Despite repeated signals that growth is resuming, unemployment or under-employment in low-paid jobs remain stubbornly high in many countries. Promoting sustained job creation is now the defining challenge of many governments around the world.
Coping with a job loss when offers are scarce and competition is fierce would be difficult for anyone. But being without work over a long period of time can have long-lasting “scarring” effects. Unfortunately, six years into the crisis such scarring has taken place and demands policy attention.
By the end of 2013 in the euro area, one in two unemployed persons was out of work for 12 months or more, corresponding to 17 million people. This group has almost doubled in size since 2007, with a particularly sharp increase among low-skilled workers.
Being out of work for that long can lead to a decline in skills, ill health and a loss of motivation to look for work. It raises the risk of dropping out of the labour market altogether, or at the very least taking on a poor quality job. The result is often exclusion and more demotivation, which can spill over into social tensions, while adding to the strain on public finances and long-term productivity.
The crisis has been particularly harsh on young people. In Europe, almost one young person in four is unemployed with the youth unemployment rate well above 30% in Portugal and the Slovak Republic, 42% in Italy, 54% in Spain and 58% in Greece. Youth unemployment is also high in some emerging economies–52% in South Africa, for example. In other countries, many youngsters are limited to low-paid, JOBS precarious jobs with little or no social protection in the informal economy.
The unemployment rate does not capture the full picture. While unemployment has driven some people to continue their studies and delay their job search in order to improve their qualifications, others do not even bother to look for work anymore. Almost one young person in six (15-24 years of age) in the OECD area is unemployed or, worse, not in any kind of employment, education or training–the so-called NEETs.
To make matters worse, many governments still face the daunting challenge of having to “do more with less” by providing effective labour market and social services to millions while controlling unprecedented public deficits.
High unemployment cannot be addressed without a return to sustained growth. But growth alone does not guarantee adequate job creation, as recent spates of “jobless growth” testify. More and better jobs with decent prospects are needed to kick-start a virtuous circle of rising confidence in the future and sustainable growth. A broad range of structural reforms is also needed to increase competition and enhance productivity, as are labour and social policies that orientate workers towards more productive jobs, and provide support to jobseekers and vulnerable groups.
Helping youths get off to a good start in their careers is an absolute priority. This is why we have devised an Action Plan for Youth, launched at our OECD Ministerial Council Meeting in May 2013, which combines short-term measures to boost job creation for youth with more in-depth reforms to enhance access to jobs, improve education and strengthen the skills match.
Promoting inclusive growth requires both higher participation in the workforce and more productive and rewarding jobs that draw people to the labour market. An important aim should be to increase female participation rates, for instance, and to make sure women do not feel confined to low-paid/low-productivity employment with dim prospects of improvement, but can access better-paid, full-time jobs too. Nor should women feel forced to take on unprotected informal jobs, as is frequently the case in emerging markets. With labour forces set to shrink in many OECD and partner countries over the next 20 years, and with women increasingly outperforming men on several fronts in education, policies that boost female labour force participation and tear down long-standing structural obstacles to their employment would yield widespread benefits, while making economies more resilient and societies more inclusive. This applies not only to women but to other groups that are underrepresented in the labour market, such as youths, disabled people, low-skilled workers and older unemployed people.
The road ahead may be challenging, but with the right policy tools and effective co-operation, including among social partners, governments can not only put millions of people back to work, but help make labour more inclusive and rewarding for everyone.
OECD work on Social and Welfare Issues
OECD Forum 2014 Issues
Stefano Scarpetta Director, OECD Directorate for Employment, Labour and Social Affairs
© OECD Yearbook 2014