OECD, Directorate for Employment, Labour and Social Affairs
Organisation for Economic Co-operation and Development
National Adult Literacy Conference
The Royal Hospital Kilmainham, Dublin,
8th September 2010
The jobs crisis in OECD countries: some stylised facts
John P. Martin Director for Employment, Labour and Social Affairs, OECD
The jobs crisis
An unprecedented crisis
•OECD-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 dropped a bit (8.5% in June 2010)
While recovery is underway, the jobs crisis is far from over
•OECD UR projected to show little change this year, before dropping slowly through next year, but could still be 8% by end 2011
Bold action needed to tackle high and persistent unemployment
• Individuals in jobless households 5x more likely to be poor on average
•Social costs go well beyond the loss of income (e.g. health, crime etc.)
•High risk of hysteresis effects
Part I
What are the labour market impacts of the crisis?
•Historical patterns and recent trends
The unemployment impact so far differs greatly across countries
Percent of the labour force
* March 2010 for Greece, April 2010 for Norway, Turkey and the United Kingdom, May 2010 for Sweden, 2010 Q1 for New Zealand and Switzerland, 2010 Q2 for Iceland (OECD harmonised unemployment rate data are not available on a monthly basis for the last three of these countries).
0
2
4
6
8
10
12
14
16
18
20
KOR
NO
R
AUT
NLD
CHE
AUS
JPN
LUX
MEX NZL
DN
K ISL
DEU CZ
E
GBR
CAN
FIN
ITA
BEL
SWE
USA PO
L
FRA
HU
N
PRT
TUR
GRC IR
L
SVK
ESP
OEC
D G7
EU-2
7
Euro
are
a
% December 2007 June 2010*
Different responses of employment to output declines
Total percentage change, 2007 Q4 to 2009 Q4
-14
-12
-10
-8
-6
-4
-2
0
2
4
6
% Change in real GDP Change in total hours worked
Different margins of adj. in the labour market: employment vs.
hoursTotal percentage change, 2007 Q4 to 2009 Q4
-14
-12
-10
-8
-6
-4
-2
0
2
4
% Change in total employment Change in average hours worked
The current crisis is the worst in recent decades
Index base 100 = OECD area unemployment rate at the preceding business-cycle peak (based on output gap), quarterly data
Source: OECD Economic Outlook, May 2010.
90
100
110
120
130
140
150
160
0 1 2 3 4 5 6 7 8 9 10 11 12
Quarters elapsed since the beginning of the recession
1973 Q2 1979 Q2 1990 Q1
2000 Q2 2007 Q3 Projected
Recessions not only hurt lots of people, but also take a long time
to fix Harmonised unemployment rates in the United States, January 1970 - July 2010
0
2
4
6
8
10
12
1970M1 1975M1 1980M1 1985M1 1990M1 1995M1 2000M1 2005M1 2010M1
26 years
9 years
4 years3 years7 months
5 years5 months
8 years
3 years3 months
4 years9 months
3 years8 months
Recessions not only hurt lots of people, but also take a long time
to fix Harmonised unemployment rates in Germany, January 1970 - June 2010
0
2
4
6
8
10
12
1970M1 1975M1 1980M1 1985M1 1990M1 1995M1 2000M1 2005M1 2010M1
5 years 7 years6 months
2 years8 months
2 years4 months
4 years6 months
3 years17 months
Recessions not only hurt lots of people, but also take a long time
to fix Harmonised unemployment rates in Ireland, January 1970 - June 2010
0
2
4
6
8
10
12
14
16
18
1970M1 1975M1 1980M1 1985M1 1990M1 1995M1 2000M1 2005M1 2010M1
4 years
7 years
3 years 2 years
8 years
2 years11 months
9 years4 months
Who have suffered the most during the
recent recession?
Percentage change of employment over 2007 Q4 to 2009 Q4Panel A. OECD weighted average Panel B. Ireland
-2.2 -3.4-0.7
-9.6
-2.1
3.7
-7.1-3.8
3.9
-2.2
0.0
-5.2
-48
-40
-32
-24
-16
-8
0
8
Tota
l
Men
Wom
en
15-2
4
25-5
4
55-6
4
Low
-ski
lled
Med
ium
-ski
lled
Hig
h-sk
illed
Self-
empl
oyed
Perm
anen
t wor
kers
Tem
pora
ry w
orke
rs
Gender Age groups Educational attainment
Workforce groups
-12.4-17.3
-6.2
-41.5
-8.2
-1.6
-29.6
-14.1
1.9
-13.2 -13.0
-3.5
-48
-40
-32
-24
-16
-8
0
8
Tota
l
Men
Wom
en
15-2
4
25-5
4
55-6
4
Low
-ski
lled
Med
ium
-ski
lled
Hig
h-sk
illed
Self-
empl
oyed
Perm
anen
t wor
kers
Tem
pora
ry w
orke
rs
Gender Age groups Educational attainment
Workforce groups
Part II
How have OECD countries responded to the crisis on the labour market policy front?
Resources available for LM policies differ across OECD countries
Passive and active labour market programmes (expenditures as a % of GDP) in OECD countries, 2008
0
0.5
1
1.5
2
2.5
Tota
l pas
sive
m
easu
res
Une
mpl
oym
ent
bene
fits
Earl
y re
tire
men
t
Tota
l acti
ve
mea
sure
s
PES
and
adm
inis
trati
on
Trai
ning
Empl
oym
ent
ince
ntive
s
Dir
ect j
ob
crea
tion
Inte
grati
on
of d
isab
led
Passive measures Active measures
%
OECD average
Minimum
Ireland
Maximum
Discretionary changes in labour market policy in response to the economic
downturnNumber of OECD countries that have taken different types of measures
0
5
10
15
20
25
30
Job
subs
idie
s, re
crui
tmen
t in
centi
ves
or p
ublic
sec
tor j
ob c
reati
on
Redu
ction
s in
non-
wag
e la
bour
cost
s
Shor
t-tim
e w
ork s
chem
es
Activ
ation
requ
irem
ents
Job
sear
ch a
ssis
tanc
e an
d m
atch
ing
Job-
findi
ng a
nd b
usin
ess
star
t-up
ince
ntive
s
Wor
k exp
erie
nce
prog
ram
mes
Trai
ning
pro
gram
mes
Gen
eros
ity o
r cov
erag
e of
un
empl
oym
ent b
enefi
ts
Soci
al a
ssis
tanc
e
Oth
er p
aym
ents
or
in-k
ind
supp
ort
Fisc
al m
easu
res
for l
ow e
arne
rs
Trai
ning
for e
xisti
ng
wor
kers
Appr
entic
eshi
p sc
hem
es
Measures to support labour demand for job seekers and vulnerable workers
Measures to help unemployed find work
Income support for job losers and low-income earners
Other training
measures
Part III
SOME KEY CHALLENGES FACING LABOUR MARKET POLICIES
THE NEED TO ADAPT ACTIVATION POLICIES TO THE JOBS CRISIS/EMERGING RECOVERY
Over the past decade, major efforts made in many OECD countries to implement activation policies to get jobseekers off benefits and into work. Where they were well-designed and implemented effectively, they worked.
But the jobs crisis presents important threats to activation strategies:
- Risk of reduced intensity of interventions in the unemployment spell (less job-search controls; fewer in-depth interviews; less action plan follow-up etc.) as PES resources do not keep step with rising UN inflows and stocks
- Vacancy flows decline, resulting in a lower number of direct referrals
16
THE NEED TO ADAPT ACTIVATION POLICIES (Cont.)
Overriding goal: prevent job losers from becoming disconnected from the labour market
- Core element of activation regimes and mutual obligation principle should not be allowed to lapse or be overly diluted- For those at risk of LTU, re-employment services need to be adapted to specific conditions of slack LM- Shift to somewhat from a “work-first” to a “train-first” approach (OECD evidence suggests that the benefits to investing in training programmes for the unemployed rise in a
deep recession)- Training for the unemployed should remedy basic skill deficiencies and have a strong workplace component
17
CHALLENGES FACING IRELAND ON THE ACTIVATION FRONT
OECD (2009) showed that the intensity of activation strategy in Ireland was relatively weak prior to the crisis.
The FÁS debacle came at just the worst moment when we most needed a high-performing PES.
However, the recent amalgamation of FÁS Employment Services with the benefit agency under DSP is a potentially important step forward so long as an effective governance system is put in place with clear quantifiable objectives and a performance management system that rewards good employment/career outcomes.
Worries: Training is an important ALMP. How to ensure effective co-ordination
and delivery of effective training to FAS/DSP clients?
How to resource adequately FÁS/DSP at a time of serious public finance constraints?
How to ensure that the new integrated agency delivers performance-oriented results?
18
CHALLENGES FACING IRELAND ON THE VET FRONT
Main burden of rising unemployment has fallen on youth and the low-skilled (many of whom have weak literacy and numeracy skills).
While the weak labour market is encouraging many youth to stay on longer in education and training, this poses a huge challenge to our VET system to cope with rapidly rising demand and maintain/improve quality.
Need a fundamental rethink of the apprenticeship system:
•Too narrow in terms of occupations (e.g. dominant focus on construction, few services)
•Too few women apprentices
•Inappropriate sharing of the costs between apprentices, firms and the public purse.
A fundamental redesign of the apprenticeship system could be inspired by the good practices in Australia and Switzerland
19
CHALLENGES FACING IRELAND ON THE VET FRONT (Cont.)
Need to expand the role of on-the-job training in many VET programmes.
Much greater emphasis needs to be put into remedying basic skills deficiencies among working-age adults.
•This will require much more systematic screening by FAS/training providers for potential literacy and numeracy training
•For those diagnosed with insufficient literacy/numeracy skills, basic skills support will need to be an integral part of their VET courses.
20
Concluding remarks
Governments are intervening actively to minimise the scale of the jobs crisis
Some have been more successful to date than others With a sluggish recovery underway, governments
must not reduce their efforts to tackle high and persistent UNR and some countries may have to do more
Ireland faces a massive challenge to cut high and persistent UNR
The crisis is an opportunity to radically rethink its LM and training policies and institutions in order to promote more and better jobs.
FURTHER READING
22
FURTHER READING (Cont.)
23
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