Mitigating social consequences of structural adjustment programmes

Reducing unemployment effects of restructuring policies
ILO has a number of programmes aimed at reducing the negative social impacts of structural adjustment focused on economic issues. Successful programmes have been organized to reduce the period during which displaced workers are unemployed. One method has been to give direct assistance for the creation of new activities in communities severely affected by plant closures or large layoffs. In the case of backward regions, efforts have included increasing the supply of skilled labour in addition to necessary physical capital. Economy-wide measures include training and retraining programmes, especially on the job.

Criticism of the World Bank's structural adjustment efforts is that reforms have been planned with too little regard for the impact on poor people and many have entailed social hardships. In response, the Bank has supported 'social safety nets' to mitigate the negative impact, rather than designing and implementing policies that benefit poor people.

Economic change has been able to take place in Russia without obvious mass unemployment because of the very substantial flows of labour from unsuccessful to successful enterprises. Bankruptcy of the former would throw a mass of people onto the labour market who are unable/unwilling to work elsewhere. Disguised unemployment would then become conspicuous unemployment. Social networks are still very important. They are the primary means by which people move jobs and also provide access to secondary and casual employment. However, the absence of mass unemployment conceals low pay, unpaid wages and compulsory leave. The main policy conclusion drawn by researchers is that employment policy should shift from its present focus on losing jobs, to a strategy which seeks to maintain employment in the state sector, whilst inducing its managers to restructure. Employment policy should focus on providing minimum, subsistence wages and job preservation on the basis of the productiveness and sustainability of the jobs preserved, not political criteria. In the short-term, employees in state enterprises could be employed on programmes of social and public works. In the long-term, employment policy must be combined with an industrial policy that encourages investment-led restructuring in all enterprises.

It is essential to develop micro-economic adjustment policies to lower the social costs of transition and to redistribute them.
Type Classification:
F: Exceptional strategies