April 19, 2012 | Contribution by
ARUP BANERJI, DAVID A. ROBALINO The World Bank’s spring meetings this year have been all about “Closing the Gap”. And one of the gaps the world certainly needs to close is the one on jobs – between those whose jobs are productive and those who scrape by in low-return work, and between those who have them and those who don’t. The recent crises have brought this gap into even sharper focus, if that’s possible – with growth slowdowns meaning that in many countries, many who had jobs joined the rolls of the unemployed, and many who don’t have jobs have found them hard to get. Indeed, some estimates put the number of jobs lost between 2007 and 2009 at 27 million – mainly in advanced economies, countries in Europe and Central Asia, and Latin America. In other regions, employment did not contract, but its growth slowed down significantly.
But governments across the world reacted in a major way, and in rich and developing countries alike, put in place a slew of public policy measures to try and redress the situation. But until now, we haven’t had a full understanding of what really happened in terms of the sweep of policies put in place by different countries, and how these differed among countries themselves.
For the first time, we have a new database that looks precisely at this. This is joint work by the International Labour Organization (ILO) and the World Bank -- an Inventory of Policy Responses to the Financial and Economic Crisis. Launched on April 20, at noon at a World Bank spring meeting event by the Minister of Economic Affairs from Switzerland, Johann N. Schneider-Ammann, it will be introduced by Jose Manuel Salazar-Xirinachs, ILO Executive Director, and Tamar Manuelyan Atinc, Vice President for Human Development at the Bank.
The database has an accompanying report. Available as part of “Open data” to everyone, including academics and policy analysts, they together provide an in-depth first-time look at how governments around the world responded to the 2008-2009 global financial crisis in terms of macroeconomic (fiscal and monetary), sectoral, and labor and social policies—such as public works, unemployment benefits, wage subsidies, and work-sharing. The inventory of policies took almost two years to complete; it was a truly collaborative effort between the two institutions. It sampled 77 countries significantly affected by the crisis (55 low- and middle-income and 22 high-income), representing 89% of global GDP and 86% of the global labor force.
What does the data show? Most importantly, that the degree of government intervention in both developed and developing countries was unprecedented – perhaps only to be expected in a crisis of historic proportions.
Close to half of the developing countries included in the sample made public interventions to increase labor demand, facilitate the matching between workers and jobs, and expand social insurance benefits. For them, the most popular policies were credit support to small and medium enterprises (SMEs), public works, and transfers (both in-cash and in-kind). In high-income countries, by far the most common policy was to expand unemployment benefits, followed by more training programs and support to SMEs.
Countries moved aggressively to expand income and social protection
(Percentage of Countries Implementing a Given Policy)
Source: Inventory of Policy Responses to the Financial and Economic Crisis
The report itself just reports on the data, and does not try to identify the most effective policies to contain jobs and income losses and facilitate the recovery--although it argues that fiscal and monetary policies did make a difference. It also contends that countries need to expand the coverage of social insurance and social assistance programs, given that even in middle high-income countries (such as Chile and Mexico), the social insurance system covers less than 60% of the labor force, and in Africa and most of Asia, the coverage is below 5%.
The challenge for analyzing the effectiveness of the policies based on this report is the absence of a counterfactual—what would have happened if governments had not intervened. But the report itself is perhaps less important than the database that underlies it. The hope and expectation is that this unprecedented database will be used by researchers and policy analysts, combined with other data and analysis, and help us all better understand how to devise more effective labor and social protection policies in response to an economic downturn.