'The Austerity Trap Has Sprung': Countries Should Choose Growth-Oriented Policies
May 3, 2012 The current global jobs situation is "alarming," and many countries have fallen into the "austerity trap," according to the new report “World of Work Report 2012: Better Jobs for a Better Economy” from the International Labour Organization (ILO).
The report finds the path of austerity that many countries have chosen to address fiscal crises simply has not generated jobs and has worsened the economic situation.
"The narrow focus of many Eurozone countries on fiscal austerity is deepening the jobs crisis and could even lead to another recession in Europe,” said Mr. Raymond Torres, Director of the ILO Institute for International Labour Studies and lead author of the report.
In contrast to the austerity chosing countries, "countries that have chosen job-centered macroeconomic policies have achieved better economic and social outcomes,” added Mr. Torres.
The report states bluntly: "The austerity trap has sprung. Austerity has, in fact, resulted in weaker economic growth, increased volatility and a worsening of banks’ balance sheets leading to a further contraction of credit, lower investment and, consequently, more job losses."
However, the report notes that "it is possible to move away from the austerity trap." And "more fundamentally, it is high time for a move towards a growth- and job- orientated strategy.
A growth-oriented strategy could bring about the creation of between 1.8 and 2.1 jobs over a one year period, the ILO states.
The report also finds "the weakening of collective bargaining likely to provoke a downward spiral of wages, thereby delaying recovery further."
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