The world's rich countries need to extend initiatives to boost spending and support employment to fix a dire labor market that could threaten entire societies, the International Monetary Fund said on Monday.
At a conference co-hosted by the IMF and the International Labor Organization, visiting Spanish Prime Minister Jose Luis Rodriquez Zapatero said high unemployment may trigger a crisis of confidence in Europe.
The IMF said more and more workers worldwide were unable to find jobs for longer periods, weakening social cohesion and raising risks of unrest and even undermining democracy.
The labor market is in dire straits, IMF Managing Director Dominique Strauss-Kahn told the one-day meeting, adding that the Great Recession had left a wasteland of joblessness. We must acknowledge that the crisis will not be over until unemployment declines significantly, he said, calling growth and jobs the most urgent problems.
According to International Labor Organization (ILO) data, 30 million people have lost their jobs since 2007 -- three-quarters of them in the developed world. A further 23 million would be without a job if not for stimulus packages.
The IMF said that extended fiscal stimulus was worth the additional debt if it helped cut long-term unemployment, which imposes an even costlier burden on society as workers get discouraged, lose lifetime earnings or leave the labor market.
PESSIMISM AND STRIKES
Zapatero said longer periods of high unemployment could set off a confidence crisis in the European Union, which has been rocked by high debt and financing fears from Greece to Portugal.
The worst crisis would be a crisis of pessimism, of a lack of confidence, of resignation. Europe must not fall into that, he said, adding that job training would be the top priority for Spain, where 20 percent of the workforce is without a job.
We have to bring new oxygen into our democratic institutions, Greek Prime Minister George Papandreou said.
European Commissioner for Employment and Social Affairs Laszlo Andor said 2010 had been an annus horribilis for unemployment. If we fail to act ... 2011 may still turn out to be the annus horriblis for social cohesion.
Ahead of planned strikes in several EU countries, such as France, Greece and Spain, ILO director general Juan Somavia said it was natural for trade unions to protest and help vent steam in societies hurt by job losses -- but they should also be involved in brokering deals to keep the economy going.
IMF'S CHANGING FACE?
The IMF said that given the extent of the crisis, it now backs schemes to extend unemployment benefits to help maintain demand and morale, and to give short-term incentives to companies to retain more workers but at reduced hours and wages.
Strauss-Kahn defended the IMF's focus on jobs and concerns over the impact of long-term unemployment, saying it was a misleading caricature to think that the fund cared only about the austerity cuts usually associated with its programmes.He said unemployment was about far more than just a pay check.
In developed countries, the jobless had poorer health and their children performed worse at school, while in poorer states unemployment led to violent conflict, even war, he said.
The ILO estimates some 443 million people will seek to join the global workforce over the next decade, compared with 210 million currently without a job, raising the specter of a lost generation. Somavia called on governments to extend measures to foster a still fragile recovery and jobs.
But Iain Duncan Smith, Britain's Secretary of State for Work and Pensions, disagreed, telling Reuters: Everyone is throwing out a lot of stimulus, but to lesser and lesser effect.
We think it's time to start pulling that back, he said. If it goes on, we will start to squeeze out the private economy so it won't have room to grow.
(Additional reporting by Alister Doyle and Joachim Dagenborg, writing by Wojciech Moskwa; Editing by Ruth Pitchford)