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The jobs crisisAn unprecedented crisisOECD-area UR jumped from
25-year low of 5.8% at the end of 2007 to a post-war high of 8.8%
in October 2009. Since then, it has remained fairly stable (8.5% in
July 2010), close to the rate in Italy (8.4%)
While recovery is underway, the jobs crisis is far from overOECD
UR projected to show little change this year, before beginning to
drop slowly through next year, but still to be around 8% by end
2011OECDs Interim Economic Outlook (9th Sept.) suggests that world
economic recovery is more fragile than previously anticipated
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The current jobs crisis is the worst in recent decadesIndex base
100 = OECD area unemployment rate at the preceding business-cycle
peak (based on output gap), quarterly dataSource: OECD Economic
Outlook, May 2010.
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The unemployment impact so far differs greatly across
countriesPercent of the labour force* March 2010 for Greece; April
2010 for Turkey; May 2010 for the United Kingdom; June 2010 for
Chile, Estonia, Mexico, Norway and the Netherlands; and 2010 Q2 for
Iceland, New Zealand and Switzerland (OECD harmonised unemployment
rate data are not available on a monthly basis for the last three
of these countries).
Chart1
2.43.5
3.13.7
43.8
3.54.4
2.84.4
3.85.2
4.35.3
4.25.3
3.85.5
3.56.8
2.26.8
4.86.8
7.96.9
3.26.9
4.97.3
5.17.8
68
7.28.3
6.78.4
68.5
6.58.5
7.28.9
8.39.4
59.5
7.810
810.3
910.8
7.810.8
811
4.813.6
10.515
4.118.6
8.820.299999
5.88.5
5.58.2
6.99.6
7.410
December 2007
July 2010
Sheet1
Column1December 2007July 2010
NOR2.43.5
KOR3.13.7
AUT4.03.8
CHE3.54.4
NLD2.84.4
JPN3.85.2
AUS4.35.3
LUX4.25.3
MEX3.85.5
NZL3.56.8
ISL2.26.8
SVN4.86.8
DEU7.96.9
DNK3.26.9
CZE4.97.3
GBR5.17.8
CAN6.08
FIN7.28.3
SWE6.78.4
ITA6.08.5
CHL6.58.5
BEL7.28.9
POL8.39.4
USA5.09.5
FRA7.810
HUN8.010.3
TUR910.8
PRT7.810.8
GRC8.011
IRL4.813.6
SVK10.515
EST4.118.6
ESP8.820.299999
OECD5.88.5
G75.58.2
EU-276.99.6
Euro Area7.410
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Who have suffered the most during the recent recession?
Percentage change of employment over 2007 Q4 to 2009 Q4
Panel A. OECD weighted averagePanel B. Italy
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Labour market policy challenges Short-term challenges vary a lot
across countries
Providing an adequate safety net to the unemployed, including
the LTUProviding effective re-employment services. What to do with
the unemployed when labour demand is weak?Is the work-first
approach recession-proof? Maintaining viable employment/promoting
job creation. How to sustain effective labour supply?
Minimise the risk of persistent LTU in those countries which
have experienced sharp jumps in UNR
*
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Providing an adequate safety nets while minimising benefit
dependency
The jobs crisis is leading to longer average unemployment spells
Where unemployment benefit durations are short, temporary extension
during the crisis helps reducing the poverty risk among the
long-term unemployed. Extension of benefits in e.g. Canada,
Finland, Japan, Portugal and United States;
Increasing numbers of ineligible jobseekers due to the increase
in non-standard work in some countriesSome countries have extended
coverage to temporary and/or young workers, e.g. Finland, France,
Japan; Italy introduced a lump-sum payment to unemployed former
project contract workers
*
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Need to adjust activation strategies during the jobs
crisisThreats to previously successful strategies:DNK and SWI are
the only two countries where resources for ALMP increase almost
automatically with unemployment...... in other countries in the
past, PES staff and ALMP funds did not increase much in downturns,
but this time there has been a stronger responseRisk for intensity
of interventions in the unemployment spell (job search controls;
in-depth interviews; action plan follow-up) to decrease, and, given
lower vacancies, a lower number of direct referrals.Overriding
goal: prevent job losers from becoming disconnected from the labour
marketCore element of activation regimes and mutual obligation
principle should not be allowed to lapse or be overly
dilutedAdequate increase in resources is needed to:handle client
flows and maintain the range of PES interventionscompensate for the
fall in vacancy notifications by scaling up short-term programmes
such as job clubs, work trials or internships*
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Need to ensure that S-T measures to support labour demand are
well targeted and temporaryMost OECD countries have introduced
measures to support labour demand:Subsidies for the reduction in
working time (22 countries, including ITA with
CIGO/CIGS);Reductions in non-wage labour costs (16
countries);Hiring subsidies and work experience, generally targeted
at disadvantaged groups (15 countries).
When and how to scale down labour demand support measures?By
protecting job matches these measures have reduced socially and
economically inefficient job losses but risk increasing dualism (U
highly concentrated on already disadvantaged groups and new
entrants)....and slow-down efficiency-enhancing labour
reallocationHiring subsidies may help promoting employment for
disadvantaged groups, but have to be well targeted and with strict
conditions for employers. *
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Annual average stock of employees participating in short-time
work schemes as percentage of all employeesData on short-time
workers are from the OECD-EC questionnaire, except in the following
cases. * indicates that data are from national sources. **
indicates that data are OECD estimates using flows data from the
OECD-EC questionnaire or from national sources.*
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Country-specific impact of short-time work schemes on permanent
workersProportional and absolute changes in permanent employment
due to short-time work schemes (percentage changes)** indicates
countries that introduced a new short-time work scheme in response
to the crisis. The estimated jobs impacts refer to period from
which the short-time work scheme became operational until the end
of 2009 Q3.
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Going forward: the skills investment imperativeSkill development
is crucial to renewing economic growth on a balanced and
sustainable basis:The crisis has intensified longer-term shifts in
skills as blue-collars have been hit harder than white-collarsAnd
youth and low-skilled most at risk of being left behind in the
recoveryGrowing importance of lifelong learning so that workers can
upgrade their skills to cope with population ageing, globalisation,
climate changeBut tackling inequalities in training is difficult
The crisis has also reinforced the message that we will need to be
more job-mobile than in the past. Acquiring a range of generic
skills can prove to be a life insurance against prolonged
unemployment and help displaced workers find new jobsBut which
generic skills are most useful?How can more comprehensive and rapid
information on skill demands be provided?
Skills for mobility and sustainable growth*
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Going forward: the skills investment imperative (cont.)Skills
needs are evolving towards high-skilled jobs -- but some evidence
of polarisation (i.e. hollowing-out of skill distribution of
jobs)Need for better information on skill requirements of jobs,
e.g. importance of: Routine versus non-routine tasksHard skills
versus soft skillsConsiderable challenge for education and training
systems to adapt to these changes in skill demandsNeed to
strengthen links with employer organisationsIdentifying key
skillsChart 1.Change in labour demand in terms of routine and
non-routine tasks, United States *
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Going forward: the skills investment imperative (cont.)Important
challenge to better utilise existing stock of human capital E.g.
women and older workers may face employment barriers because of
family responsibilities, early retirement measures and poor working
conditionsNeed to expand skill investments for mid-career workers
Need to anticipate future skill needs:Expanding workforce in health
and long-term will raise issues of appropriate skill mix (general
versus specialist skills in medical care) and the transferability
of qualifications (especially for immigrants)Green jobs are likely
to expand but again need for better information on what types of
skills these jobs will requireBetter utilising skills and
anticipating future skill needs*
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Improving the knowledge basePIAAC will extend and improve on the
work of previous international surveys of adult skills by:Expanding
direct assessment to problem-solving skills in context of IT and
component literacy skillsExtending skill measures to broader range
of skills used at work Tightening focus on links between skills and
labour market outcomesDetermine importance of soft skillsMeasuring
comparably both formal and less formal training and barriers to
training*Literacy, numeracy & problem-solving skillsSkill
formation & labour market and social outcomesSkills used at
workHousehold-based survey of population 16-65 (minimum of 5000
respondents per country) to be held in 2011-201228 (mainly OECD)
countries participating incl. ItalyThe OECD Programme for the
International Assessment of Adult Competencies (PIAAC): a new
window on adult skills
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Concluding remarksOECD countries are facing a deep jobs crisis,
but the nature of the crisis and policy challenges vary
significantly across the boardRecent LM policy reforms may have
helped to deal with the rapid rise in unemployment but a number of
issues remain:Administrative capacity to scale up LM programmes and
possible role of private providersHow to help those unemployed who
are not eligible for income support schemesDiscretionary LM policy
measures should be timely, temporary and targetedThe severe
economic downturn could be an opportunity to invest in labour
market institutionsA longer-term strategy of investing wisely in
skills is also needed to ensure recovery from the crisis is
converted into balanced and sustained growthThis requires better
data on training and skill needs, more evaluations of existing
skill development programmes and sharing of experiences across
countries.The OECDs PIAAC survey will help fill these knowledge
gaps as well as its ongoing assessment of students (PISA) and its
reviews of VET, tertiary education and regional skill
strategies
*
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www.oecd.org/els/employment/outlook
*
**The hike in OECD unemployment tracks closely the hike after
the first oil shock in 1973.
Such a steep rise in unemployment raises the spectre of
persistently high unemployment (so-called hysteresis) which was the
scourge of many EU countries in the 1980s and early 1990s.
*Wide variation in UNRs across countries: from lows of 3 - 4% in
Norway, the Netherlands, Switzerland and Korea to a high of over
20% in Spain. Large hikes in several countries (Spain, Ireland, US,
Iceland). Contrast this with small hikes in some continental
countries (Italy, Belgium, France, Poland; Switzerland); small drop
in Germany. Has there been a new "German miracle" during the
crisis? The variation in UNRs across countries during the current
downturn as measured by the standard deviation of the OECD
harmonised UNRs is larger than that recorded in three of the four
preceding downturns.
* Mostly, the pattern of OECD job losses (see Panel A) during
the recent recession has mirrored those of past cyclical
downturns:
Men have experienced much bigger job losses then womenYouth have
been particularly hard hit, as have temporary workersLow-skilled
and medium-skilled workers have also suffered large losses while
high-skilled employment has continued to grow.
Two interesting exceptions in the current downturn:
Employment of older workers has held upMedium-skilled workers
have also experienced job losses.
Panel B shows that Italy has experienced similar patterns of job
losses.** Temporary extension of UBs has been particularly
noticeable in US, from a norm of 26 weeks before the crisis to
almost 2 years in some states a major part of the Obama
Administrations stimulus package.
*Activation of recipients of UI/SA benefits, where well-designed
an implemented, proved to be a successful strategy to cut
unemployment in many countries before the crisis.
Some argue that activation cannot work in this crisis because
there are not enough jobs available for the growing pool of
unemployed.
But OECDs view, endorsed by Employment ministers in September
2009, is that effective activation strategies are a vital tool to
combat high and persistent UNR, but they need some adaptation to
the current circumstances.
Italy has tightened eligibility requirements for UB recipients
by requiring them to register wtih the PES or participate in
training. But there is no evidence on the implementation of these
directives.*
Short-time working schemes (STWs) have been one of the main LM
policy innovations in the jobs crisis. Have been widely cited as
one of the main factors behind the new German jobs miracle even
though other factors have been just as, if not more important, than
the Kurzarbeit, e.g. collective bargaining and the Hartz LM reforms
of the mid-2000s.
Have STWs worked in the present crisis?
*OECD has made estimates of the size and impacts of STWs in its
recent Employment Outlook.Chart shows that (a) there has been a
significant recourse to STW during the jobs crisis and (b) that the
size of the recourse to STW varies greatly across countries from
less than 1% of workers in many countries to a high of over 5% in
Belgium. Italy had an above-average use of the scheme at its peak
over 3% of all workers.*STWs did save permanent jobs but there was
some deadweight loss, i.e., some jobs were subsidised that firms
would have retained anyway in the absence of the subsidy. OECD
estimates put the deadweight cost at around 30-40%, i.e. out of
every 100 permanent jobs subsidised by STW, 60-70 were saved.*