A new study by the International Labour Office (ILO) highlights that people’s economic security promotes personal well being, happiness and tolerance, while benefiting growth and development. Published: 2.09.2004 |
The report, “Economic Security for a Better World
,” includes estimates for countries representing
more than 85 percent of the world’s population,
and says such economic security—coupled with
democracy and government spending on social
security—not only benefits growth but can also
promote social stability.
The report cautions, however, that economic
security remains out of reach for the vast
majority of the world’s workers, about
three-quarters of whom live in circumstances of
economic insecurity that fosters what the report
calls “a world full of anxiety and anger.”
Only 8 percent of people—fewer than one in
ten—live in countries providing favourable
economic security, said the survey produced by the
ILO’s Socio-Economic Security Programme.
“Coming shortly after the report of the World
Commission on the Social Dimension of
Globalization, this book should enrich the debate
on how we can build a fair globalization,” says
ILO Director-General Juan Somavia. “Unless we can
make our societies more equal and the global
economy more inclusive, very few will achieve
economic security or decent work.”
The report marks the first attempt to measure
global economic security as perceived by ordinary
people and was based on detailed household and
workplace surveys covering over 48,000 workers and
more than 10,000 workplaces worldwide. Economic
security is measured on the basis of seven forms
of work-related security including income, labour
markets, employment, skills, work, jobs and
representation.
Key findings
People in countries that provide their citizens
with a high level of economic security have a
higher level of happiness on average, as measured
by surveys on national levels of life-satisfaction
and happiness, the report finds. The most
important determinant of national happiness is not
income level – there is a positive association,
but rising income seems to have little effect as
wealthy countries grow wealthier. Rather, the key
factor is the extent of income security, measured
in terms of income protection and a low degree of
income inequality.
In addition, the report finds that a high level of
skills security, measured by an index
incorporating indicators of schooling and
training, is actually inversely related to well
being when jobs are poorly attuned to the needs
and aspirations of people, especially as they
become more educated and acquire more
competencies. At present, too many people are
finding that their skills and qualifications do
not correspond to the jobs that they have to
perform, resulting in what the report calls a
“status frustration” effect.
The report shows that political democracy and a
trend towards civil liberties significantly
increases economic security and that government
spending on social security policies also has a
positive effect. But there is only a weak impact
of economic growth on security, measured over the
longer-term. In other words, rapid growth does not
necessarily create better economic security,
although it sometimes can do it if accompanied by
appropriate social policies.
In looking at national levels of economic
security, countries are divided into four clusters
– Pacesetters (with good policies, good
institutions and good outcomes), Pragmatists (good
outcomes in spite of less impressive policies or
institutions), Conventionals (seemingly good
policies and institutions but with less impressive
outcomes) and Much-to-be-Done countries (weak or
non-existent policies and institutions, and poor
outcomes).
Many wealthy countries could easily achieve more
economic security for their citizens, since the
report shows that some lower-income countries
achieve higher levels than some of the rich
countries. Indeed, the ILO analysis finds that the
global distribution of economic security does not
correspond to the global distribution of income,
and that the countries in South and South-East
Asia have a greater share of global economic
security than their share of the world’s income.
Whereas South Asia has about 7 percent of the
world’s income, it has about 14 percent of the
world’s economic security. By contrast, Latin
American countries provide their citizens with
less economic security than could be expected from
their relative income levels, the report says.
Indeed being insecure has resonance in people’s
attitudes, which at times can be detrimental to
their ideas of a decent society. In a recent
survey undertaken by the Latinobarometro in Latin
American countries, 76% of the people surveyed
were concerned about not having a job the
following year, and a majority said that they
would not mind a non-democratic government if it
could solve their unemployment problems.
A feature of the findings is that only countries
that provide a coherent set of policies that
strengthen all seven forms of labour security have
a high score on overall economic security.
Countries with very strong attainment in some
spheres but with weak attainment in one or more
others do not do well overall.
The report also finds that “income security is a
major determinant of other forms of labour-related
security” (p.296), and that income inequality
worsens economic security in several ways. “The
message is,” the report concludes, “that highly
unequal societies are unlikely to achieve much by
way of economic security or decent work.”
The analysis shows that there has been an upward
trend in the frequency and severity of economic
shocks during the recent period of globalization
(since 1980), as well as a coincidental growth in
the number of natural disasters affecting very
large numbers of people. It also shows that,
excepting the two most populous nations (China and
India), globally, and particularly among
developing countries, economic growth rates in per
capita terms have declined while the variability
of annual economic growth rates has increased (see
chapter 2), implying more national economic
insecurity, contrary to predictions often made by
those pushing for rapid economic liberalization.
The ILO report notes that these trends are
important because they show that more people are
being exposed to systemic risk, rather than
contingency risks. The latter are due to
individual life-cycle events, such as individual
unemployment or illness, which are covered by
standard social security systems. People are far
less able to prepare for shocks that affect whole
communities and regions.
The ILO report also shows that for developing
countries, the national level of economic security
is inversely related to capital account openness
(Chapter 11), implying that it would be sensible
for developing countries to delay opening their
capital accounts until institutional developments
and social policies were in place to enable their
societies to withstand external shocks. In other
words, countries should postpone opening their
financial markets until they have the
institutional capacities to handle fluctuations in
confidence and the impact of external economic
developments.
Besides drawing on a global databank of national
policies, the report uses statistics from a series
of People’s Security Surveys carried out in 15
countries, in which over 48,000 working people
were interviewed about their work, the
insecurities they experience, and their attitudes
to inequality and related aspects of social and
economic policy.
Respondents were asked about their attitudes to
various aspects of economic insecurity and
inequality. A majority everywhere favoured more
support for the economically vulnerable and a
desire to reduce inequality (see Chapter 12). The
report says survey data show that economic
insecurity fosters intolerance and stress, which
contribute to social illness and ultimately may
lead to social violence.
Among other findings are the following:
most workers in developing countries are unaware
of trade unions, which in most countries represent
under 10 percent of workers;
women usually experience more insecurity on
average than men and face more types of
insecurity;
employment security is diminishing almost
everywhere, due to the informalization of economic
activities, outsourcing, and regulatory reforms
(Chapter 6);
a large number of people possess skills that
they do not use in their work;
job security (the possession of a position
giving good prospects of satisfying work and a
career) is weak in most countries, and data from
the People’s Security Surveys highlights
wide-spread job dissatisfaction (chapter 9).
Finally, the analysis considers a wide range of
policies to determine which offer the best
prospect for providing greater levels of economic
security, particularly in developing countries. To
evaluate such policies, it proposes a novel
approach, evaluating them on the basis that they
should offer the strong prospect of reducing the
economic insecurity of the most insecure groups in
society and of not imposing controls and
“unfreedom” on intended beneficiaries.
The ILO analysis concludes that conventional
social security systems are inappropriate for
responding to the new forms of systemic risk and
uncertainty that characterize the emerging global
economic system (Chapter 14). Accordingly,
governments and international agencies should
promote universalistic, rights-based schemes that
provide people with basic economic security,
rather than resort to selective, means-tested
schemes.
For further information, please contact the
Socio-Economic Security Programme secretariat:
email: ses@ilo.org or by phone: +41 22–799.7913
Members of the team can give interviews in
English, French, Portuguese or Spanish. For those
interested in the issues in Africa, there is a
companion book due for publication in September
2004, namely Confronting Economic Security in
Africa. Copies of this will be available at that
time.
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