At the release of the Fiscal Monitor report from the International Monetary Fund, unemployment was foremost on the agenda with the fund issuing a warning to members:
“Unemployment remains unacceptably high in many countries. It increased dramatically during the great recession. Global unemployment currently exceeds 200 million people, and an additional 30 million people are expected to be unemployed by 2018.”
Youth unemployment received particular attention from the IMF’s Fiscal Affairs Department, with Director Vitor Gaspar highlighting a dire situation for young people across the world, regardless of whether they live in developed countries or not:
“There are examples of advanced economies in Europe where youth unemployment surged above 50 percent. In several developing economies, job creation does not absorb the large number of young workers entering the labor force every year. This puts unemployment at the top of the global policy agenda.”
The Fiscal Affairs team recommended labour market reform to create a more sustainable and stable match of workers to work. They suggest using fiscal policy to ease such a transition, where this can be done without jeopardizing the service of public debt.
Mr Gaspar had some examples for where fiscal policy could support an economy geared towards growth and full employment:
“In advanced economies, we find a carefully designed reduction in employer social security contributions on young workers can have a significant impact on youth employment. In emerging market and developing economies we find that removing tax barriers, providing basic public services and offering a greater access to finance and training, can help address challenges related to informality and low growth in labor productivity.”
The full Fiscal Monitor Report for October 2014 “Back To Work: How Fiscal Policy Can Help” can be downloaded here.