The Relationship Between Poverty and Unemployment (2023)

July 12, 2022

Thought Leadership

The Relationship Between Poverty and Unemployment (1)

For a quarter-century, nations around the world had made significant gains in reducing poverty, a silver lining for many despite widening income inequality. But the COVID-19 pandemic reversed many of those important gains and now inflation and other factors are causing elected officials and others to redouble efforts to combat poverty and pernicious unemployment.

According to the United Nations (UN), “full and productive employment” is one of the main ways that people experiencing poverty can improve their well-being.

However, inflation, supply chain disruptions, warfare, the coronavirus pandemic, and other compounding social risk factors continue exacerbating both poverty and unemployment.

Despite a reduction in poverty over the past 25 years, the COVID-19 pandemic reversed that steady progress, leading to the first rise in extreme poverty in more than two decades, reads the UN’s Sustainable Development Goals Report 2021.

Simultaneously, pandemic-induced unemployment has also climbed to new heights with the loss of the equivalent of 255 million full-time jobs—about four times the amount lost in the 2007-2009 financial crisis, the report continues.

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In order to alleviate global poverty and fuel sustainable social and economic growth, it is vital world leaders align supportive economic strategies with UN Sustainable Development Goals (SDGs) and urgently create quality, productive employment opportunities for all.

The State of Poverty & Unemployment

Reversal of Poverty Progress Amid Global Upheaval

According to the UN, poverty “entails more than the lack of income and productive resources to ensure sustainable livelihoods. Its manifestations include hunger and malnutrition, limited access to education and other basic services, social discrimination and exclusion as well as the lack of participation in decision-making.”

Before the COVID-19 pandemic, around 8.6% of the world lived in poverty in 2018, a UN poverty analysis states.

In 2020 alone, an additional 119 to 124 million people were pushed into extreme poverty—living on less than $1.90 a day and struggling to access healthcare, water, sanitation, food security, and other necessities, the UN states.

That number continues to grow.

The war in Ukraine, inflation, food insecurity, the ongoing Yemen conflict—which has evolved into one of the largest humanitarian crises in the world—and other social risks, threatens to push even more people into poverty.

It is estimated that these crises will force an additional 75 million to 95 million into extreme poverty in 2022, and by 2030, the global poverty rate is projected to be 7%—missing the target of eradicating poverty.

“Women, youth, and low-wage and informal workers, especially those living in urban areas, were among the hardest hit,” the World Bank reported. “Inequality rose both within countries and between countries, with long-term impacts on access to opportunity and to social mobility.”

Unemployment Rates Remain High

Meanwhile, this upheaval has also wreaked havoc on global employment.

Just as the world was beginning to rebound from what the UN called “the worst economic crisis in decades in 2020,” new waves of COVID-19 infections, rising inflation, supply chain disruptions, and ongoing warfare further plummeted economic gains and stalled recovery.

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In 2021, the global unemployment rate declined slightly to 6.2%, yet the International Labor Organization (ILO) predicts it will remain above 2019 levels (5.4%) until at least 2023. Many have still not returned to the labor force while others have lost a significant portion of working hours (4.3% in 2021)—equivalent to a deficit of 125 million full-time jobs, the UN analysis continues.

Additionally, although youth had only represented 13% of the pre-pandemic employment population, they encompassed 34.2% of the decline in employment during 2020, according to the UN. The amount of global youth not in education, employment or training (NEET) has climbed to the highest levels in nearly 20 years.

The Relationship Between Poverty & Unemployment

As warfare, disease, and inflation continue exacerbating poverty and unemployment, it is increasingly vital to understand how they relate to one another and promote sustainable solutions.

Unemployment “lies at the core of poverty,” reads a UN account.

In fact, unemployment rate, median wages, and wage inequality are all significant determinants of poverty, according to research from American nonprofit organization the National Bureau of Economic Research (NBER). A 1% increase in unemployment yields a 0.4 to 0.7% increase in poverty rates, and a 10% increase in minimum wage yields a 2% decrease in poverty rates, it states.

Productive, steady employment is often one of the only assets that people experiencing poverty can leverage to improve well-being—making such opportunities essential in poverty reduction and sustainable social and economic development, the UN account continues.

Given its vital role in reducing poverty, job creation should be a central focus in policies and strategies, it states.

However, it is not enough to simply create more jobs; quality work is a crucial part of rebuilding a sustainable working economy.

Empowering ‘Full & Productive Employment’

Although unemployment is a poverty predictor, having a job does not necessarily ensure adequate quality of life.

Countries such as Burundi (79%), Madagascar (76%), and the Democratic Republic of the ​​Congo (69%), among others, maintain significantly high working poverty rates—the proportion of employed people living in households below the poverty line, reads an ILO analysis.

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ILO data further reports that the “majority of the 3.3 billion people employed globally in 2018 had inadequate economic security, material well-being and equality of opportunity.”

It is vital that policymakers not only prioritize job creation, but promote decent work, characterized by full and productive employment for all, equal pay, protection of labor rights and safety, and elimination of forced labor.

The UN’s Sustainable Development Goals (SDGs) champion such targets in its eighth SDG to “promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all” by 2030.

The UN also seeks to achieve higher levels of economic productivity, promote development-oriented policies, and sustain per capita economic growth with national circumstances, among other indicators.

With multiple crises converging at once, it is more crucial than ever for global leaders to create productive employment opportunities that fuel sustainable development.

In shaping such opportunities and relevant policies, it is common to rely on surveys and other traditional methods to garner feedback. However, such means—although effective—lack urgency, possess inherent biases, and lack complete populational representation.

On the other hand, emerging technologies and social understanding software enable world leaders to leverage relevant, timely, and representative feedback regarding working conditions, shortages, food insecurity, and other topics that play a crucial role in assessing and improving employment.

During a time when public distrust has plummeted, cutting-edge AI advancements empower citizens to be a part of transformational decisions and policies.

For instance, offerings such as Citibeats collect unstructured data from social media, forums, discussions, and other social platforms, generating actionable insights regarding important issues—from supply chain shortages and working conditions to food and water insecurities.

Intelligently organizing millions of data into customizable indexes on a real-time dashboard, these insights fundamentally revolutionize policymaking—facilitating more equitable, inclusive, and contextualized changes to employment and, by extension, poverty.

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Citibeats leverages ethical AI for social understanding. By gathering and analyzing real-time data from social media comments, blog posts, forums, and more, our Sustainability and Social Risk Monitors generate millions of conversational trends unfolding in real time. These unprecedented advancements empower global leaders with actionable insights to contextualize and enact necessary changes in poverty and unemployment.

Schedule a demo today to learn more.

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