Global imbalances,crisis and the lack of global governance

Gross domestic product

Vast disparities in per capital income levels continue to exist around the world. The catching-up process of the developing world, which has broadened since 2003, received a boost since the global crisis as key developed countries have struggled to recover from it. These post-crisis developments are not fully benign, since the hesitant and fragile recovery in developed countries risks holding back or even undermining income growth in developing countries. The fast shifting balance in the world economy is reflected in the decline in the share of developed countries in global gross domestic product (GDP).

Employment and unemployment

Widespread unemployment and underemployment in the global economy continues to present the most pressing social and economic problem of our time. The situation was made worse by the global crisis. While many developing countries merely suffered a temporary deterioration, the lasting labour market impact in major developed countries poses fresh challenges and risks to the continuation of positive runs in job creation and poverty reduction in the developing world. Ill-guided policies directed at the labour-market legacies of the crisis in developed countries risk global spillovers that could destabilize developing countries.

Current and account Imbalances 

Large current account balances have been at the centre of long-standing international economic policy debates regarding global imbalances. The United States has run persistent current account deficits since the early 1990s, with net private capital inflows as well as official inflows (i.e. international reserve accumulation by other countries) as the counterpart. A small and only partly evolving group of developed and developing countries features prominently on the surplus side of global imbalances. Current account imbalances may arise for a number of reasons and are not indicative per se of a systemic problem that needs coordinated intervention. Rather, it is the loss of competitiveness at the national level that causes an unsustainable current account deficit.

Misaligned exchange rate

Countries’ competitiveness positions are primarily shaped by trends in unit-labour costs and exchange rates. Since the end of the multilateral Bretton Woods exchange rate system, non-orderly floating of currencies has prevailed, featuring large exchange rate swings and persistent misalignments. Current account imbalances caused by unbalanced competitiveness positions matter both at the regional and global levels. Unbalanced competitiveness positions are the underlying cause of the ongoing European crisis. In general, exchange rate movements that are persistently inconsistent with achieving balanced global competitiveness positions provide strong evidence for the need to coordinate global currency markets.

Interest rates, volatile capital flows and exchange rate instability

Traditional theory holds that floating exchange rates insulate countries against external shocks and enlarge national policy space. Driven by stabilizing currency market speculation, movements in nominal exchange rates are held to compensate for inflation and/or interest rate differentials, so as to avoid any build-up of unbalanced competitiveness and trade positions. Actual experiences speak another language altogether. In the absence of proper global governance, global finance has become dominated by herd-like short-term risk-reward calculations that may ignore the gradual build-up of economic imbalances and related financial fragilities for a long time. The authorities of target currencies in the developing world are facing difficult choices.

Financial liberalization and the financialization of commodity markets

Sizeable commodity price volatility can have adverse effects at both the macroeconomic and microeconomic levels. The wide price fluctuations observed over the last decade coincided with major shifts in commodity market fundamentals, as well as with increased trading by financial investors in commodity derivatives markets. The financialization of commodity markets has accelerated significantly since about 2002–2004 and most probably reduced the reliability of price signals emanating from commodity futures exchanges. Greater market transparency and tighter regulatory measures are called for to contain the price impact of financial investors and the associated risk of price bubbles.

Global rebalancing and recovery contributions

After briefly shrinking during the global crisis, global imbalances in trade and financial flows have made a comeback during the recovery and remain large as of today. While the balances of the main surplus and deficit countries or regions are below their pre-crisis peak, there has been no fundamental change in the global imbalance constellation. Developing countries at large have contributed disproportionately to global rebalancing and recovery, while an increasing number of them have reached the point where rising current account deficits signal future risks of fragility and crisis.

Source: United Nations conference on Trade and Development 2012

Global imbalances,crisis and the lack of global governance

Employment and Unemployment

Work represents – for the majority of the population – the main source of personal income, the other sources being the revenues from capital and social transfers. For working-age populations, employment is also essential for social inclusion. As productivity growth and structural change, featuring job destruction, are inherent aspects of development, the timely creation of jobs in sufficient numbers is a permanent challenge. Job creation is of even more vital importance when population growth in conjunction with demographic and social factors yield a growing labour force ready for employment – or at risk of raising the reserve of unemployed or underemployed workers. Widespread unemployment and underemployment in the global economy continues to present the most pressing social and economic problem of our time because it is closely related to poverty, on the one hand, and social peace and political stability on the other.

 

Growth of employment and real gross domestic product in developed economies, 1971–2011
(Percentage)

Source: UNCTAD, TDR 2011 (Table 1.1) andTDR 2010 (Chart 3.3) March 2012 update;UNCTADstat database and Historical Statistics of Japan, Statistical Bureau

Note: Developed countries comprise: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Iceland, Ireland, Israel, Italy, Japan, Luxembourg, the Netherlands, New Zealand, Norway, Portugal, Spain, Sweden, Switzerland, the United Kingdom and the United States.

In developed economies, there is a strong link between GDPgrowth and employment creation. By contrast, in developing economies, changes in informal employment and self-employment dampen the effects of growth cycles on formal employment  (Chart). In the absence of social safety nets fulfilling this role in developed economies, in developing economies movements into and out of informal, low-quality employment is typically cushioning employment in the formal economy as captured in official statistics, if at all. The segmentation of the labour structure in developing countries reflects the dualism that characterizes their economic structures: The coexistence of a modern sector with relatively high productivity and a sluggish traditional sector with low productivity. Moreover, the segmentation also highlights the importance of the quality of employment created; above and beyond the sheer quantity of, perhaps, precarious and poorly paid jobs feeding the ranks of the working poor. While unemployment rates always have to be assessed in conjunction with labour force and employment data in both developed and developing countries. Classification of workers by employment status underlines that the self-employed and contributing family members continue to play a far more prominent role in developing countries (Table).

 

Real gross domestic product and employment by region, 2003–2011 (Annual average growth rate)
Region		03-08				09-10				2011
Developing economies		7.0		1.9		6.4		1.4		6.0		..
East Asia		8.9		0.6		8.6		0.4		7.6		2.0
South Asia		8.0		2.5		7.5		1.4		6.5		2.2
South-East Asia		6.0		2.0		5.5		2.3		4.8		2.7
West Asia		6.3		2.3		5.2		3.6		6.6		4.3
North Africa a		5.1		4.2		4.8		2.3		-0.5		1.3
Sub-Saharan Africa		6.4		3.0		5.4		2.8		4.7		..
Latin America and  the Caribbean		4.8		2.8		4.1		1.7		4.3		1.9
Transition economies		7.4		1.2		5.4		-0.5		4.5		1.0
Developed economies		2.3		1.3		1.4		-2.4		1.4		2.4
North America		2.4		1.3		1.5		-2.0		1.7		0.7
Asia		1.6		0.3		0.8		-0.8		-0.7		-2.1
Europe		2.4		1.4		1.5		-1.0		1.6		0.2
Source: UNCTAD, TDR 2011 (Table 1.1) and TDR 2010 (Chart 3.3), March 2012 update
Note: a North Africa excluding Sudan.

Given the pivotal importance of GDP growth as contributing force behind job creation and the prevalence of unemployment or underemployment in economies in general, events such as the collapse in GDP growth in the global crisis are bound to have a major impact on the employment and labour market situation too. It turns out that countries that achieved a quick and full recovery from the crisis generally only experienced a temporary deterioration in the employment and labour market situation. Until now, this has proved true for developing countries at large, although regional disparities exist. The global crisis has temporarily dented the favourable trends established during the global boom of 2003–2007, but not derailed the benign developments. In principle, developing countries are thus generally facing the same kinds of challenges regarding job creation and poverty reduction as prior to the crisis, their principal problem being that of deficient productive capacity rather than its underutilization.

 

The situation is starkly different in major developed economies, where actual GDP is falling well short of potential output and large negative output gaps persist (Table). In these economies the short-run challenge remains to fully undo the crisis impact on GDP and employment by appropriate macroeconomic policies. In case of failure, crisis-induced unemployment would in due course be classified as structural, which would become true to the extent that a deterioration of human capital (a loss of skills and morale due to long-term unemployment) and lack of physical capital (for lack of investment) artificially creates a state of deficient productive capacity resembling the situation in developing countries. Labour market and welfare system reforms designed to accentuate downward wage pressures would not solve the underlying problem of deficiency of effective demand in these countries, but make them also more similar to developing countries in terms of a widespread prevalence of working poor. It would also tend to make these economies more export reliant and focused on external competitiveness. 

The fragile and unfinished recovery of major developed economies affects developing economies as the former represent critical export markets for the latter. Ill-guided policies in developed countries pose new and additional challenges in developing countries.

• Highlights

• There is a strong link between GDP growth and employment creation;
• The relative role of social safety nets and informal employment varies in developed vs. developing economies, and stark differences in employment status of the labour force persist;
• The employment impact of the global crisis has proved temporary in many developing economies, but lasting in major developed economies;
• The underlying problem of insufficient effective demand and possible ill-guided policies pursued in developed economies cause spillover effects in the developing world.

Sexual harassment in the workplace

Sexual harassment is unwelcome sexual behaviour, which could be expected to make a person feel offended, humiliated or intimidated. It can be physical, verbal or written. 

Sexual harassment is covered in the workplace when it happens:

• at work
• at work-related events
• between people sharing the same workplace
• between colleagues outside of work. 

Responding to harassment

All incidents of sexual harassment  no matter how large or small or who is involved require employers or managers to respond quickly and appropriately. Just because someone does not object to inappropriate behaviour in the workplace at the time, it does not mean that they are consenting to the behaviour.

The law

Sexual harassment is against the law. Some types of sexual harassment may also be offences under criminal law and should be reported to the police, including indecent exposure, stalking, sexual assault and obscene or threatening communications, such as phone calls, letters, emails, text messages and postings on social sites

Liability

While the person who sexually harasses someone else is liable for their behaviour, employers can also be held vicariously liable for acts of sexual harassment by their employees or agents. 

Sexual harassment can involve employees, managers, contractors, agents, clients, customers and others connected with or attending a workplace. It can happen at work, at work-related events or between colleagues outside the work environment.

A common workplace

A workplace covers any place that a person attends for the purpose of carrying out their work or trade. They do not need to be an employer or employee of the workplace.

For example, Miki is contracted by an employment agency to fill a short-term reception role with an IT company. During her two-week placement she is sexually harassed by one of the company’s staff. Although Miki is not an employee of the IT company she is still covered by the law.

Industrial organisations

Employees or members of industrial organisations must not sexually harass other employees or members of the organisation, or people seeking to become a member.

For example, Louise is a union member and workplace representative for her union. At a union meeting she is sexually harassed by another member. She is covered by the law.

Qualifying bodies

Employees or members of a qualifying body, such as a professional association, must not sexually harass other employees or members, or people seeking action on an occupational qualification.

For example, Justine is a dental hygienist and a member of a professional association. On a professional development course run by the association she is sexually harassed by one of its employees. She is covered by the law.

A partnership

A partner in a firm must not sexually harass another partner or anyone seeking to become a partner at that firm.

For example, Noel is up for partnership at a law firm when he is sexually harassed by one of its senior partners. He is covered by the law.

Volunteers and unpaid workers

Volunteers and unpaid workers have the same rights and responsibilities in relation to sexual harassment as paid staff. 

Source: Victorian equal opportunity& Human rights commission 

Access date: 7/20/2015

Effective ways of handling employee grievance

Grievance may be any genuine or imaginary feeling of dissatisfaction or injustice which an employee experiences about his job and it’s nature, about the management policies and procedures. It must be expressed by the employee and brought to the notice of the management and the organization. Grievances take the form of collective disputes when they are not resolved. Also they will then lower the morale and efficiency of the employees. Unattended grievances result in frustration, dissatisfaction, low productivity, lack of interest in work, absenteeism, etc. In short, grievance arises when employees’ expectations are not fulfilled from the organization as a result of which a feeling of discontentment and dissatisfaction arises. This dissatisfaction must crop up from employment issues and not from personal issues.

Grievance may result from the following factors-

1. Improper working conditions such as strict production standards, unsafe workplace, bad relation with managers, etc.
2. Irrational management policies such as overtime, transfers, demotions, inappropriate salary structure, etc.
3. Violation of organizational rules and practices

The manager should immediately identify all grievances and must take appropriate steps to eliminate the causes of such grievances so that the employees remain loyal and committed to their work. Effective grievance management is an essential part of personnel management. The managers should adopt the following approach to manage grievance effectively-

1. Quick action- As soon as the grievance arises, it should be identified and resolved. Training must be given to the managers to effectively and timely manage a grievance. This will lower the detrimental effects of grievance on the employees and their performance.

2. Acknowledging grievance- The manager must acknowledge the grievance put forward by the employee as manifestation of true and real feelings of the employees. Acknowledgement by the manager implies that the manager is eager to look into the complaint impartially and without any bias. This will create a conducive work environment with instances of grievance reduced.

3. Gathering facts- The managers should gather appropriate and sufficient facts explaining the grievance’s nature. A record of such facts must be maintained so that these can be used in later stage of grievance redressal.

4. Examining the causes of grievance- The actual cause of grievance should be identified. Accordingly remedial actions should be taken to prevent repetition of the grievance.

5. Decisioning- After identifying the causes of grievance, alternative course of actions should be thought of to manage the grievance. The effect of each course of action on the existing and future management policies and procedure should be analyzed and accordingly decision should be taken by the manager.

6. Execution and review- The manager should execute the decision quickly, ignoring the fact, that it may or may not hurt the employees concerned. After implementing the decision, a follow-up must be there to ensure that the grievance has been resolved completely and adequately.

An effective grievance procedure ensures an amiable work environment because it redresses the grievance to mutual satisfaction of both the employees and the managers. It also helps the management to frame policies and procedures acceptable to the employees. It becomes an effective medium for the employees to express t feelings, discontent and dissatisfaction openly and formally.

Source: management study guide 2013