Our guest blogger is Luke Reidenbach, Special Assistant for Economic Policy at the Center for American Progress Action Fund.
Last week, the Republican National Committee used positive labor market developments — such as the news that payrolls in the United States remained virtually unchanged in November and the unemployment rate decreased to 10 percent — as an opportunity to criticize the policies that have pulled the country’s economy back from the brink. Additionally, some commentators misread the new data and argued for ending economic stimulus efforts early, like CNBC’s Trish Regan.
The global economy is slowly on the rebound, but it remains crucial that governments maintain policies that protect workers, both in developed and developing nations. Indeed, the International Labor Organization confirms this conclusion with its new World of Work report, released yesterday. The ILO argues that fiscal stimulus around the world was effective, crucial for recovery, and needs to continue as the world economy returns from the brink:
The Report shows that badly shaped spending cuts now would hit many existing jobs which were saved thanks to earlier stimulus measures but are still at risk. Such an early exit would also postpone employment recovery and would aggravate the risk of long-term joblessness, labour market exclusion and employment informality.
The ILO highlights just how precarious global labor market conditions are. While public spending by nations has prevented 7.2 percent of the world’s workforce from losing their jobs, almost 43 million workers around the world are still at risk of exclusion from the labor market. Terminating fiscal stimulus packages before they have run their due course would exacerbate this problem, putting workers at serious risk and potentially destabilizing the fragile recovery.
Furthermore, continuing policies that help workers around the world during recovery is just good economic policy. Today, more than ever before, global markets are deeply connected. Policies to help workers, here at home and abroad, get back on their feet will help boost global aggregate demand. Using the crisis as an opportunity to build and strengthen social protection and labor market institutions will contribute to the creation of a global middle class that has the purchasing power to help sustain global economic growth and alleviate some of the pressure on the American consumer.
It isn’t just the ILO that understands both the value of and need for keeping stimulus measures in place. In early November, Finance Ministers and Central Bank Governors from the G20 supported continued fiscal stimulus, agreeing to “maintain support for the recovery until it is assured.” The administration understands this as well. Treasury Secretary Timothy Geithner has reiterated that while the economy is healing, the administration will not end the stimulus prematurely.
This is the right choice, and throughout the world there is evidence of both an economic recovery and the need for a continued role of public policy to steer the global economy in the correct direction.