Job Losses Pose a Threat to Stability Worldwide

February 15, 2009

Job Losses Pose a Threat to Stability Worldwide
By NELSON D. SCHWARTZ
New York Times

PARIS — From lawyers in Paris to factory workers in China and bodyguards in Colombia, the ranks of the jobless are swelling rapidly across the globe.

Worldwide job losses from the recession that started in the United States in December 2007 could hit a staggering 50 million by the end of 2009, according to the International Labor Organization, a United Nations agency. The slowdown has already claimed 3.6 million American jobs.

High unemployment rates, especially among young workers, have led to protests in countries as varied as Latvia, Chile, Greece, Bulgaria and Iceland and contributed to strikes in Britain and France.

Last month, the government of Iceland, whose economy is expected to contract 10 percent this year, collapsed and the prime minister moved up national elections after weeks of protests by Icelanders angered by soaring unemployment and rising prices.

Just last week, the new United States director of national intelligence, Dennis C. Blair, told Congress that instability caused by the global economic crisis had become the biggest security threat facing the United States, outpacing terrorism.

“Nearly everybody has been caught by surprise at the speed in which unemployment is increasing, and are groping for a response,” said Nicolas Véron, a fellow at Bruegel, a research center in Brussels that focuses on Europe’s role in the global economy.

In emerging economies like those in Eastern Europe, there are fears that growing joblessness might encourage a move away from free-market, pro-Western policies, while in developed countries unemployment could bolster efforts to protect local industries at the expense of global trade.

Indeed, some European stimulus packages, as well as one passed Friday in the United States, include protections for domestic companies, increasing the likelihood of protectionist trade battles.

Protectionist measures were an intense matter of discussion as finance ministers from the Group of 7 economies met this weekend in Rome.

While the number of jobs in the United States has been falling since the end of 2007, the pace of layoffs in Europe, Asia and the developing world has caught up only recently as companies that resisted deep cuts in the past follow the lead of their American counterparts.

The International Monetary Fund expects that by the end of the year, global economic growth will reach its lowest point since the Depression, according to Charles Collyns, deputy director of the fund’s research department. The fund said that growth had come to “a virtual halt,” with developed economies expected to shrink by 2 percent in 2009.

“This is the worst we’ve had since 1929,” said Laurent Wauquiez, France’s employment minister. “The thing that is new is that it is global, and we are always talking about that. It is in every country, and it makes the whole difference.”

In Asia, any smugness at having escaped losses on American subprime debt has been erased by growing despair over a plunge in sales among major exporters. On Thursday, Pioneer of Japan said it would abandon the flat-screen television business and cut 10,000 jobs worldwide in response to sagging demand for consumer electronics.

Millions of migrant workers in mainland China are searching for jobs but finding that factories are shutting down. Though not as large as the disturbances in Greece or the Baltics, there have been dozens of protests at individual factories in China and Indonesia where workers were laid off with little or no notice.

The breadth of the problem is also becoming apparent in Taiwan, where exports were down 42.9 percent last month, compared with a year ago, the steepest plunge in Asia.

Chang Yung-yun, a 57-year-old restaurant kitchen worker, was laid off when her employer closed in mid-November. Her son, an engineer, has been put on unpaid vacation for weeks, a tactic that has become common in Taiwan.

“The greatest fear for our people is losing jobs,” Taiwan’s president, Ma Ying-jeou, said in an interview.

Calls for protectionism have resonated among a fearful public. In Britain, refinery and power plant employees walked off the job last month to protest the use of workers from Italy and Portugal at a construction project on the coast. Some held up signs highlighting Prime Minister Gordon Brown’s earlier promise of “British jobs for British workers.”

Unemployment in Britain is expected to rise to 9.5 percent by the middle of 2010, from 6.3 percent now, according to Peter Dixon, an economist with Commerzbank in London. Germany’s jobless rate could rise to 10.5 percent from 7.8 percent, he added.

In France last week, President Nicolas Sarkozy agreed to supply low-interest loans of 3 billion euros, or $3.86 billion, each to PSA Peugeot Citroën and Renault in exchange for an agreement not to lay off French workers.

To a greater extent than in past European downturns, highly trained white-collar workers are pounding the pavement, too. Naomi Runquist-Ohayon, a trademark lawyer, has been looking for work in Paris since the beginning of the year, after losing her job in December.

“This is a new experience for me,” said Ms. Runquist-Ohayon, 39, a Swedish native who has lived in Paris and London and speaks fluent English, French, Swedish and Italian. “In London, I never had to really look. Recruiters or headhunters would call me or I would call them. It’s not so easy now.”

Half a world away in Colombia, Jaime Galeano, 40, is in a similar predicament. As a bodyguard in a country notorious for drug-related violence and kidnappings, Mr. Galeano thought his profession was immune until he lost his job last year.

“The conditions for finding a job are terrible,” he said. What is more, his age is now an impediment, with a ministry informing him that only applicants under the age of 32 would be considered for new positions.

“After turning 35, a person is worth nothing,” Mr. Galeano said.

Even India, whose startling rise to the forefront of the global economy was portrayed in the hit movie “Slumdog Millionaire,” has hit a wall. About 500,000 people lost jobs between October and December 2008, according to one recent analysis.

In New Delhi, Tarun Lamba lost the first real job he ever had about a month ago, when he was laid off as a sales manager. Mr. Lamba, 24, said he knew bad news was coming because it had been weeks since he had written a truck loan. If he has to, he said, he could join his father’s business, selling clothes. But he hopes it will not come to that.

“The cycle has to keep running,” he said. “We had a boom period one year ago, now we are in a recession, and after some time the boom will come again.”

Many newer workers, especially those in countries that moved from communism to capitalism in the 1990s, have known only boom times since then. For them, the shift is especially jarring, a main reason for the violence that exploded recently in countries like Latvia, a former Soviet republic.

“For the young generation, aged 20 to 24, this is the first time we’ve had this,” said Valdis Zatlers, Latvia’s president.

The ripples from the slowdown in Europe, North America and Asia are also being felt in Africa as migrant workers abroad lose their jobs and find themselves unable to send money home.

Since his last temporary job as a metalworker in Paris ended three months ago, Ignace Abdul has halted the monthly 200 euro payments he had been sending to his wife and three children back in Senegal. “Between 2004 and 2008, I worked nonstop,” Mr. Abdul, 30, said in an interview in a bleak Paris unemployment office. “Right now, there is nothing.”

Reporting was contributed by Keith Bradsher from Taipei, Taiwan; Heather Timmons from New Delhi; Simon Romero and Jenny Carolina González from Bogota, Colombia; and Maïa de la Baume from Paris.