The Social and Eocnomic Impacts of the Global Financial and Economic Crisis

Abstract

This paper examines the social and economic impacts of the global financial and economic crisis and highlights a global jobs crisis involving widespread job losses, increased unemployment and wage repression in developed countries, and characterized by a growing informal economy, increased vulnerable employment and working poverty in developing countries. It briefly reviews the reach of the crisis across demographic and social groups, showing its varied effects on the employment and income of women and men, its disproportionate effect on youth and the strain it imposed on various vulnerable groups in terms of reduced income. In so doing, this paper highlights the dire consequences that individuals and their families face in both developed and developing economies. It concludes by highlighting some of the major challenges faced in addressing the jobs crisis, and suggests that, besides employment generation and income support, other forms of social protection will be of utmost importance in overcoming the effects of the crisis. The global financial and economic crisis triggered sharp output contractions in almost all industrialized economies in 2009 for the first time in the post-Second World War era. Besides the direct impacts of this contraction in developed economies, subsequent declines in cross-border trade and the rising cost of finance had serious negative effects on emerging and developing economies. In particular, as businesses cut production in response to lower aggregate demand, workers were shed in large numbers, sharply increasing unemployment worldwide. Between 2007 and the end of 2009 there was an unprecedented increase in the numbers unemployed (International Monetary Fund and International Labour Organization, 2010). This reported increase in unemployment most likely underestimates the true depth of the problem, since job loss figures are based on official labour statistics, which in many developing countries only covers employment in the formal economy, mainly in urban areas. Beyond job losses, the quality of employment also deteriorated in both developed and developing countries. Across the globe, many workers who did not lose their jobs were forced to accept reduced working hours as well as lower wages and benefits. In developing countries, a large number of workers lost their jobs in export sectors and were forced into informal and vulnerable employment elsewhere. Although the global economy recovered more quickly than expected largely due to coordinated stimulus packages, unemployment is still high. The situation is being further aggravated by austerity measures in most developed economies. The Great Recession has thus created a jobs crisis. The increased job insecurity due to the recession has resulted in sustained and devastating impacts on individuals, families, households and their communities. Communities are affected when manufacturing jobs disappear as a result of plant closures or workforce downsizings, or when young people relocate to other cities and towns in search of better job opportunities. Such job losses since 2008 have pushed countless families into financial and economic hardship, resulting in the loss of homes to foreclosure and increases in poverty, debt and bankruptcy, especially in the United States and other advanced economies. Because work is intimately related to several dimensions of individual well-being, job losses and worsening job and economic insecurity have also been associated with increased poor health, psychological hardship and family dissolution (Stucklerand others, 2009b). The recession has also affected various social and economic groups in very different ways. In general, women have been disproportionately adversely affected, but in some economies, the adverse impacts on men have been more severe than on women. In other economies, less skilled workers, youth, older persons and migrant workers have suffered in terms of lost jobs, benefits and earnings. These effects have also varied across and within regions and countries. The global economic downturn has had wide-ranging negative social outcomes for individuals, families, communities and societies, and its impact on social progress in areas such as education and health will only become fully evident over time. During times of financial and economic crisis, households often adopt coping strategies, such as making changes in household expenditure patterns; however, these can negatively influence education, health and nutrition outcomes, which may lead to lifelong deficits for the children affected and thus perpetuate the intergenerational transmission of poverty. Given the fragility of the economic recovery and the uneven progress in major economies, social conditions are expected to recover only slowly. The The Social and Eocnomic Impacts of the Global Financial and Economic Crisis www.iosrjournals.org 51 | Page increased levels of poverty, hunger and unemployment will continue to affect billions of people for years to