ISLAMABAD: Introducing universal basic old-age pensions in developing countries would increase their GDP per capital by 14.8 per cent within 10 years and reduce extreme poverty by six percentage points — a drastic reduction from the current rate of 15.5pc, according to a new report by the International Labour Organisation (ILO).

ILO’s latest edition of ‘Monitor on the World of Work’ says significant social protection policy gaps remain in developing countries, especially low-income ones with regard to old-age pensions. Only 38.6pc of older persons in lower-middle-income and 23.2pc in low-income countries receive an old-age pension.

The induced effects of basic pensions would reduce the gender gap in labour income by 3.6 percentage points, equivalent to the global progress registered in the last 15 years, the report notes.

It emphasised financial social protection, which is challenging but not unattainable. For developing countries, the annual cost of providing old-age pensions at the level of national poverty lines would be the equivalent to 1.6pc of their GDP.

“The required financial reso­urces for expanding basic old-age pensions are large but not insurmountable. For developing countries, the annual cost of providing basic old-age pensions at the level of national poverty lines is equivalent to 1.6pc of GDP — 2.3 and 1.5pc respectively of GDP for low-income and lower-middle-income countries, respectively,” the report says.

ILO projects that low-income countries, Africa and the Arab states are unlikely to recover to pre-pandemic levels of unemployment this year. While the global unemployment rate is expected to fall below the pandemic level in 2023, this reflects stronger-than-expected resilience in high-income countries rather than a generalised recovery.

In 2023, the global jobs gap is projected to stand at 453 million people, more than double the level of unemployment. Job gaps are periods during a professional career where an individual did not have stable, secure and formal employment. The real scale of employment challenges is encapsulated by the ILO’s jobs gap indicator which includes all persons who would like to work but do not have a job.

Low-income countries face the largest jobs gap rate at 21.5pc, while the rate in middle-income countries stands slightly above 11pc. High-income countries register the lowest rates, at 8.2pc. Low-income countries are the only country income group that has seen a long-term rise in the jobs gap rate, from 19.1pc in 2005 to 21.5pc in 2023.

ILO’s latest estimates project that the global unemployment rate will fall by 0.1 percentage points in 2023 if the pension system proposed is implemented ideally. This implies a decline in the total number of globally unemployed people of 1m, which is due to greater-than-anticipated labour market resilience in high-income countries in the face of economic slowdown. There are signs that further interest rate hikes in high-income countries will be limited as central bankers start to prioritise concerns about the health of the economy.

Debt-distressed countries face the biggest labour market challenges and have much more constrained policy space, which will hinder further policy responses in the face of ongoing crises and new shocks. In the low-income countries that are classified as in debt distress, the jobs gap is significantly higher, estimated to reach 25.7pc in 2023, compared with 11pc in developing countries at low risk of debt distress.

Published in Dawn, June 3rd, 2023