The 66-page report,”Inventory of Policy Responses to the Financial and Economic Crisis”, demonstrates how countries of all income levels, used labour market interventions to limit the economic and social impacts of the crisis.
Covering 77-countries, the authors discuss how governments used various policy tools to spur employment, household income, and economic growth and reduce poverty.
The joint initiative also produced a new online database that gives a detailed track record of policies enacted during the height of the financial crisis, and implications for the design of policies to address future economic downturns.With a sample of 77 countries significantly affected by the crisis, representing 89 percent of global GDP and 86 percent of world labour force, the database allows for cross-country comparisons on a large scale, the report said.
“For the first time, policymakers now have access to data on what other countries did during these turbulent times, in order to better understand what works best to create jobs and reduce poverty in the wake of crises,” said Tamar Manuelyan Atinc, World Bank Vice President for Human Development.
The large country sample enables derivation of policy comparisons across a large and diverse set of economic, social, and policy settings.
“Policy makers and researchers worldwide will be able to use this database to analyse policies and draw further lessons which continue to be highly relevant today as the jobs crisis persists.”said Jose Manuel Salazar-Xirinachs, International Labour Organisation Executive Director for Employment.
The report recommends that countries focus on improving the coordination between macro and sectoral policies; expand social insurance cover to all workers; integrating and strengthening safety nets.
The report said a majority of affected countries used expansionary fiscal and monetary policies to stimulate the economy, and also intervened to protect or create employment, preserve skills and matched job-seekers and employers, and protect the incomes of the unemployed and vulnerable groups.
Analysts say severe economic downturns themselves are caused by expansionary fiscal and monetary policies.
Countries that continue to spend during a downturn could find their inflation rising and currencies depreciating, reducing the real value of wages and lifetime financial savings impoverishing both the poor and the rich.
But conventional measurements, based on domestic inflated currency caused by of expansionary policies may not immediately capture such effects.
Expansionary policies 'protect jobs' by cutting real wages through inflation and currency depreciation and giving more profits to businesses.
However if demand for credit reduces during a downturn, governments have more ability to borrow and spend, though it may increase debt levels and bring trouble in the future.
In many cases, social dialogue helped guide the policy response. This was critical, for instance, when implementing work-sharing arrangements.
But there are questions about how well prepared countries were to respond to the economic crisis, particularly developing countries.
Many countries, for instance, did not have significant social security programs that could be scaled up during the crisis. In addition, across the board, the coverage of social insurance programs was low.
Policies such as the increase in the level and duration of unemployment benefits, for example, were helpful, but in some cases, might have only benefited formal sector workers.
Active labour market programmes such as employment services, training, and wage subsidies, were also commonly used, but there are many lessons as to how their design and implementation can be improved.
Many countries lacked surveys or administrative data to track the impacts of the crisis on labour markets and workers, the authors noted.