from each other according to the devoted budget and number of beneficiaries. Therefore, in order to compare In terms of frequency, most of the measures sought to the effect of these policies in different countries, further evaluation of the policies is necessary. improve the employability of youth rather than act on the demand for young workers. About 78 percent of b Betcherman, Gordon; Godfrey, Martin; Puerto Olga Susana, Rother reported policy measures focused on the supply side Friederike, and Stavreska Antoneta, (2007) “Global inventory of inter- ventions to support young workers: Synthesis Report�. World Bank, of the labour market. On the other hand, 20 percent Washington, DC. of measures supported the demand side. In a non-crisis c C. Saget and J.-F.Yao: “The impact of the financial and econom- context, an inventory of youth employment policy in ic crisis on ten African economies and labour markets in 2008–2010: 84 countries found that more than three-quarters of the Findings from the ILO/World Bank policy inventory,� Employment measures sought to assist the supply side.b Working Paper No. 100 (Geneva, ILO, 2011). 25 training and a cash allowance for three months to start to run their own business, which constitutes a substantial their businesses or find a job. As of September 2009, of portion of the estimated 572,000 unemployed Thai the 550,000 applicants, 173,000 had already completed workers in 2009.16 the training, while 134,000 were no longer in need of the training, having found a job in the meantime. According to government sources, Tonkla Archeep had already helped 16 See: http://www.nationmultimedia.com/home/Tonkla- 150,000 trainees to find jobs, and another 20,000–30,000 Archeep-target-to-be-lowered-amid-recovery-30111997.html. 26 5 Building Social Protection Systems and Protecting People Social insurance and social assistance programmes are the unemployment schemes, the most common form of crisis main instruments to provide income protection to workers response was the extension of cash transfers—which can in the case of a shock. The most common social insurance be implemented more quickly than social security schemes programmes include health insurance; old-age, disability, and discontinued once the crisis is over—and public work and survivorship pensions; and unemployment benefits. schemes. In low-income countries, food subsidies and, to The programmes are usually financed, at least in part, a lesser extent, public works were a common option. through workers contributions and pay-roll taxes. Social assistance programmes, on the other hand, include various In looking at unemployment schemes, 23 countries forms of targeted or universal cash or in-kind transfers adopted expansionary measures, by relaxing eligibility financed out of general revenues. requirements, extending the duration of unemployment benefits, or increasing the level of support; seven countries Confronted with increased needs, 69 countries expanded adopted both expansionary and austerity measures, for social insurance and social assistance programmes, example, reducing the level of benefits while extending while three took only austerity measures.17 There was their maximum duration; four countries adopted mainly also a clear trend towards expanding existing schemes austerity measures (Figure 17); three countries introduced rather than introducing new ones. With the exception a new unemployment scheme, all of which had been of public works, the frequency of policies consisting of planned before the crisis; and nine countries did not changes to existing schemes outnumbered the creation introduce any change. There are no unemployment of new schemes by a ratio of six to one. The planning schemes in the remaining 31 countries.18 and investments necessary for capacity-building make it difficult to introduce new schemes when there is a On pensions, 24 countries adopted expansionary measures, sudden need for social protection. In contrast, public for example, by increasing the level of the basic pension works have the advantage of being quicker to implement and discontinue after the need is over, although the most 17 See: F. Bonnet, C. Saget and A. Weber: “Social protection and innovative public works also take time to implement. minimum wages responses to the 2008 financial and economic crisis: Findings from the ILO/World Bank Inventory�, Employment The survey clearly demonstrates regional trends in terms Working Paper No. 113 (Geneva, ILO, 2012); see http://www.ilo. of responses. High-income countries were more likely to org/employment/Whatwedo/Publications/working-papers/ amend their unemployment benefit systems. In middle- WCMS_166606/lang--en/index.htm. income countries, most of them lacking established 18 ILO: World Social Security Report (Geneva, 2012, forthcoming). 27 Figure 17: Distribution of Social Protection Responses by Branches of Social Security 70 62 60 59 50 Number of countries 40 38 37 31 31 29 30 23 24 23 25 20 14 9 10 8 10 7 6 7 3 4 2 3 3 1 1 1 0 1 0 0 0 0 Unemployment Pension Health care Other social Social Public work/ scheme scheme scheme security branches assistance increased public investment in infrastructure Expansionary measures Introduction of new scheme Austerity measures Both expansionary & austerity measures No measures taken No unemployment scheme Source: Based on full sample of 77 countries of ILO/WB inventory of policy responses to crisis. or making a one-off transfer payment; two countries took Social Assistance Programmes/ both expansionary and austerity measures; seven countries adopted austerity measures,such as increasing the pensionable Transfers age or the required period of contribution (with effects mainly in the long run); and six countries introduced a new In many high-income countries, those without jobs who were not pension scheme, such as a non-contributory minimum eligible for unemployment benefits were often able to access social pension.The remaining 38 countries did not make changes assistance (welfare) and housing support payments. For example, to their existing pension schemes. in the United States, federal funding was provided for social assistance payments to the unemployed who had Fourteen countries reported expansionary measures in exhausted their unemployment benefits, while France healthcare systems, such as extended coverage or subsidies made one-off supplemental payments to social assistance for health insurance of particular groups. One country recipients. In Japan, another new support measure came introduced a new scheme (PhilHealth in the Philippines); in the form of government assistance for employers who the scheme was not introduced as a response to the crisis, continued to provide housing to laid-off workers. An but coverage was expanded and benefits increased as a interesting intervention took place in Canada where, as part response to the global crisis. Three countries adopted of the Economic Action Plan, the Wage Earner Protection austerity measures within their healthcare systems. Program (WEPP)19 was expanded in January 2009 to In the area of social assistance, the inventory provides information on measures taken by 46 countries, including 19 The Wage Earner Protection Program (WEPP) is a targeted 37 that expanded social assistance, such as food subsidies federal programme that came into effect on 7 July 2008. Employees and poverty eradication programmes. New programmes who lost their employment as a result of the bankruptcy or of social assistance were adopted in eight countries, while receivership of their employer are provided with financial one country introduced austerity measures. assistance through the WEPP. 28 JOINT SYNTHESIS REPORT 2012 include coverage of termination and severance pay. This existing social assistance cash transfer programme to expansion was intended, essentially, to protect workers in support households living with orphans and vulnerable firms who could not afford to pay severance pay. It raised, children (CT-OVC). The additional funds aimed to of course, the risk of moral hazard regarding the provision at least double the number of households covered by of reserves to cover liabilities related to severance pay. the programme (from around 48,000 in June 2009 to approximately 115,000 households by the end of June Conditional cash transfers (CCT) were most common in Latin 2010). In Bangladesh, the government expanded the cash America where, prior to the crisis, they had been implemented transfer programme for the well-being of the financially in 15 countries, covering an estimated 22 million households insolvent disabled, poor lactating mothers, orphan (over 90 million people or 16 percent of the region’s population). students, disabled students, and those affected by disaster. Most countries expanded these programmes, thus protecting the incomes of the poorest. For example, in Some of the evidence suggests that countries that were Brazil, the Bolsa Familia programme quickly responded better able to protect the most vulnerable during the by expanding coverage to 12 million families and recent crisis already had well-functioning social security increasing the amount of transfers by 10 percent in 2009. schemes in place. When such systems were not in place, Colombia’s Familias en Acción, a programme focusing policy-makers’ options for responding effectively to the on strengthening nutrition and education for children, crisis were far more limited, and they were forced to expanded to an additional 1.5 million families. Mexico’s turn to less efficient interventions such as general food Oportunidades increased benefits paid by US$1.5 billion. subsidies or temporary workfare programmes, which Paraguay expanded the Tekepora programme, reaching an were costly and had a limited impact.21 additional 120,000 poor families for a total coverage of 600,000 people (which is half of the country’s population Before the crisis, CCTs made important contributions to living in extreme poverty).20 One country in the poverty reduction in at least some of the countries where they inventory that did not previously have CCTs in place, had been implemented. These reductions arose essentially Barbados, implemented these programmes in 2009. because CCTs benefits had been unusually well targeted, and were not substantively offset by labour-supply Other types of transfer were also used during the crisis. disincentives.22 Thus, the combination of geographical Countries with non-contributory pensions or non- targeting and proxy means-testing used by many CCTs contributory health scheme expanded these programmes. Examples from the inventory include Argentina and El Salvador. Countries such as Panama relied instead on 20 ECLAC: “The reactions of Governments of the Americas to the in-kind transfers (mainly food programmes). At the International Crisis: An overview of policy measures up to 31 May other extreme, Argentina expanded the coverage of 2009� (Chile, United Nations, 2009). family allowances—a benefit typically offered for those 21 See Ferreira, Francisco, and David Robalino “Social Protection covered by social security—to informal sector workers. in Latin America: Achievements and Limitations.� (2011) in: Although there is no evidence about the incidence of the José Antonio Acampo and Jaime Ros (eds) “Handbook of Latin programme, it classifies as one of the few interventions that American Economics�. Oxford: Oxford University Press. could have benefited non-poor informal sector workers. 22 See assessments for Mexico (Skoufias, Emmanuel, and Vincenzo Chile also introduced an extraordinary benefit of 40,000 di Maro. 2006. “Conditional Cash Transfers, Adult Work Incentives, and Poverty.� Policy Research Working Paper 3973, World Bank, Chilean pesos (US$67) for families and individuals who Washington, DC.), Ecuador (Edmonds, Eric, and Norbert Schady. benefit from certain social programmes (Subsidio Familiar, 2008. “Poverty Alleviation and Child Labor.� NBER Working Paper Asignación Familiar, Chile Solidario, Asignación Maternal). 15345, National Bureau of Economic Research, Cambridge, MA.) and Cambodia (Filmer, Deon, and Norbert Schady. 2009. “Are In Africa and Asia, cash or in-kind transfers were implemented in There Diminishing Returns to Transfer Size in Conditional Cash most of the countries surveyed. In-kind transfers seemed to be Transfers?� Policy Research Working Paper 4999, World Bank, more prevalent than in other regions and continued to be Washington, DC.). Although one paper (Bourguignon, Francois, Francisco Ferreira, and Philippe Leite. 2003. “Conditional Cash an important mechanism to protect workers. Nonetheless, Transfers, Schooling, and Child Labor: Micro-Simulating Brazil’s more governments introduced/expanded in-cash social Bolsa Escola Program.�World Bank Economic Review 17 (2): 229– assistance schemes. In Africa, the government of Kenya 54. ) find little effect of (the older) Bolsa Escola program on child invested considerable effort and funds to expand an work, Edmonds and Schady (2008) find a bigger impact in Ecuador. 29 to identify beneficiary households proved to be one of existing unemployment scheme, workers did not spend the main sources of their success. For instance, Mexico’s enough time in a formal sector job to be eligible for Oportunidades delivered 45 percent of all benefits to the benefits (this seems to be common among youth).26 Third, poorest 10 percent of its population, while programmes some workers were unemployed long enough for their in Chile and Jamaica achieved shares of 35–40 percent for benefits to expire, and no complementary unemployment the bottom decile.23 provision (usually unemployment assistance) existed to further provide an income replacement (at a lower level). Although CCTs can be an important component for crisis- response, they are challenging to implement well and are A number of countries increased the coverage of unemployment primarily a tool to provide social assistance. At a minimum, any benefits, mostly high-income and upper middle-income countries. programme should include a reliable database of registered Unemployment benefit rules changed in several Eastern European households and management information systems, and Central Asian countries, both in terms of the duration and level payment and delivery mechanisms, and tools for basic of benefits. In Poland, the social unemployment subsidy was monitoring, oversight, and control. There are then three extended from 12 months to 18 months in 2009, while in challenges that need to be addressed.The first is improving Romania it was extended from six months to nine months. the management of conditionalities and the quality of In the Czech Republic, the duration of unemployment supply-side interventions. In countries such as Ecuador, benefits was extended by one month, favouring adults for instance, conditionalities exist but are not enforced. In relative to young workers (if the person was aged below 50, all cases, the low quality of education and health services the benefit was paid for six months; if the age was between is a serious implementation constraint and reduces the 50 and 55 it was paid for nine months, and above the age of impact of the programmes. Second, it is necessary to adapt 55 it was paid for 12 months).The Czech Republic, like the the programmes to urban areas, where issues related to Russian Federation, also increased the level of benefits (for incentives and targeting are likely to be different.24 Finally, the first two months from 65 to 80 percent of the average enrolment, registration, and recertification systems are net monthly salary of the unemployed person, for the next critical, particularly during a crisis. The long-term goal two months from 50 to 55 percent, and for the remaining is to have more flexible arrangements to manage flows in months from 45 to 55 percent).27 and out of the system, so that poor families do not have to wait to receive benefits, and those whose income has increased past a given threshold can graduate from the 23 See Chapter 3 in Fiszbein, Ariel, and Norbert Schady. 2009. programmes. Because of the administrative demands this “Conditional Cash Transfers: Reducing Present and Future entails, CCTs by themselves are not an adequate substitute Poverty.� Policy Research Report, World Bank, Washington, DC. for social insurance programmes, and can be subject to 24 See Ribe, Helena, David Robalino, and Ian Walker. 2010. fiscal instability. Achieving Effective Social Protection for All in Latin America and the Caribbean: From Right to Reality. Washington, DC: World Bank. 25 Source: ILO, 2010: World Social Security Report 2010/11: Unemployment Benefits Providing coverage in the time of crisis and beyond. http:// www.socialsecurityextension.org/gimi/gess/RessFileDownload. For the majority of countries, protection against do?ressourceId=15263 unemployment relied essentially on severance pay. Even 26 See Robalino, David, and Helio Zylberstajn. 2009. “Ex-Ante among the countries that implemented unemployment Methods to Assess the Impact of Social Insurance Policies on benefit schemes, however, coverage was very low. Labor Supply with an Application to Brazil.� Policy Research Globally, only, 15.4 percent25 of the unemployed were Paper 5027, World Bank, Washington, DC and Chapter 2 in Ribe et al. (2010). likely receiving benefits for at least three reasons. The first and most important reason is the absence of 27 As the recovery takes place, a few countries are tightening the regulations concerning unemployment benefits. In Hungary, the an unemployment scheme to provide such benefits government is implementing a programme called “The Way to (worldwide, 57.2 percent of all countries do not have any Work, which restricts the eligibility criteria of welfare provisions unemployment scheme providing periodic cash benefits; for long-term unemployed who have already exhausted the the proportion is 40 percent among the 77 countries duration of their benefits. The rationale behind this measure is to covered by the inventory). Second, when there was an encourage more effective training and jobseeking activities. 30 JOINT SYNTHESIS REPORT 2012 In Latin America and the Caribbean, most countries that had to increase its coverage and improve members’ benefits in established unemployment benefit systems also expanded them response to the global crisis. The gradual implementation during the crisis. This was the case in Argentina, Brazil, of the package planned to increase benefits by 35 percent Chile, Colombia, and Uruguay. In these countries, the began, and coverage was extended with the help of duration of unemployment benefits was extended either local government units providing funding for insurance in specific sectors or across sectors aiming at protecting premiums of selected “indigent families.� The government formal workers from longer unemployment spells. Brazil, of Trinidad and Tobago has increased the Public Assistance for instance, extended the duration of unemployment Grants designed to provide financial aid to adults who are benefits by two months, but only for those sectors most unable to work because of ill health. affected by the crisis, such as mining and metalwork. In Chile, unemployment insurance was expanded to Where access to health care and health insurance is linked to cover workers with fixed-term employment or service employment, workers who become unemployed (and their contracts for up to two months at replacement rates of families) not only lose their jobs—and thus their sources 35 percent of income. Mexico does not have a proper of income—but simultaneously they lose affordable health unemployment benefit system but, during the crisis, the services when they need them. Measures that protect the government issued regulations to facilitate the withdrawal unemployed from losing access to health care and other of savings from the mandatory individual pension social services or benefits are, thus, crucial but often accounts. However, this would not be sustainable in the forgotten elements of the design of any scheme providing medium to long run. There is no systematic information protection to those affected by unemployment. In the to look at the incidence of unemployment benefits in course of the crisis, some of the countries have addressed Latin America and the Caribbean but, as in the case of this particular issue, notably the United States, by providing ECA, coverage rates were quite low.28 For example, in a 65% subsidy to help people who have lost their jobs or Argentina it is estimated that only between 7 percent have experienced reductions in hours to purchase health and 13 percent of the total unemployed population insurance, thereby allowing individuals to maintain their were covered by unemployment insurance in 2008. The health insurance by paying only 35% of the premiums. extension of benefits in the case of Brazil reached only 216,500 workers out of an estimated 7–8 million total Jamaica was one of the few countries to document unemployed.29 contractionary measures related to health-care insurance, noting the need for austerity measures in the face of financial constraints as a result of the crisis. At the same Health Care Revisions to health-care policy were less prevalent than 28 A recent study shows that the coverage of unemployment benefits is even lower than that of old-age pensions. Less than 20 employment-related measures during the crisis, with a per cent of the labour force in countries that have implemented total of 14 countries recording changes.30 These include the systems are likely to be covered. This is, in part, because measures specifically targeting the poor and other measures eligibility also depends on the number of months of continuous that protect the unemployed from losing their access to contributions to the social security system (see Ribe et al., 2010). health care. Ghana provided state support towards health- 29 In other regions, the prevalence of unemployment benefits is care premiums for the poorest of the population by paying much lower. In Africa, only Algeria, Egypt, Jordan, Mauritius, the health insurance premium for 28,434 households in Morocco, and South Africa have some form of unemployment addition to the subsistence allowance received by them. benefits programme. In Asia, only Indonesia,Thailand, andVietnam have such a programme in place (see Pham, 2009. “Impact of India expanded a health-care insurance scheme for the the Global Financial and Economic Crisis on Vietnam: A Rapid informal sector and Below Poverty Line (BPL) families. Assessment.� ILO (Bangkok) and ILO, 2010,World Social Security Japan increased medical services for the elderly and those Report ILO (Geneva). in remote areas. In the Philippines, PhilHealth provides 30 F. Bonnet, C. Saget and A. Weber: “Social protection and health insurance for around 66 percent of the population minimum wages responses to the 2008 financial and economic (coverage is almost 100 percent for formal workers and 50 crisis: Findings from the ILO/World Bank Inventory�, percent for informal workers). The scheme was mandated Employment Working Paper No. 113 (Geneva, ILO, 2012). 31 time, an increase in spending by at least 25 percent in the self-employed. Through this scheme, the government the financial year 2010–11 (0.3 percent of GDP) on provides matching contribution for the equivalent of 5 targeted social assistance programmes was planned, percent of declared earnings for a period of five years. including some health components such as the school Nigeria made a proposal to introduce a universal basic feeding programme and the Programme of Advancement pension scheme that attempts to include the informal through Health and Education (PATH). sector in the social security system, while Colombia increased the coverage of the assistance programme for Mali was the only country that implemented a new the elderly. health-care scheme in 2009. However, this move had been planned since 2006 and so should not be recognized Several countries increased the level of pension benefits, as a direct policy response to the crisis. particularly for non-contributory pensions targeting the poor. Several examples of increases in the benefit level of non-contributory pension were reported in the inventory (Barbados, CapeVerde, Costa Rica, Lesotho, and the Russian Pensions Federation). Some other countries—notably developed— provided, as an immediate and temporary measure, a Another social security area where there were a number supplementary one-time, or at least temporary, benefit to of revisions was pensions. Changes were almost universally the elderly, sometimes in-kind (food support to pensioners expansionary, with 14 countries increasing benefits or in Paraguay). Among the countries that implemented such lowering the level of contributions, widening the scope of measures are Bulgaria (old-age supplements to pensions), eligibility for benefits to groups that were not previously Germany (“extended pension guarantee� to maintain covered, sometimes through significant structural reforms. pension level to stabilize domestic demand), Italy (bonus for pensioners “Bonus famiglie�),Thailand (distribution of Several countries adopted reforms, often not as a direct 500 Thai baht (THB) (US$7.2) allowances per month, to response to the crisis, but with a view to increasing about 5 million senior citizens for a period of six months), coverage and/or improving effectiveness and efficiency31 the United Kingdom (£60 (US$103) paid to all pensioners (such as reform of the public pension scheme in Uganda in 2008), and the United States (a one-time payment to to improve efficiency). Among structural reforms, retirees, the disabled, and social assistance recipients). Argentina, Chile, Colombia, Malaysia, and Nigeria can be mentioned. The government of Argentina launched a A number of countries revoked wholly or partially the wide-ranging stimulus package, including major structural pension reforms of the 1990s or early 2000s that sought reforms, such as the re-nationalization of the pension to privatise a part of the social security pension schemes. system and reductions in social security contributions. The reversals were largely due to the high budget burden. Chile also adopted, earlier than originally planned, some Examples are Argentina, Estonia, Hungary, Latvia, and of the structural reform measures planned before the crisis, Poland. establishing a solidarity pension system that benefits those who, for various reasons, fail to save enough to finance a decent pension. The objective for many countries was clearly to extend coverage to the uncovered, particularly 31 For an overview see: Robalino, David A., Aleksandra Posarac, workers in the informal economy and the poor. As an Friederike Rother, Michael Weber, Arvo Kuddo, and Kwabena Otoo, 2012. “Towards Smarter Worker Protection Systems: example, the government of Malaysia established the Improving Labor Regulations and Social Insurance Systems Malaysia Retirement Savings Scheme, administered by the while Creating (good) Jobs�. SP Discussion Paper. World Bank, Employees Provident Fund (EPF), to provide pensions to Washington, DC. 32 6 Minimum Wages One issue which has emerged during the crisis concerns illustrate these different aspects of wages. Out of 77 the link between wages within a country and its countries surveyed, 33 countries reported changes in the aggregate demand for wages and services. On the one minimum wage over the period mid-2008 to end 2010 hand, a country’s low wages, relative to its productivity (Figure 18). Among countries that changed their level of growth, may help to reduce its unit labour costs and minimum wage during the crisis, 21 had negative growth increase its exports. On the other hand, low wages rates in 2009, while 30 at least halved their growth in depress household consumption. Minimum wage 2009, illustrating the levels at which these countries were policies followed by countries surveyed in the inventory affected by the crisis. Among countries adjusting the level of their minimum wage during the crisis period, 16 increased it in real Figure 18:  Changes in the Minimum Wage: terms, ten increased more or less in line with the July 2008–end 2010 consumer price index (CPI), while six increased it by less than the CPI, and only one cut its level temporarily. Low- and middle-income countries Thus, minimum wage policy was an important element of countries’ responses to the crisis, in contrast to the Increase in minimum wage>cpi experience of earlier crises in Africa, Asia, and Latin 21% America.32 The countries that utilized minimum wage policies as a crisis-response instrument are at various stages of development and include export economies, as well as countries hit by the food crisis and those which experienced a severe recession, thus providing a broad Increase in representation of experience in using the minimum wage minimum Countries without as a policy response. wage=cpi Increase in minimum national minimum 13% wage