The current weak economic recovery will keep unemployment rates in Organisation for Economic Co-operation and Development member countries high until at least the end of 2013, according to a new report from the OECD.
“The recent deterioration in the economic outlook is very bad news for the labour market,” said OECD Secretary-General Angel Gurría at the presentation of the report in Paris. “It is imperative that governments use every possible means at their disposal to help jobseekers, especially young people, by removing barriers to job creation and investing in their education and skills. The young are at most risk of long-term damage to their careers and livelihoods. Targeting the most cost-effective policies is essential.”
According to the report, titled ‘The Employment Outlook 2012’, the OECD-wide joblessness rate is forecast to remain high at 7.7 per cent in the fourth quarter of 2012, close to the 7.9 per cent rate in May 2012. This leaves around 48 million people out of work across the OECD. In the Euro area, unemployment rose further in May to an all-time high of 11.1 per cent.
To get employment rates back to pre-crisis levels, about 14 million jobs need to be created in the OECD area, according to the report. Young people and the low-skilled continue to bear the brunt of the jobs crisis. Moreover, job creation during the weak recovery of the past two years has often been concentrated in temporary contracts, because many firms are reluctant to hire workers on open-ended contracts in today’s uncertain economic environment.
Differing Situations
The employment situation varies widely between countries, however. Unemployment has been rising in the European Union since the end of 2011, but has been stable at around 8.25 per cent in the United States. In OECD countries, the unemployment rate was highest in Spain, at 24.6 per cent, with double-digit rates also evident in Estonia, France, Greece, Hungary, the Slovak Republic, Italy, Portugal and Ireland.
On a lighter note, the OECD drew attention to the situation in Germany, where unemployment continues to fall as the economy thrives.
In most key emerging economies, with the exception of South Africa, labour markets have weathered the crisis well. But there have been recent signs of a slowdown in the rapid pace of economic and employment growth in some such nations, notably Brazil, China and India.
Long-term unemployment has risen since the start of the crisis in the OECD area, with around one in three unemployed persons being out of work for 12 months or more. The share of long-term unemployed remains highest in EU countries, at around 44 per cent on average. In the US, however, the share of people out of work for 12 months or more has soared, from 10 per cent pre-crisis to around 30 per cent today.
Furthermore, the number of people out of work for two years or more in the OECD area has grown by 2.6 million since 2007 to reach 7.8 million in 2011. This group faces a high risk of poverty and social exclusion.
Combating unemployment
Helping people stay in touch with the labour market is essential to avoid today’s high levels of long-term unemployment becoming entrenched, according to the OECD. Spending on active labour market policies, such as job-search assistance and training, must be maintained or increased, where possible, to help the unemployed back to work.
Since the start of the crisis, such spending has increased, and often by more than in previous recessions, but not by enough to keep pace with the steep rise in the number of unemployed. Countries cutting the resources available to job-seekers risk making the unemployment situation even worse, and jeopardising their long-term potential for economic growth, warns the report.
Publicly-subsidised work experience could help people keep in touch with the labour market. Targeted subsidies for new hires by employers would have greater impact and be more cost-effective than wide reductions in payroll taxes, according to the OECD. Apprenticeships and other dual vocational and training programmes would also help young people to improve their job skills and career prospects, according to the OECD.
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