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2-min read

Financial crisis to cost 20 million jobs, says UN agency

Construction, real estate and financial services are most likely to be hit.

News18test sharma |

Updated:October 21, 2008, 11:09 AM IST
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Financial crisis to cost 20 million jobs, says UN agency
Construction, real estate and financial services are most likely to be hit.

Geneva: Twenty million jobs will disappear by the end of next year as a result of the impact of the financial crisis on the global economy, a United Nations agency said on Monday.

Construction, real estate, financial services, and the auto sector are most likely to be hit, according to the International Labour Organisation's (ILO) estimate, which is based on International Monetary Fund projections for the world economy.

The toll on jobs could be even higher if IMF economic projections are cut, said ILO Director-General Juan Somavia.

"We have to talk about the financial crisis in terms of what happens to people and what happens to jobs and enterprises," he told reporters.

Somavia said the ILO, which brings together governments, employers and workers, wanted to steer discussions about the resolving the crisis toward job creation and other steps to promote the "real economy".

"It would be tragic to respond to a sub-prime crisis with sub-prime policies," he said.

The ILO does not yet have a regional breakdown of projected job losses, which Somavia said would take global unemployment to 210 million in late 2009 from 190 million last year, the first time it has topped 200 million. But countries with large domestic markets that do not depend heavily on exports would be able to weather the crisis better, he said, citing as an example China, where exports make up only 11 per cent of the economy.

It was alarming that global unemployment had stayed at the same levels despite the strong economic growth seen between 2002 and 2007, said Somavia, who files to New York this week for talks with the heads of all UN agencies, chaired by UN Secretary-General Ban Ki-moon.

He said resources should be pumped into the economy to stave off or mitigate recession, concentrating on employment-intensive sectors including small enterprises.

The financial sector should also be steered back to its fundamental function of lending to entrepreneurs, according to the Chilean lawyer and diplomat. Somavia said the financial sector's share in the profits of US companies had risen to 41 per cent last year from 5 per cent in 1980.

As a result, banks preferred to invest in financial transactions rather than lending to other productive sectors. "So this system began to siphon off resources from the real economy process," he said.

And listed non-financial companies came under pressure to match the returns of the financial sector, forcing them to cut costs – often by freezing salaries or laying off staff – rather than making long-term investments.

"From one point of this view this is called productivity increases. From a more profound point of view it means a worker becomes a commodity," he said.

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