Annual Meetings    Boards of Governors World Bank Group International Monetary Fund WASHINGTON, D.C.	1999 Annual Meetings Home Bank Home Fund Home

Needed: Two Billion Jobs
Meeting the Challenge of Youth Unemployment
by
Kofi Annan
United Nations Secretary-General
Washington, D.C., September 25, 1999

Ladies and Gentlemen:

I am very grateful for this opportunity to speak to such a distinguished audience, containing many of the leading economic policy-makers in the international system.

For the last two years, I know, many of you who work in the Bretton Woods Institutions have been preoccupied with the better management of capital flows, after we saw how grave the destabilising effect of unmanaged or ill-managed flows can be. The issue is a very important one, and I hope you will not lose sight of it just because the worst of that particular crisis seems now to be behind us.

But this afternoon I want to remind you of another perspective, which in the long run may be even more decisive for the success or failure of globalisation – namely, its effect on the poor, and specifically its power to create jobs.

Next month the world’s population will pass the six billion mark. Let us not forget that five out of those six billion live in developing countries, and that for many of them the great scientific and technical achievements of our era might as well be taking place on another planet.

The progress that we celebrate has by-passed the poorest countries and the poorest people. In many cases, inequalities - both between and within nations – have even widened.

There is so much to do – and yet millions, perhaps billions, of able-bodied people are either un- or under-employed.

This is worse than a crisis. It is a scandal. Overcoming it must be our top priority in the first decades of the new century.

[pause]

Let me start by reminding you that at this moment there are nearly 1.3 billion people in the world struggling to survive on less than one dollar a day

The majority of such people still live in the countryside. But the world’s urban population is growing faster and faster. Already, about forty per cent of people in the developing world live in cities – where the cost of living is higher. The urban poor cannot grow their own food: they have to buy it, which means they need to earn money. Yet many of them cannot find jobs.

The poor must be able to work their way out of poverty. The fact that so many of them cannot do so today is a bleak condemnation of development strategies over the past half century.

[pause]

According to the International Labour Organisation, there are only 150 million fully unemployed people in the world, in a labour force of three billion - and 40 million of them are in developed countries.

That does not sound so bad, but it is very misleading.

Large parts of the world economy are outside the modern, organized sectors covered by employment surveys. Also, as the great Swedish scholar Gunnar Myrdal said thirty years ago, unemployment is a luxury that only the better off members of the working population in developing countries can afford.

The real magnitude of the world-wide unemployment crisis is observable in three related phenomena. One is widespread under employment; the second is high rates of youth unemployment; and the third is the increase in the number of working children.

[pause]

Nearly one billion people, or one third of the economically active population in the developing countries, are under-employed. They are working either in subsistence agriculture or in informal sector activities which do not provide a living wage.

More than seventy per cent of the poor in Sub Saharan Africa and South Asia live in rural areas and work in subsistence agriculture. But in Africa food production is not keeping pace with population growth.

The rural poor lack the income and assets needed to produce enough food for themselves, or to buy or barter it from others.

In Latin America and East Asia, where industrial development is more advanced, people forced off the land have a better chance of finding jobs in the informal sector.

But in Latin America, over the past two decades, the implementation of Structural Adjustment Programmes, privatisation and enterprise restructuring have resulted in increasing unemployment.

In East Asia, for three decades up to 1997, job opportunities expanded, and poverty declined. But then, in a mere six months the financial crisis of 1997-98 wiped out more than twenty-five million jobs.

At the best of times, the informal sector provides only "survival employment" - very low pay for very long hours. But in many developing countries there is not enough of even this low-productivity work to absorb the ever-growing mass of young people.

[pause]

There are at present one billion people in the world between the ages of fifteen and twenty-four. Eighty-five per cent of these – nearly nine hundred million young people - live in developing countries.

And more than half of those are neither at school nor at work.

Youth unemployment is also a problem for the developed countries. Young people make up half the forty million unemployed in the developed world as a whole.

Moreover, most of them are long-term unemployed, whose chances of finding work diminish with every passing month. Many give up even registering as job seekers.

This is a terrible waste of human potential.

In developing countries, some young people eventually do find low-productivity jobs in the informal sector - or they engage in illegal activities, or join militias.

Only when most young people find regular, productive jobs can a society hope to solve many of its other problems, from poverty in general to drug abuse, criminality and emigration.

In theory migration may not be a bad thing: there is a large body of evidence that immigrants become net contributors to production in the countries where they settle. But often they become a source of social tension and clashes with other disadvantaged groups in those countries. Politically, immigration is seldom popular.

[pause]

Meanwhile, back home, the working poor can only manage – in so far as they manage at all - by relying on multiple sources of income.

All members of the family have to contribute, including – unhappily - children. No parent wants this, but children have to work, for their own survival and that of their families.

In Venezuela – a country which has received enormous oil revenues over the last quarter-century – there are still half a million children and teenagers who are not enrolled in schools. In the next two years that number is likely to rise to eight hundred thousand.

In Bangladesh, a much poorer country, young girls work as maids from the age of ten. To survive, many children leave their families for a precarious existence on the streets.

World-wide, the ILO estimates that no fewer than two hundred and fifty million children aged between five and fourteen are working in the fields or sweatshops, instead of attending school. Such missed learning opportunities will have a serious impact, not only on these young people as individuals but on the whole future of their societies.

It is vital that all of us – international institutions, national authorities, the private sector and civil society at large - join forces to put an end to child labour at least in its worst forms, such as slavery, debt bondage, forced labour, the sale and trafficking of children and their use for prostitution, pornography or other illicit activities. All these have been clearly condemned by a new international convention adopted just three months ago.

Friends,

The problem of mass unemployment and under employment – especially of young men and women - affects countries all across the globe.

In the European Union, the unemployment rate has been over ten per cent for the past decade.

In the countries of the former Soviet Union, widespread unemployment has been an unfortunate by-product of economic restructuring programmes.

In Latin America, rising production has brought a rise in the demand for skilled labour, but also a decline in the demand for unskilled labour. Urban unemployment is in double digits in most Latin American and Caribbean countries.

In Africa, more and more rural households are headed by women, as the men leave to look for work in the cities or the mines.

In South Asia, more and more people are moving into the cities, but even so the number of landless people in the countryside goes up and up.

The economies of East Asia are showing signs of recovery, but it will take a long time to recover the jobs that have been lost and to absorb the newcomers into the labour force.

In short, this is a world-wide problem. Solutions to it must be found mainly at the national level, but the international environment also plays an important part.

[pause]

The present size and age pyramid of the world's population provides a dramatic picture of what lies ahead.

More than half of the five billion people now living in developing countries are under twenty-five.

During the next twenty-five years the labour force in those countries will increase by one billion, to reach a total of 3.5 billion.

The challenge for the next two decades is to absorb the large number of young people that are joining the labour force.

Next year the number of fifteen-year olds in the ten largest developing countries will total sixty-five million.

Even if thirty million of these young people can stay in school, thirty-five million jobs will be needed for the others.

And these young people, my friends, are not just statistics. Every one of them has a name and a story. They want what we want for our own children: the chance to lead productive lives, to fulfil their potential.

[pause]

In the words of a South African community leader: "The poor are not expecting highly paid jobs, company cars, flushing toilets, tarred roads and street lights. They are hoping for the opportunity to send their children to school, to be able to have a few containers of water without having to walk many miles, to have enough money to feed their children and to get a piece of land to work on."

And yet somehow we seem to have lost sight of these core concerns.

Yes, it is important to remove barriers to trade and financial flows, and to give the private sector a bigger role in the economy. But these are means to an end, not an end in themselves.

The aims of economic policy must be to ensure that everyone who wants to work has the chance to do so, and to provide for the basic needs of all the population.

Market based reforms have had many successes but more needs to be done. So far they have not contributed significantly to the growth of employment world-wide.

In many cases, they have even widened the gap between rich and poor.

[pause]

Somehow, the world economy has to generate two billion new jobs, at productivity levels sufficient to keep working families out of abject poverty, and to absorb the ever-growing number of job seekers.

What is needed is not just growth, but growth that creates jobs.

And this requires major policy changes, with the political will to sustain them, from three groups of decision-makers: those in the developing countries themselves, those in the developed countries, and those in the multilateral financial institutions.

First, the developing countries need to re-orient their development strategies towards job creation.

• Since agriculture employs seventy per cent of the working population, this means giving higher priority to raising the rate of growth of output and investment in the agricultural sector.
• This in turn requires a redistribution of assets, particularly land, to give the poor the means of earning their livelihood. Widening income inequalities result in a lack of social cohesion and political instability. But of course, reversing this trend will not be easy. Building the necessary consensus requires skilful leadership.
• At the same time, agriculture must become more productive – and thus more rewarding to the individual farmer or farm-worker. Private capital can supply only part of the investment needed to improve the technology of tropical agriculture, to provide irrigation, fertiliser and new seeds, to build rural roads and markets, to provide water supply, education, conservation and soil management. The public sector has an important role to play in providing many of these services.
• More must be spent on basic education and health, and less on defence and security. The quality and availability of education and training at all levels - primary, secondary, technical and vocational – is of decisive importance in the struggle against unemployment in every society. It is those with appropriate skills who find jobs, and those without them who do not.
• And more must be done to mobilise domestic resources for investment – especially by strengthening regulatory and financial systems and promoting good governance. Foreign capital is more likely to flow into countries where political stability is based on the consent and participation of the governed, and where society as a whole shows itself committed to sound macro economic policies and the efficient use of capital.

But few, if any, developing countries can hope to lift their people out of poverty purely by their own unaided efforts. Foreign capital inflows and improved access to overseas markets also have a crucial role to play.

• Perhaps the most important thing that developed countries, particularly those in Europe, could do for the developing world would be to achieve higher rates of growth themselves. This would lead to a more balanced pattern of world growth, and higher employment world-wide.
• International financial mechanisms also need to be strengthened, to facilitate the flow of long term capital from the developed countries, which have high rates of investment and low returns, to the developing countries, which at present have low rates of investment in spite of high returns.
• For the very poorest countries, however, something more is needed: an increased flow of long-term capital at concessional rates.
• To achieve this, developed countries should be prepared to consider bold new initiatives, such as a comprehensive restructuring of developing-country debt. A few months ago, we all welcomed the statement on debt relief made by the Group of Seven at their meeting in Cologne. Let us hope we shall see it followed by action, before the Jubilee Year begins in less than a hundred days’ time.
• At the same time, as I said at the beginning, the momentum to reform and strengthen the international financial system must be maintained, so as to reduce the volatility of private capital flows and instability in the currency markets, which did so much damage to developing countries in the crisis of 1997-98. Incentives must be created to encourage a shift in private flows - away from short-term portfolio investments, which simply inflate the prices of existing assets, and into productive investments which create jobs.
• The developing countries must also be given wider access to developed-country markets for their exports. So far, trade liberalisation has been slowest in those commodities where the developing countries are most competitive: in agriculture, textiles and light manufactured goods.

Lastly, I come to the role of multilateral institutions such as those which are our hosts today.

• It is up to them, surely, to find ways of increasing long term capital flows to the poorest countries, so as to support higher levels of investment.
• They should also take initiatives to support private flows to countries and sectors where market signals are weak. African countries which have transformed their economies through structural reform programmes still receive only a tiny share of global private investment.
• Within developing countries, the multilateral institutions should be able to help guide capital inflows towards those sectors and projects that create most jobs.
• And in assessing a country’s economic performance and social development, they should surely assign higher priority to job creation.
• Finally, multilateral institutions have a vital role to play in co-ordinating the efforts of all the different actors – international, national and local – who are struggling to tackle the extraordinarily complex problems of youth unemployment.

Friends

The world economy has never been more prosperous. We have the resources - financial, technical and human - to get the job done.

We even know, more or less, what it is that needs doing. Already in 1995 at the Social Summit – one hundred and seventeen heads of state and government pledged themselves to put "the creation of employment, the reduction of unemployment and the promotion of appropriately and adequately remunerated employment" at the centre of their strategies and policies.

Since then the United Nations system has been addressing that goal through its main political forums, and through the expertise of the International Labour Organisation.

But much, much more remains to be done.

The young people who need jobs are not a projection that could be wrong. They exist. They are already born.

I said just now that progress had bypassed the poorest countries and the poorest people. But that does not mean they are unaware of it. Many of the poorest and least educated people on this planet have glimpsed, through film and television, the life styles of the most affluent.

That makes it naïve to imagine that people in the remotest villages or the worst urban shanty towns regard their own deprivation as anything but exceptional, unnecessary, and - above all - profoundly unjust.

We have a choice: we can give them the tools they need to fulfil their human potential, or we can leave them to nurse their sense of frustration, misery and grievance. It is up to us.

Thank you very much.