Employment policies and data

OECD Employment Outlook 2011: chapter summaries


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Chapter 1. Income Support for the Unemployed: How well has the safety-net held up during the "Great Recession"?

Evolution of unemployment rates by duration in the OECD area

Percentage of total labour force 


Source: OECD Employment Outlook 2011

The 2008-09 global recession served a tough “stress test” to the social safety-net in OECD countries. The recession drove unemployment rates sharply higher in most countries with an increasing number of the unemployed experiencing a year or more of joblessness. Across the OECD, social safety-net systems responded by delivering increased income support to the unemployed, but potentially significant gaps also became evident. Receipt of unemployment benefits rose in all countries, with the increase in the number of recipients averaging about 60% of the increase in the total number of unemployed people. “Last-resort” programmes, such as social assistance, can act as a back stop to unemployment benefits, but enrolment in these programmes was only moderately responsive to rising unemployment. Among the lessons emerging from the crisis is that there may be a good case to temporarily raise the maximum duration of unemployment benefits during a deep recession, especially in countries where the normal duration of these benefits is relatively low and access of the long-term unemployed to last-resort benefits is limited. However, any such expansion needs to be assessed carefully in light of their potential to dull labour supply incentives and the implied cost to the public purse.

Background document: » Chapter 1- further material

Chapter 2. The labour market effects of social protection systems in emerging economies

Coverage of contributory social schemes remains limited, especially among the most vulnerable

Affiliation to social security by earnings quintile, latest year



Source: OECD Employment Outlook 2011

An important challenge in designing social protection systems in emerging economies is to ensure that these systems do not weaken incentives for work. An in-depth analysis of unemployment insurance in Brazil, cash transfers in South Africa and health protection in Mexico shows that the nature of the potential trade-offs between social and employment policy objectives takes a somewhat different form in emerging economies than in advanced economies. These trade-offs tend to be less pronounced in emerging economies for social assistance (e.g. cash transfers that do not require social security contributions for eligibility), but more pronounced for social insurance (e.g. contributory unemployment compensation). These differences are largely due to the weaker administrative capacity of governments in emerging economies and the greater importance of informal work. Extending social protection in emerging economies can, if well-designed, contribute to improved labour market outcomes. To ensure positive outcomes, countries should consider: targeting income support policies to those who need it most; better integrating programmes and policies; and promoting self-insurance among those who can afford it. These OECD recommendations are in line with the UN’s Social Protection Floor initiative which seeks to promote access to at least minimum levels of social protection for all.


Background Document: » The labour market effects of social protection systems in emerging economies: further material

Chapter 3. Earnings volatility: causes and consequences

Progressive income tax and generous unemployment benefits tend to mitigate the effects of earnings volatility on household welfare

Decomposition of change in household disposable income resulting from overall individual earnings volatility for individuals experiencing at least a 20% decrease in labour earnings


Source: OECD Employment Outlook 2011.

Many workers experience large fluctuations in labour earnings from one year to the next. Youth entering the labour market, workers in non-standard jobs, those with a low level of education, poor health or approaching retirement are the most likely to experience volatile earnings. Large drops in individual earnings increase the risk of household poverty and financial stress, with the impact largest in the poorest households. Progressive income taxation and generous unemployment benefits tend to mitigate the effects of earnings volatility on household welfare, but may also intensify the business cycle’s effect on earnings. Moreover, by intensifying the effects of macroeconomic shocks on government revenues, these measures can be costly for the public purse during recessions. It is therefore necessary for governments to achieve a sound fiscal stance during periods of growth, so as to be able to provide adequate income support for vulnerable households when a crisis occurs. Employment protection – notably strict dismissal rules for workers with regular contracts – mitigates the short-term impact of macroeconomic shocks on employment and earnings. However, strict dismissal regulations are often associated with labour market duality, requiring policy makers to strike a balance between competing effects of dismissal regulations.


Background document: 
» Aggregate earnings and macroeconomic shocks: the role of labour market policies and institutions (SEM Working Paper No. 123)

Chapter 4. Right for the job: over-qualified or under-skilled?

Over-qualified workers in OECD and selected countries, 2005
percentages of all workers


Source: OECD Employment Outlook 2011


Ensuring a good match between skills acquired in education and on the job and those required in the labour market is essential to make the most of investments in human capital and promote strong and inclusive growth. On average for the OECD area, one in four workers is over-qualified (they possess higher qualifications than those required by their job) and just over one in four are under-qualified (they possess lower qualifications than those required by their job). Over-qualification is particularly common for immigrants and new labour market entrants, while under-qualification is most frequent for experienced workers lacking a formal qualification for the skills they have acquired on the labour market. Genuine mismatch between skills possessed by workers and those required in the labour market only explains a small portion of qualification mismatch. Nonetheless, about 40% of over-qualified workers feel that they have the skills to cope with more demanding tasks at work and this group also experiences a pay penalty relative to equally qualified workers employed in occupations matching their level of formal qualifications. Governments should take a number of steps to ensure that education systems, lifelong learning institutions and labour market policies support workers to acquire the skills needed on the labour market and then to move into jobs that make good use of those skills.


Background documents: 
Right for the job: over-qualified or under-skilled? 
(SEM Working Paper No. 120)
» Over-qualified or under-skilled: a review of exisitng literature 
(SEM Working Paper No. 121)


Related Documents


EMO 2011 Statistical Annex


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