Launch of the 2014 Employment Outlook, Remarks by Angel Gurría, Secretary-General, OECD
3 September 2014 - Paris, France
Ladies and Gentlemen,
Welcome to the OECD. It is my pleasure to present the 2014 edition of the OECD Employment Outlook. As you know, tackling the epidemic of unemployment and underemployment that our countries have been facing since the first years of the crisis has been one of our top priorities at the OECD. It has also proved to be one of the greatest challenges of many countries around the world.
Some progress has been made. The OECD unemployment rate, which reached a historic 8.5% in October 2009, and which seemed stuck at 7.9% in 2011-2013, fell to 7.3% in June of this year. According to our projections, this average will decline slightly to 7.1% by the end of 2015.
We are moving on the right trajectory, but we are moving at very slow speed. Our average unemployment rate, even at 7.1%, is still well above the pre-crisis level of 5.6% (in 2007). This means that more than seven years after the onset of the global financial crisis, only half of the surge in unemployment will have been reversed. In fact, by the end of next year, almost 45 million people will be unemployed in the OECD area – 12 million more than before the crisis.
We are observing a gradual decline in unemployment in the United States, Mexico, Japan, and in most emerging economies. And unemployment rates stand at 5% or lower in Germany, Austria, Switzerland and Norway.
Unemployment is first and foremost a human tragedy. Jobless households risk falling into poverty. And the longer someone is unemployed, the harder it becomes to bounce back.
OECD Secretary-General Angel Gurría presents the 2014 OECD Employment Outlook
By the first quarter of 2014, more than one in three unemployed people in the OECD area had been out of work for 12 months or more. This means that there are now over 16 million long-term unemployed people in the OECD area – an increase of 85% since 2007.
Youth unemployment is one of the most critical features of this challenge. Most countries around the world are still making efforts to address the multi-dimensional problem of the so called NEETs – young people who are neither employed nor in education or training. According to our latest estimates, the NEETs in the OECD countries represent 15% of individuals between 15 and 29 years.
But unemployment is not the only way in which the crisis has caused hardship for families. This year’s Employment Outlook provides compelling evidence that many of the people who have kept their jobs have also been affected by changes in wages.
Real wages have grown slowly, or even declined, bringing further hardship
For the OECD as a whole, real wage growth has come to a virtual standstill since 2009. And wages have actually fallen by between 2% and 5% per year in countries such as Greece, Ireland, Portugal, Czech Republic and Spain.
Wage cuts have helped contain job losses. They have also helped countries with large current account deficits before the crisis to restore their competitiveness. Indeed, following the introduction of the euro, labour costs grew considerably faster than labour productivity in several euro-area countries, notably Greece, Portugal, Ireland and Spain, especially when compared with Germany. But stagnant or falling real earnings can mean sharp cuts to family budgets, bringing further hardship to the most disadvantaged people.
At the height of the crisis in 2010, we saw that across a range of OECD countries, one in two workers experienced real cuts in wage compensation. And within that group of workers, more than half had experienced a cut in nominal wage compensation.
These cuts are often caused by a reduction in overtime hours and by lower bonuses – rather than by lower hourly wages. Nevertheless, the effect on household incomes can be severe.
We need better policies for more and better jobs
What can governments do to improve labour market conditions in the current environment?
First, we need to look at the continued role of macroeconomic policies in sustaining the recovery from the crisis, and in supporting job creation. High unemployment, below-target inflation, and high levels of government debt, mean that monetary policies need to remain accommodative in the main OECD areas. There is little room for fiscal stimulus in most OECD countries. But following significant progress in stabilising public finances, we will need to see a careful balance between further fiscal consolidation, and support to the broader recovery.
Second, we need to complement sound macroeconomic policies with structural policy reforms that boost productivity, and in turn growth. While wage cuts have helped contain job losses and restore competitiveness to countries with large deficits before the crisis, further reductions may be counterproductive and neither create jobs nor boost demand. Furthermore wage moderation during the crisis has not been fully translated into lower prices. This partly reflects the necessary efforts of many firms to restore profitability after the crisis. However, it also stems from insufficient competition. Further structural reforms to enhance effective competition in product and services markets is therefore vital. This can ensure that the moderation shown by workers and firms in setting wages results in greater competitiveness and is accompanied by better productivity and growth performance. We also need to make it easier for workers to move between sectors and firms. Providing work experience and training to job seekers can help foster this labour mobility.
Third, we need to address gaps in employment protection, especially between permanent and temporary workers. This year’s Outlook shows that when these gaps are excessive, the impact of a downturn on job losses is greater, especially among those in “atypical” and precarious jobs. In Europe, for example, less than half of all temporary workers in a given year had full-time permanent contracts three years later. In emerging-markets and many developing countries informal and un-protected employment looms large, and addressing gaps in effective employment protection must go hand-in-hand with the broader challenge of expanding the scope and coverage of social protection.
Fourth, we need to look beyond the level of wages to look at their distribution. Low-paid workers and their families are most at risk of hardship from cuts in real wages. Mandatory minimum wages now exist or are being implemented in 26 OECD countries, as well as in a number of emerging economies. When set at the right level, these can help underpin the wages of low-paid workers without having adverse effects on employment.
Last but not least, we need to focus more on the quality of jobs, and their impact on well-being. And this is exactly what our Employment Outlook does this year. We have outlined a new framework for assessing job quality along three main dimensions: the level and distribution of earnings; job security; and the quality of the work environment.
And there is good news: overall, there is little sign of a trade-off between job quantity and job quality across countries. In other words, implementing policies that help improve job quality should not result in fewer jobs. There are however wide differences across countries and between socio-economic groups, with youth and low-skilled having lower quality jobs.
Ladies and Gentlemen:
Unemployment is finally on a downward path in many countries. But the levels of unemployment will remain well above their pre-crisis level for the rest of this year and throughout 2015.
We need to step up our efforts. We need to identify the most effective policies, the most innovative programmes. And we need to act on different coordinated fronts. This is what this study attempts to do: to inspire our policy-makers, to provide them with the best policy tools; to promote better labour market policies for better lives.