The crisis is killing jobs in all corners of the economy. The young, the old and migrants are hit hardest. Watch the video

The OECD-wide unemployment rate has increased at an unprecedented pace during the economic crisis. In September 2009, there were 15.7 million more unemployed people in the OECD area compared with the end of 2007. Unemployment is projected to continue to rise until the end of next year, albeit at a diminishing pace. By then, the number of unemployed  people in OECD countries will be almost 21 million higher than at the end of 2007.

Even with somewhat stronger job creation through 2011, unemployment is only likely to fall back to its already high current levels. There is a clear risk that at least part of the rise in unemployment since the crisis began will prove long-lasting, despite improvements in labour market policies to mobilise jobseekers back to work.

Every OECD country has implemented one or more changes to directly sustain labour demand, either through expanding job subsidy or public sector job creation programmes, lowering employer social contributions, establishing or expanding short-time work schemes, or some combination of the three. The full report is available here .
 
On policies to improve the employment prospects of the unemployed, much of the focus is on expanding the capacity of public employment services, job search assistance and training programmes. Relatively few countries have formally altered activation or mutual obligation requirements in response to worsening labour market conditions, and where they have, requirements have been tightened in most cases.
 
Around half of OECD countries have moved to increase the incomes of job losers by increasing the generosity of unemployment benefits or extending coverage to those previously excluded. A number of countries have also provided new or expanded support for job losers through social assistance, training allowances, housing support or health insurance.
 
While most of the policy responses have focused on those out of work as the result of the downturn, a number of countries have stepped up resources for training existing workers or apprentices to improve their labour market prospects or provide income support for low income earners through the tax system.

Most governments have responded to the crisis with vigorous macroeconomic measures including sometimes very large stimulus packages. Greater resources are also available for labour market and social policies to cushion the negative effects of the crisis on workers and low income households. Spending on unemployment benefits has increased automatically as job losses mounted. And many governments have moved promptly to scale up resources for active labour market programmes.

However, when compared with the overall resources available in the fiscal stimulus packages, the additional funds targeted on labour market programmes are rather limited in most countries, and governments are facing difficult choices concerning how best to respond to the different demands coming from the labour market.

As in previous severe economic downturns, already disadvantaged groups in the labour market – youth, immigrants and workers in temporary or part-time jobs – are bearing most of the brunt of the job losses, although men have also be disproportionately affected. For example, the youth unemployment rate in Spain rose by 12.9 percentage points in the year to the second quarter of 2009, reaching 36.2%, while youth unemployment in Ireland rose by 13.1 percentage points reaching 24.5%. Almost one in four teenagers in the labour market is now jobless in the United States compared with one out of ten for all workers.

Temporary workers have also been very hard hit by the current economic downturn, a pattern that has been particularly pronounced in Spain where the employment of temporary workers fell by about 20 percentage points in the year to the second quarter, accounting for almost the 90% of the total employment decline. In Italy, the employment rate of temporary workers decreased by 7% in the year to the first quarter, even as employment edged up for workers on regular contracts.

There is ample evidence that immigrants and their families may be especially hard-hit. The impact on the immigrant labour market is particularly visible in countries where the crisis began earlier and immigrant labour had played a large role in the preceding expansion period. For example, immigrant unemployment surged in the early months of the crisis in Ireland, although it has subsequently subsided as many immigrants returned to their countries of origin. The labour market situation of immigrants in Spain began to deteriorate sharply in 2008 and the unemployment rate of migrants is now nearly 8 percentage points above that for native-born workers.

In many countries, job losses for  men have exceeded those for women, due to the greater tendency for men to be employed in the most affected sectors, including construction and manufacturing. In Spain, the male unemployment rate almost doubled in the year to the second quarter 2009, whereas for women it increased by a smaller (but still large) 54 percent. In the United States, unemployment rate for men reached 10.1% in August, up from 5.8 percentage points since a year earlier, whereas the unemployment rate for women increased by a smaller 2.5 percentage points.

• Promote labour demand while avoiding excess layoffs by credit constrained firms. Short-time working subsidies or reduction in social security contributions will help preserve viable jobs, if they are well-targeted on firms facing a temporary fall in demand and workers who will find it difficult to get another job if made redundant.

• Provide adequate safety-nets to job losers and low-income families. In those OECD countries where the maximum duration of benefits is short, temporary extensions have been implemented to avoid the long-term unemployed drifting into poverty. This should be accompanied by a close monitoring of eligibility conditions to avoid abuses and/or inducing dependence.

• Ensure social assistance benefits are adequate and accessible to those who lose their job and do not have access to unemployment insurance benefits.

• Expand effective active labour market programmes. Public employment services should place emphasis on providing job search assistance to the most employable job losers. Greater reliance should also be placed on training, particularly if it is tied to labour market needs. For the most hard to place unemployed, it would also be advisable to make more use of targeted hiring and work-experience subsidies and public sector job-creation measures.

• Take decisive actions targeted on at-risk young people. In this context, it would be important to ensure that out-of-school youth who are encountering difficulty in the labour market can access appropriate active labour market policies, such as job-search assistance and training.  Further efforts should be made in many countries to ensure that no youth enters the labour market without a recognised and valued qualification. Drop-outs also need special attention from the education authorities to ensure they remain engaged in, or re-connect with, education through the completion of an upper secondary diploma or its equivalent, preferably with an on-the-job training component. 

The financial and economic crisis has rapidly turned into a jobs crisis with large job losses and potentially severe social consequences. OECD employment and labour ministers met on 28-29 September to discuss how labour market and social policies can best help workers and low-income households weather the storm of the current jobs crisis. Read the reports prepared for the meeting on issues including youth unemployment and active labour market policies, as well as other papers, here . 

While the economic crisis is drawing much attention to unemployment levels, the quality of jobs available is also a concern. In some developing countries, up to 60% of the labour force works informally – without written contracts or social security. In India, for example, the official unemployment rate was 4.7% in 2005, but 83% of non-agricultural workers were informal, with jobs but without the benefit of employment protection, unemployment insurance or pension entitlement. The current economic crisis is likely to lead to a surge in informal employment due to job losses in the formal sector, resulting in deteriorating working conditions and lower wages for the poorest. Read more about this issue in "Is Informal Normal? Towards More and Better Jobs in Developing Countries ".

For further information, please contact Stefano Scarpetta, Head of the Employment Analysis and Policy Division, stefano.scarpetta@oecd.org or tel: +33 1 45 24 19 88