Transcript No Slide Title

Tackling the Jobs Crisis:
An OECD Perspective
Paul Swaim
Employment Analysis and Policy Division
OECD Directorate for Employment,
Labour and Social Affairs
Nordic Conference
The Capacity to Avoid Incapacity
10 November 2009, Reykjavík
Outline of talk
I. The labour market impact of the crisis
II. The employment and social policy
responses
I. What are the labour market
impacts of the crisis?
The unemployment impact differs
greatly across countries
December 2007
20
18
16
14
12
10
8
6
4
2
0
July 2009
Four lessons from previous
experience
• Deep recessions result in large increases in
unemployment
• Cost of becoming unemployed increases considerably in
recessions due to increased unemployment duration and
loss of human capital
• Disadvantaged groups bear the brunt of the rise in
unemployment, but no group is spared
• Rise of unemployment difficult to reverse and risk of
permanent exclusion for some disadvantaged groups
Youth are particularly exposed
Unemployed as a % of the labour force
40
2007q4
35
30
25
20
15
10
5
0
6
Source: National labour force surveys.
2009q2
Recessions not only hurt lots of people,
but also take a long time to fix
20
18
Unemployment rates, Finland
16
14
12
10
8
18 years
6
4
4 years
14 years
2
3 years
0
1970M1
1975M1
1980M1
1985M1
1990M1
1995M1
2000M1
2005M1
II. What are the policy choices ?
Labour market policy challenges
• Short-term challenges:
– Should labour demand policies play a major role?
– Are social security systems appropriate? Should unemployment
benefits (UBs) or social assistance benefits be expanded?
– Is the work-first approach recession-proof? How to activate the
unemployed when labour demand is weak?
• Long-term challenges:
– How to avoid high unemployment from persisting?
– How to avoid undermining long-run labour supply?
– How to avoid undermining long-term labour market efficiency?
Supporting labour demand
• Vigorous macro-economic policy response, including large fiscal
packages, to boost aggregate demand
– Estimated to save 3.2 to 5.5 jobs in 2010 in the 19 OECD included in the
analysis
• Most OECD countries have introduced targeted measures to support
labour demand
– Reduction in social security contributions (estimated cost per additional
job: 1.7 times average job costs in short-term; 7 times in long-term)
– Short-time work schemes (e.g. Kurzarbeit in Germany counts more
than 1.4 million participants corresponding to about a 1 percentagepoint smaller rise in unemployment)
• Labour demand measures play a positive role, but have to be
temporary and well-targeted
Reinforcing social safety nets
• Crisis leads to longer average unemployment spells
– Where UB durations are short, temporary extension during the crisis
helps reduce the poverty risk among the long-term unemployed
– Countries that have temporarily extended benefits durations are:
Canada, Finland, Japan, Portugal and United States
• Increasing numbers of ineligible jobseekers due to the
increase in non-standard work in some countries
– Consider extending UB coverage if adequate job-search enforcement
can be provided
– Countries that have extended coverage are: Finland, France, Japan and
United States
– Make sure social assistance is adequate and accessible (backstop)
• Extensions generally should be temporary and targeted to the
most vulnerable, and not undermine job-search requirements
UB are only one element of
safety nets for job losers
Average net replacement rates over a 5-year unemployment spell
Unemployment benefits only
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Cash housing-related benefits
Cash social assistance
Helping job-seekers find a job
• Maintain core jobs-search assistance to help jobseekers
– Even in recessions firms continue to create many new jobs
– Cost of job loss increases due to longer expected unemployment
duration and loss of human capital
– Many countries have made good progress in recent years in
implementing back-to-work policies
• For those at risk of long-term unemployment, reemployment services need to be adapted to the crisis
situation
– Shift in emphasis from “work-first” approach to “train-first approach”
through training and work-experience programmes
– Negative effects of programme participation on job-search less of an
issue in recessions
– Helps provide jobseekers with “the new skills for the new jobs” in the
recovery
• Requires more resources for ALMPs
Discretionary funds for ALMPs limited
with some notable exceptions
Average annual planned additional expenditure in response to the economic downturn
As a % of GDP (left-side scale)
% of GDP
0.50%
As a % of 2007 ALMP expenditures (right-side scale)
484%
% of 2007 ALMP expenditure
100%
0.45%
90%
0.40%
80%
0.35%
70%
0.30%
60%
0.25%
50%
0.20%
40%
0.15%
30%
0.10%
20%
0.05%
10%
0.00%
0%
Inappropriate government responses
can undermine labour supply
in the long run
• Allowing the unemployed to drift into ULT and inactivity
– Essential to maintain mutual-obligations activation regimes (“bend but
don’t break”)
• Early retirement schemes and exemptions from job search of
older UB recipients
– Did not free up jobs for youth and took a long time to unwind
– So far so good?
• More recently, large inflows of working-age persons into
sickness and disability programmes
– Some countries have made reforms aimed at promoting employment
and employability of people with remaining work capacity
– Will they stay the course?
Concluding remarks
• Governments are intervening to prevent the jobs crisis from turning
into a fully-blown social crisis
• Even with the recovery in sight, governments must not reduce their
efforts to tackle high and persistent unemployment and some
countries may have to do more
• Governments must tackle the jobs crisis in ways that do not
undermine labour market inclusion in the long run.
THANK YOU
www.oecd.org/els/employment/outlook
Annex: Fiscal stimulus packages and
automatic stabilisers* vary across OECD countries
* Coefficients résumant la variation automatique de solde budgétaire liée à une variation d’un point de pourcentage de l’écart de production.
Annex: Resources available for labour market
policies differ across OECD countries
•
•
•
On average in 2007, 1.3% of GDP of which: 0.8% passive and 0.6% active
But large differences across countries: e.g. from 0.4% in US to 2.8% in DEN
Spending on UBs exceeds spending on ALMPs in almost all countries
2.5
OECD
average
2
1.5
Minimum
1
0.5
Maximum
Integration of
disabled
Direct job
creation
Employment
incentives (c)
Training
PES and
administration
Total active
measures
Early
retirement
Unemployment
benefits (b)
0
Total passive
measures (b)
%
Apprenticeship schemes
Income support for job losers and low paid
raining for existing workers
Fiscal measures
for low earners
Other payments
or in-kind support
Social assistance
Measures to help unemployed find work
Generosity or coverage
of unemployment benefits
Training programmes
Work experience
programmes
Job-finding and business
start-up incentives
Job search assistance
and matching
Measures to support labour
demand for jobseekers and
vulnerable workers
Activation requirements
Short-time work
schemes
Reductions in non-wage
labour costs
Job subsidies, recruitment
incentives or public sector
job creation
Annex: Governments have taken many
types of measures in response to the
jobs crisis
Number of OECD countries that have taken different types of measures
30
Other training measures
25
20
15
10
5
0