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Economy

The impact of labour market trainings on unemployment process in the global labour economy

Gunel Abdullayeva

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Since the 1990s, the persistence of high unemployment has been followed by two downturns, which affected an economic life over the world across the nation-states. The overt consequences cost unpleasantly social and economic outcomes for the states as well as societies. Henceforth, activation turn has observed once more shifting passive employment policies within the active policy actions of countries upon labour market at the beginning of a new millennium. It was supposed that the activation of jobless people through keeping employees occupied, job-search assistance, job creation and work experience programs, training and invest in up skilling, is an open way to fight against high unemployment and secure economic growth as well. Hereby, the idea of an active labour market policy (ALMP) became again pivotal tool in the domestic policy agendas of states in order to engage in new challenges of labour markets. Since the 1950s,it is an apparent fact that in Europe and the Nordic countries that the effectiveness of ALMPs engenders diminution in a structural and long-term unemployment and leads to increase net income together with the employment ratio of targeted groups in national economies.

With the XXI century’s new technological vicissitudes and industrialization, the active employment policies have been designed to support people with monetary (income) and non-monetary (education) incentives in order to reduce inequality, keep the balance of social inclusion, and stimulate market beyond to decrease unemployment. Consequently, labour market training grew into to become an important measure of ALMP strategies in the background of “welfare to workfare policy approach” to create better-skilled workforce as well as to surge adequate match between skilled manpower and needs of progressive demand in labour markets.

In fact, the scholarly studies state significant impacts of training and vocational programs in the activation of the workforce. For example, the 1950-1960s – Post War Era characterized with the rapid economic growth and labour supply shortage in the European industry. And as a solution, national employment policies started to focus on labour trainings. So that Sweden with its successful retraining system has been the pioneer of ALMP idea in the history. On the other hand, Germany with 1969`s Employment Promotion Act considered training as a principal component of active employment policies to upskill workforce in terms of new industrial needs by market demand.

The UN 2009 reports that education is considered one of the main indicators of poverty reduction: education and human resource investments contribute to an economic development of nation-states and societies. Higher educated people or up-skilled workforce boost up productivity and react the positively to technological changes. Some scholars and interlocutors claim that in long-term perspectives ALMPs should have to aim to develop an education and training system that enhances the productivity and employability of a labour force. Because of the fact that the skilled manpower is one of the cornerstones of the higher employment, developed economy, higher net income and well-being of the whole society.

Many types of research have been carried out to identify the prominence of labour market training, however, the Katz`s study (1993) shows the significant point of job market training as turning “unskilled labour” into “skilled labour”. Perceptibly, the unemployment problem is more common among less skilled individuals and new entrants to the market. Shifting in demand against unskilled labour force causes an unemployment among those people. In contrast to unskilled force reservation wage and labour demand is high for skilled manpower in the market. Here, the training policy helps turn out unskilled to a skilled workforce and to increase total employment in order to decrease unskilled unemployment. Research argues that training policy extends the skilled labour force and close the gap between the unskilled and skilled workers. Caruana and Theuma (2012) refer to Katz (1993) argue that in order to push jobless people towards work, some trainings improve the qualification of those workers who are already in the market. Hence, Katz (1993) emphasizes the importance of labour market training in reducing the unemployment rate of unskilled labour by transferring more workers to the skilled labour pool. They also underline the significant role of a training policy in improving the skills of employees and increasing, the supply of skilled manpower in the economy. The following figure “Development of Unskilled Labour Force” visualizes Katz`s statement andshows how training measure affects the job market in both ways. The points where demand curves intersect supply curves, which are given wages for skilled and unskilled labour respectively. As the author explains, the wages represent the remuneration of foregone opportunity costs that, logically, is higher for skilled labour than for unskilled one. Since labour demand for the skilled labour is stronger than that of unskilled labour, thus, the demand curve for the former one is more elastic. As the figure illustrates, after the implementation of training, part of unskilled labour is moving up to the skilled.

At the same time, scholar states that wage setting regulation, training, and education systems affect differently net income and employment perspectives. Consequently, education and labour training policies create an equal distribution of skills and able to reduce supply and demand shifting on wages and employment. Another study by Calmfors et al., (2001) argue that training programs increase the reservation wage of attendees. However, salary growth and employment perspectives are possible by time after long run participation in the program.

To sum up, the training policy is considered as a main supply-side policy tool of activation to tackle unemployment. Scholars argue that training programs are useful to prevent the long run unemployment and to keep unemployed active in the market via participation. However, ex-post evaluation of training programs is controversial. Country case studies show that training programs are more effective in the background of vocational education reforms and collaboration with demand-side active labour market policies.

Reference list:

  • , Forslund A., &Hemstrom M., (2001), Does Active Labour Market Policy Work? Lessons from Swedish experiences, Swedish Economy Policy Review, 85, 61-124
  • Caruana C. &Theuma M., (2012), The next leap – From Labour Market Programmes to Active Labour Market Policy.
  • Katz, F.L., (1993), Active Labor Market Policies to Expand Employment and Opportunity.
  • United Nations, (2009), Rethinking Poverty: Report on the World Social Situation 2010, Retrieved from http://www.un.org/esa/socdev/rwss/docs/2010/fullreport.pdf

Ms. Gunel Abdullayeva is an independent researcher from Azerbaijan. She is recent graduate student of Corvinus University of Budapest with master degree of Economist in Public Policy and Management. She received a bachelor degree at Western Caspian University from Politics programme in Azerbaijan. Ms. Abdullayeva is a member of local municipality of Baku since 2014. Her main research fields concern on welfare states and policies, unemployment and poverty, ALMPs and education.

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Economy

The Game of Tariffs

Sabah Aslam

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Adam Smith is considered the father of economics. Back in 18th century, he presented the concept of protectionism, which was given to promote the local industry. Nevertheless, in 21stcentury, the world is facing its repercussions.

It is time that the world should be well concerned by the actions that are being opted by the two economic giants. Trade deadlock between Beijing and Washington is getting intense. U.S. protectionist and unilateral approach is the impetus behind this trade war and hence so far no promising foreseeable future can be anticipated. Moreover, China’s economic and development initiative i.e. BRI and its successful pilot project CPEC is also giving headaches to Oval. This Game of tariffs has engulfed whole of the globe into its chakra.

Trump and his policies have always been scrutinized by the analysts everywhere. Even before the elections, Trump expressed his strong urge to subdue China by means of trade restrictions. It was clearly evident even before the elections that if Mr. Trump will somehow make his path to Oval, he will surely give Chinese a sturdy time.

In Nov 2016, it happened just as it was feared. The heat of July 2018 had resulted into an economic cold war. With the world being the witness, there is no doubt that when Washington says, it knows how to make it happen. Therefore, when Washington flaunted its intentions to put serious tariffs onto Chinese commodities, it actually meant it. What started from a mere USD 34 billion, has crossed over USD 200 billion till-date. So far, Washington has imposed tariffs on USD 250 billion worth of goods coming to United States. Furthermore, it has also threatened to increase the threshold to an approximate value of USD 325 billion. In return, Beijing retaliated with putting tariffs on US$ 110 billion worth of goods.

The latest development that added fuel to the fire was on May 10, when United States raise tariffs to 25% on $200 Billion products coming from China annually. This escalated tensions between the two more as it projected that U.S. is not coming slow. Not only this, China has also banned the trade of rare elements. These elements hold prime importance in making of a number of electronic products such as mobiles and laptops in the United States.

China’s ministry of commerce has shown concern over American intentions regarding the engagement of two in the trade war and had warned that the dispute may even lead to “largest trade war in economic history”. China has repeatedly shared its concerns over the trade stand-off between Beijing and Washington. Whereas, continuous cold responses from Washington are leading situation to worse ends. China, as a responsible state, talks about equality, inclusiveness, and shared future for the globe. It always encouraged openness and cooperation.

Stubbornness of Trump’s Administration is pushing the Globe towards an economic and trade crisis. High tariffs on products will ultimately raise the costs for suppliers, manufacturers, retailers and then eventually affecting the people at tail¬— consumers. The end consumers will have to face large price raises even for the general products. On November 30, 2018, Chief of the World Trade Organization had said that global free trade is facing its worst crisis since 1947 and warned that the current spectrum of conflict will lead to global trade crisis.

These tensions are not restricted between the two; instead, they have led the global market to fluctuations, which has put business persons and investors in a situation of uncertainty. This investment dilemma can halt the economic progress inside of both countries. International Monetary Fund has also warned that a full-blown trade war would weaken the global economy. Earlier in this month, Cristine Lagarde gave remarks on Donald Trump’s intent to tax all trade between two countries that it would “shrink the global Gross Domestic Product (GDP) by one-half of one percent”.

China is the new reality. Washington needs to realize that. There are new players onto the scene. Oval’s actions will be scrutinized now; its ways will be challenged. It will no longer go uncontested.

The world knows that global economic ship today is sailing towards east and Chinese dockyard is where it will anchor. Mutual understanding is beneficiary for both the countries as well as for the world economy. Beijing is determined to meet Washington’s intentions with full capacity. United States is inducing self-inflicting pain to itself and to the world too. Companies inside US have already started showing their grievances regarding the trade stalemate between Beijing and Washington. Over 600 companies including Walmart urged Trump to resolve the dispute with China as it directly affects the business community and customers inside US. Washington needs to comprehend that it will become victim of its own protectionist gambit if it continues to be on the route on which it has maneuvered itself.

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Economy

8 facts you don’t know about the money migrants send back home

MD Staff

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Here are eight things you might not know about the transformative power of these often small – yet major – contributions to sustainable development worldwide:

1. About one in nine people globally are supported by funds sent home by migrant workers

Currently, about one billion people in the world – or one in seven – are involved with remittances, either by sending or receiving them. Around 800 million in the world – or one in nine people– are recipients of these flows of money sent by their family members who have migrated for work.

2. What migrants send back home represents only 15 per cent of what they earn

On average, migrant workers send between US$200 and $300 home every one or two months. Contrary maybe to popular belief, this represents only 15 per cent of what they earn: the rest –85 per cent – stays in the countries where they actually earn the money, and is re-ingested into the local economy, or saved.

3. Remittances remain expensive to send

These international money transfers tend to be costly: on average, globally, currency conversions and fees amount to 7 per cent of the total amounts sent. To ensure that the funds can be put to better purposes, countries are aiming through Sustainable Development Goal (SDG) 10.C to “reduce to less than 3 per cent the transaction costs of migrant remittances and eliminate remittance corridors with costs higher than 5 per cent by 2030”.

Technical innovations, in particular mobile technologies, digitalization and blockchain can fundamentally transform the markets, coupled with a more conducive regulatory environment.

4. The money received is key in helping millions out of poverty

Although the money sent represents only 15 per cent of the money earned by migrants in the host countries, it is often a major part of a household’s total income in the countries of origin and, as such, represents a lifeline for millions of families.

“It is not about the money being sent home, it is about the impact on people’s lives,” explains Gilbert F. Houngbo, President of the International Fund for Agricultural Development, IFAD. “The small amounts of $200 or $300 that each migrant sends home make up about 60 per cent of the family’s household income, and this makes an enormous difference in their lives and the communities in which they live.”

It is estimated that three quarters of remittances are used to cover essential things: put food on the table and cover medical expenses, school fees or housing expenses. In addition, in times of crises, migrant workers tend to send more money home to cover loss of crops or family emergencies.

The rest, about 25 per cent of remittances – representing over $100 billion per year – can be either saved or invested in asset building or activities that generate income, jobs and transform economies, in particular in rural areas.

5. Specifically, remittances can help achieve at least seven of the 17 SDGs

When migrants send money back home, they contribute to several of the goals set in the 2030 Sustainable Development Agenda. In particular: SDG 1, No Poverty; SDG 2, Zero Hunger; SDG 3, Good Health and Well-Being; SDG 4, Quality Education; SDG 6, Clean Water and Sanitation; SDG 8, Decent Work and Economic Growth; and SDG 10, Reduced Inequality.

If current trends continue, between 2015 and 2030, the timeframe of the 2030 Agenda, an estimated $8.5 trillion will be transferred by migrants to their communities of origin in developing countries. Of that amount, more than $2 trillion – a quarter — will either be saved or invested, a key aspect of sustainable development.

“Governments, regulators and the private sector have an important role to play in leveraging the effects of these flows and, in so doing, helping nearly one billion people to reach their own sustainable development goals by 2030,” IFAD’s Gilbert F. Houngbo stressed in a statement.

6. Half of the money sent goes straight to rural areas, where the world’s poorest live

Around half of global remittances go to rural areas, where three quarters of the world’s poor and food insecure live. It is estimated that globally, the accumulated flows to rural areas over the next five years will reach $1 trillion.

7. They are three times more important than international aid, and counting

Remittances are a private source of capital that’s over three times the amount of official development assistance (ODA) and foreign direct investment (FDI) combined.

In 2018, over 200 million migrant workers sent $689 billion back home to remittance reliant countries, of which $529 billion went to developing countries.

In addition, the amount of money sent by international migrant workers to their families in developing countries is expected to rise to over $550 billion in 2019, up some $20 billion from 2018, according to IFAD.

8. The UN is working to facilitate remittances worldwide

“It is fair to say that, in poor rural areas, remittances can help to make migration a choice rather than a necessity for so many young people and for future generations,” explained Mr. Houngbo.

As such, migrant contributions to development – through remittances and investments – is one of the Objectives of the Global Compact on Safe, Orderly and Regular Migration, adopted by the UN General Assembly in December of last year.

With half of all flows going to rural areas in developing countries, IFAD, the UN’s agency mandated with agricultural development, is working to make the development impact of remittances even greater. The organisation’s Financing Facility for Remittances programme (FFR) was designed to promote innovative business models in order to lower transfer costs and provide financial services for migrants and their families. Through partnerships across several sectors, the programme runs initiatives to empower migrants and their families through financial education and inclusion, as well as migrant investment and entrepreneurship.

“Over the past decade, IFAD has invested in over 40 countries, supporting more than 60 projects aimed at leveraging the development impact of remittances for families and communities,” said Paul Winters, IFAD’s Associate Vice-President, in an event held on Friday at UN headquarters in New York.

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Guiding a new generation of learners on inclusive green economy

MD Staff

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As population numbers continue to grow and material resource use rises to unprecedented levels, the limits of today’s dominant model of economic growth have become increasingly apparent: extraction of material resources, including biomass, fossil fuels and non-metallic minerals has tripled since 1970, reaching an approximate 90 billion tonnes in 2019. A comprehensive overview of alternative economic models that center around environmental sustainability – published by UN Environment, the Zayed International Foundation for the Environment and Tongji University – hopes to help guide efforts to move to inclusive, green economies.

The official launch today of The Inclusive Green Economy: Policies and Practice marks the successful completion of a long-standing collaborative project.

Nineteen million premature deaths are estimated to occur each year due to environmental and infrastructure-related risks and natural-resource use. Resource extraction has also been identified as the leading cause of global biodiversity loss. This has led to an increasing number of countries to rethink their economic development model.

“Since Rio+20, an increasing number of countries are embarking on pathways towards inclusive green economies. I hope this book will help guide these efforts globally”,  Dr. Mohamad Ahmed Bin Fahad, Chairman of the Zayed International Foundation for the Environment highlighted in his welcome address at the launch.

An inclusive green economy is defined by UN Environment as one that is low-carbon, efficient and clean in production, but also inclusive, based on sharing, circularity, collaboration, solidarity, resilience, opportunity and interdependence. The handbook aims to offer a comprehensive framework for analysing inclusive green economy issues, such as investing in natural capital and clean technologies, as well as policies to enable investments. 

“With this collection – based on a wide range of thinking on the transition to an inclusive green economy – we hope to provide a useful resource for students and other stakeholders” Fulai Sheng, co-editor of the publication, emphasised.

 “This new textbook makes an important contribution to our understanding of how poverty, inclusiveness and employment issues must be fully taken into account to ensure a fair and just transition to a green economy”, Steven Stone, Chief of UN Environment’s Resources and Markets Branch, said.

Commending UN Environment and its partners on their efforts, the Executive Director of the UN Institute for Training and Research (UNITAR), Nikhil Seth, further observed that “publications like the one launched today will be instrumental in transmitting novel ideas and concepts that can inspire leaders of tomorrow”.

Dr. Meshgan Al Awar, Secretary General of the Zayed Foundation and Co-Author of the textbook, summarized the implication and significance of this initiative by noting, “The Inclusive Green Economy textbook provides an inspiring framework for nations, organizations and individuals to follow and simulate as they endeavor in this direction”.

UN Environment

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