Global economic security in crisis: New ILO report finds "world full of anxiety and anger"

A new ILO report ( Note 1) says that economic security promotes personal well-being, happiness and tolerance, while benefiting growth and social stability. Yet it finds the overwhelming majority of people in a state of economic insecurity, and raises doubts over rich countries' ability to turn wealth into happiness.

GENEVA - For the first time, the ILO report measures global economic security as perceived by ordinary people and workers. Its findings make for grim reading. Nearly three-quarters of all workers live in countries with low levels of economic security and only 8 per cent in countries providing favourable economic security.

What is more, with economic security out of reach for the majority of the world's workers, the report points to "a world full of anxiety and anger". Forms of insecurity, such as irregularity of payments and non-payment of contractual wages, and more restructured and regressive social security schemes, blight the global picture, the report says.

The report is based on a global socioeconomic security databank supplemented by detailed household and workplace surveys covering over 48,000 workers and more than 10,000 workplaces worldwide. Measuring indicators of economic security such as income, representation, employment and skills, the analysis draws sometimes surprising results.

Income level is not the most important determinant of national happiness, the report says. There is a positive association, but rising income seems to have little effect as wealthy countries grow wealthier. Rather, the key factor is the extent of income security, measured in terms of income protection and a low degree of income inequality.

People are often performing jobs which do not correspond to their skills and qualifications, leading to "status frustration", the report adds, saying that economic insecurity fosters intolerance, stress, social illness and, ultimately, social violence.

Moreover, the report finds that the richest countries in the world are not always the most economically secure. South and south-east Asian countries do relatively better than many richer countries in terms of economic security.

The report also points to an increase in the frequency and severity of economic shocks under globalization. The variability of economic growth rates has increased, and individual problems, such as unemployment or illness, are being overtaken by bigger shocks affecting whole communities and regions.

"Coming shortly after the report of the World Commission on the Social Dimension of Globalization, this book should enrich the debate on how we can build a fair globalization," says ILO Director-General Juan Somavia. "Unless we can make our societies more equal and the global economy more inclusive, very few will achieve economic security or decent work."

A global picture

The study looks at national levels of economic security, and divides countries into four clusters: Pacesetters (with good policies, good institutions and good outcomes), Pragmatists (good outcomes in spite of less impressive policies or institutions), Conventionals (seemingly good policies and institutions but with less impressive outcomes) and Much-to-be-Done countries (weak or non-existent policies and institutions, and poor outcomes).

The conclusion is that many wealthy countries could easily achieve more economic security for their citizens. The report shows that the global distribution of economic security does not correspond to the global distribution of income. South Asia, for example, has about 7 per cent of the world's income, but about 14 per cent of the world's economic security. By contrast, Latin American countries provide their citizens with less economic security than could be expected from their relative income levels, the report says.

Indeed being insecure influences people's attitudes, which at times can be detrimental to their ideas of a decent society. This is shown by the interviews with 48,000 respondents. In a recent survey undertaken by the Latino barometro in Latin American countries, 76 per cent of the people surveyed were concerned about not having a job the following year, and a majority said that they would not mind a non-democratic government if it could solve their unemployment problems.

South Asian and south-east Asian countries were among the better performers, with a higher share of economic security than their share of the world's income. China and India have experienced higher economic growth under globalization and a decline in economic instability. Other countries in the region have experienced lower growth rates without an increase in economic instability, despite the Asian crisis of 1997-98.

Africa - where the extent of poverty has been understated - has suffered greater economic insecurity than any other region of the world during the past 15 years. Economic growth has been slower and more unstable than in other parts of the world, and 83 per cent of African countries surveyed were in the "Much-to-be-Done" bracket, implying weak policies, institutions and results.

Economic insecurity has grown the most in Eastern Europe over the past decade. Workers and their families suffer from acute income insecurity due to the non-payment of wages, the loss of enterprise benefits and the absence of decent state benefits. The absence of meaningful work opportunities is more severe than implied by official unemployment statistics, and laws and commitments on social security are ineffective.

Latin America - which has the most unequal income distribution - has experienced more frequent and increasingly severe economic crises. In recent years, the region has experienced a bigger decline in growth rates and a bigger increase in the volatility of growth than any other region of the world, inducing a sharp increase in economic insecurity.

Despite regional variations, a key feature of the findings is that only countries which provide a coherent set of policies which strengthen all seven forms of labour security have a high score on overall economic security. Countries with very strong attainment in some spheres but with weak attainment in one or more others do not perform well overall.

The report shows that political democracy and a trend towards civil liberties significantly increase economic security and that government spending on social security policies also has a positive effect. But there is only a weak impact of economic growth on security, measured over the longer term. In other words, rapid growth does not necessarily create better economic security, although it can do so if accompanied by appropriate social policies.

The report also finds that "income security is a major determinant of other forms of labour-related security", and that income inequality worsens economic security in several ways. "The message", the report concludes, is that "highly unequal societies are unlikely to achieve much by way of economic security or decent work."

The analysis shows that there has been an upward trend in the frequency and severity of economic shocks during the recent period of globalization (since 1980), as well as a coincidental growth in the number of natural disasters affecting very large numbers of people. It also shows that, excepting the two most populous nations (China and India), globally - and particularly among developing countries - economic growth rates in per capita terms have declined while the variability of annual economic growth rates has increased, implying more national economic insecurity, contrary to predictions often made by those pushing for rapid economic liberalization.

These trends are important, the report notes, saying that more people are being exposed to systemic risk, rather than contingency risks. The latter are due to individual life-cycle events, such as individual unemployment or illness, which are covered by standard social security systems. People are far less able to prepare for shocks which affect whole communities and regions.

The ILO report also shows that for developing countries, the national level of economic security is inversely related to capital account openness, implying that it would be sensible for developing countries to delay opening their capital accounts until institutional developments and social policies were in place to enable their societies to withstand external shocks. In other words, countries should postpone opening their financial markets until they have the institutional capacities to handle fluctuations in confidence and the impact of external economic developments.

As well as drawing on a global databank of national policies, the report uses statistics from a series of People's Security Surveys carried out in 15 countries, in which over 48,000 working people were interviewed about their work, the insecurities they experience, and their attitudes to inequality and related aspects of social and economic policy.

Respondents were asked about their attitudes to various aspects of economic insecurity and inequality. A majority everywhere favoured more support for the economically vulnerable, and a desire to reduce inequality.

Among other findings are the following:

  • Most workers in developing countries are unaware of trade unions, which in most of these countries represent under 10 per cent of workers
  • Women usually experience more insecurity on average than men, and face more types of insecurity
  • Employment security is diminishing almost everywhere, due to the informalization of economic activities, outsourcing, and regulatory reforms
  • A large number of people possess skills which they do not use in their work
  • Job security (the possession of a position giving good prospects of satisfying work and a career) is weak in most countries, and data from the People's Security Surveys highlight wide-spread job dissatisfaction
Finally, the analysis considers a wide range of policies to determine which offer the best prospect for providing greater levels of economic security, particularly in developing countries. To evaluate such policies, it proposes a novel approach, evaluating them on the basis that they should offer the strong prospect of reducing the economic insecurity of the most insecure groups in society, and of not imposing controls and "unfreedom" on intended beneficiaries.

The ILO analysis concludes that conventional social security systems are inappropriate for responding to the new forms of systemic risk and uncertainty which characterize the emerging global economic system. Accordingly, governments and international agencies should promote universalistic, rights-based schemes which provide people with basic economic security, rather than resorting to selective, means-tested schemes. And they should promote new forms of "Voice", bodies which represent all legitimate interests in society. Without Voice and basic income security, almost everybody will face a future of economic insecurity.

Note 1- Economic Security for a better world, Socio-Economic Security Programme. International Labour Office, 2004. Price: 50 Swiss francs. ISBN 92-2-115611-7. Website: