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Entering the year 2014, corporate profits are at an all-time high
and global equity markets have just finished a very strong year.
But the global labour market remains another story altogether,
with weak employment growth,
and growing numbers of unemployed and discouraged workers.
We argue in this report that
it's time for a critical "re-think" of the current policy environment
and for a new set of policies to help get labour markets back on solid footing.
Economic growth is gradually increasing, but household spending remains weak,
especially in economies where wages have stagnated
and in those with high levels of household debt.
Weak household spending has kept companies from expanding their productive capacity,
because they're uncertain where new demand for their products will come from.
These factors have put pressure on government revenues
and many governments have reduced their spending,
which had provided crucial support to labour markets in the depths of the crisis
and in the initial recovery.
ILO simulations show
that such fiscal consolidation can be self-defeating,
leading to lower growth, lower employment levels
and only limited reductions in budget deficits.
In contrast, we estimate that a job-friendly,
well-coordinated stimulus could raise global employment
while at the same time lowering public debt levels relative to the current path.
We argue that expansionary fiscal policy, namely increased government spending,
targeted towards job creation and higher productivity,
is currently needed in some countries.
Investments in active labour market policies can
help to improve the functioning of labour markets.
Such measures match workers with available employment opportunities,
incentivize discouraged workers to reengage in the labour market
and promote skills development
so that workers are equipped with the skills that are in demand in the marketplace.
Effective public and private employment services and investments in vocational training
and entrepreneurial programmes are some of the essential measures needed
to boost workers' employability and expand employment.