Our Bureau

New Delhi , Dec. 8

SOME 1.4 billion people, or, in effect, 50 per cent of the global workforce, are trapped in abject poverty, unable to earn enough to lift themselves and their families above the $2-a-day (Rs 88 a day) poverty line.

The silver lining, however, is that this figure could be reduced if policies zero in on improving labour productivity and creating jobs, says a new study by the International Labour Office (ILO).

The ILO World Employment Report 2004-05, to be released here on Thursday, states that focusing economic policies on creating decent and productive employment opportunities is vital for reducing global poverty, as called for in the `Millennium Development Goals' (MDGs).

According to the ILO Director General, Mr Juan Somavia, women and men all over the world expect to get a fair chance at a decent job and, therefore, "generating more and better jobs must become the central plank of the global drive to reduce poverty," he says.

The report also reveals that the 185.9 million people in the world who were unemployed in 2003 represent the "tip of the iceberg" of the decent work deficit, since more than seven times that number of people are employed but still live in poverty.

According to the report, some 2.8 billion people were employed globally in 2003, more than ever before. However, of these, nearly 1.4 billion — the highest number ever — are living on less than the equivalent of $2-a-day and some 550 million are living below the $1-a-day (Rs 44 a day) poverty line.

The bad news apart, the good point is, the report shows, is that the actual percentage of working persons living under both the $2 and $1-a-day poverty lines is lower today than in 1990, while the projected global growth rates may halve the $1-a-day poverty line workers in some areas of the world by 2015.

"The key to reducing the number of working poor is creating decent and productive employment opportunities and promoting a fairer globalisation as strategies for poverty reduction," says Mr Somavia.

"It is not only the absence of work that is the source of poverty, but also the less productive nature of that work. Productivity growth, after all, is the engine of the economic growth that enables working men and women to earn enough to lift themselves out of poverty," he says.

The ILO report breaks new ground with its analysis of the linkages between employment, productivity and poverty reduction. It argues that the benefits of productivity gains start at the enterprise level, with lower costs of production and increased profits and competitiveness, and can continue through to benefit workers in the form of higher earnings and reduced working time. Ultimately, these benefits impact the macro-economy with lower prices, increased consumption and increased employment.

The report, however, acknowledges that the reality can be more complex, with major shifts in employment and earnings hidden behind average figures. Productivity gains can often lead to the downsizing of some sectors, with employment increases coming elsewhere. To deal with this challenge, "institutions should provide workers with security and training to better prepare them for the changing labour market."

"A focus on where people really work is as important as a focus on emerging, dynamic sectors," the report says and highlights the importance of the expanding service sector, which has shown both productivity and employment gains and provides opportunities for both high and low skilled workers. In this context, upgrading the informal economy where most people work in many developing countries is vital, the report notes.

The report also calls for more attention to increasing productivity and earnings in agriculture since a large share of workers in this sector are informally employed and are living in poverty. The agricultural sector employs over 40 per cent of developing countries' workers and contributes over 20 per cent of their gross domestic product (GDP).

The report outlines the importance of employment stability since it helps productivity growth. Employment "stability" is not "labour immobility", the report says. For, jobs and skill requirements can change for the same person working for the same firm. To improve productivity, there is a need to balance the flexibility that firms require with protection for workers.

The report also recommends policies to improve the integration of small firms into the broader economy and to narrow the productivity gap with larger enterprises. Smaller businesses represent a substantial share of employment in both developed and developing economies but their potential to help reduce poverty is limited if their productivity is low, says the report.

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