World sinks into misery as policies flop

World sinks into misery as policies flop

Some four years after the Great Recession, monetary and fiscal economic policies of the US and other major economies have failed to dent the "misery index" (MI).

This index, devised by the late economist Arthur Okun, is a combination of the unemployment and inflation rates. Arguably it is a better guide to the welfare of nations' inhabitants, as it takes into account not only the unfortunate jobless but strains on the underemployed, the working populace, especially lower and middle income groups and pensioners.

It now appears that quantitative easing (QE), or major monetary expansion undertaken by the US Federal Reserve Board, UK and the eurozone has failed to ease the misery.

Even with governments and central bankers sweeping inflation dangers to the side and concentrating on unemployment, the progress has been dismal. The International Labour Organisation (ILO) estimates that some 197 million people were without jobs in 2012. Moreover, some 39 million people have dropped out of the labour market as job prospects have proved unattainable.

"Even with an acceleration of growth, the global unemployment rate is expected to remain at 6 per cent up to 2017, not far from its peak level in 2009," states the ILO. "At the same time, the global number of unemployed is expected to rise further to some 210.6 million over the next five years."

"Those regions that have managed to prevent a further increase in unemployment often have experienced a worsening in job quality, as vulnerable employment and the number of workers living below or very near the poverty line increased," says the ILO.

Currently, some 73.8 million young people are unemployed globally and the slowdown in economic activity is likely to push another half million into unemployment by 2014, according to the ILO. The youth unemployment rate - which had already increased to 12.6 per cent in 2012 - is expected to increase to 12.9 per cent by 2017. The crisis has dramatically diminished the labour market prospects for young people, as many experience long-term unemployment right from the start of their labour market entry, a situation that was never observed during earlier cyclical downturns.

Some 35 per cent of all young unemployed have been out of a job for six months or longer in advanced economies, up from 28.5 per cent in 2007. As a consequence, an increasing number of young people have become discouraged and have left the labour market.

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