Remarks by Angel Gurría, OECD Secretary-General, delivered at the 9th European Regional Meeting of the International Labour Organization
Oslo, Norway, 8 April 2013
(As prepared for delivery)
Prime Minister, Madame President, Director General Ryder,
Let me first thank Director-General Guy Ryder for inviting me to participate in today’s panel on “How to tackle the consequences of the financial crisis.”
I’d like to begin my intervention by briefly touching on the economic and social challenges facing the countries of Europe and Central Asia and the key policy responses that are urgently needed to get us back on a jobs-rich, sustainable growth path.
Our March Interim Economic Outlook Assessment points to a rebound in activity in many major economies, but the outlook remains very uneven and is overall still subject to significant downside risks. There are encouraging signs coming from the housing market in the United States, for example, but challenges remain.
First and foremost is the long shadow that the economic and financial crisis continues to cast on the labour market. Many countries are still facing high levels of unemployment and underemployment, as well as rising long-term unemployment. In the OECD area, the unemployment rate stands at 8% – that’s equivalent to around 48 million people out of work, or almost 15 million more than when the financial crisis began at the end of 2007. The numbers for unemployment in March in the U.S. show how big the challenge is for the Euro Area, where the jobless rate has reached 12%.
Youth, the low-skilled and immigrants have been hit the hardest. Some 35% of unemployed youth in advanced economies have been out of a job for six months or longer. In developing countries and emerging economies, the greatest challenges are posed by the high level of informality and precarious labour market conditions.
Restarting the jobs machine remains therefore essential as well as ensuring that effective support is provided to the unemployed and those at risk of falling into poverty and exclusion. Let me outline four essential measures that can help put people back to work and stay in work with better conditions.
- The first is to restore confidence and growth. Supporting aggregate demand is still a priority for stimulating job creation. In Europe, there is a need for additional actions to repair the financial system and deepen the banking union. Elsewhere, the recent announcements in Japan to pave the way to stronger growth and an exit from deflation are very welcome. In the United States, the “fiscal cliff” has been avoided so far but public finances need to be put on a firmer path over the long term.
- Second, action is needed to achieve a job rich recovery in the European Union. This is all the more important because the unemployment rate has reached 10.9% in the EU (12% in the Euro area), well above the 8% in the OECD as a whole. Even countries facing severe fiscal constraints can be smarter in designing labour market policies and targeting support to the neediest individuals using cost‑effective measures.
- Third, it is crucial to improve the employment prospects for youth. For all countries, this means ensuring that youth do not drop out of school without developing the basic skills needed for the labour market. As stressed in the OECD Skills Strategy -- where countries can find guidance on skill development policies -- they also need to ensure skills match the needs of employers. Employment services for youth also need to be strengthened. These can make a difference in facilitating the transition to productive and rewarding jobs.
- Fourth, more must be done to tackle long-term unemployment. Well-designed policy packages can minimise the long-term costs of unemployment and lay the foundations required to put people back to work. We must provide effective re-employment services and ensure that the unemployed stay connected to the labour market. Targeted job subsidies for new hires and publically subsidised work-experience programmes can help.
All these measures, of course, require appropriate funding. In the case of Europe, many countries increased spending on active labour market programmes in the early phases of the crisis. This was a positive development, but with overstretched public finances, funding for these programmes is under threat. Indeed, despite rising unemployment, the average resources spent per unemployed person in OECD countries have declined by around 21% between 2007 and 2010.
Nevertheless, effective reforms in many cases do not necessarily put a burden on the government budget. Several European countries, notably Greece, Italy, Portugal and Spain, have embarked on ambitious reforms recently. If fully implemented, they will encourage the creation of more and better jobs and improve the hiring chances of many, including the youth and other new entrants to the labour market. Special attention should be given to supporting the most vulnerable groups in the transition, given the difficult labour market context in these countries.
Moreover, these reforms should be part of a broader structural reform package that can promote investment and jobs. This is the case of initiatives to foster competition in product markets, such as retail trade and professional services. By opening up markets that are now sheltered from competition and investments, these reforms help to create new jobs and drivers of growth.
Ladies and Gentlemen:
People are increasingly calling into question the strength of the “social compact”. Re-igniting growth and putting people back to work will be essential to restore citizens’ confidence with positive spill-over effects on other policy measures and their effectiveness. It will be easier for governments to push ahead with a broad package of labour and product market reforms if there is evidence that the corner has been turned and that trust in their actions is again increasing. Reforms that are good for economic efficiency and performance can also be good for jobs and inclusiveness. There need be no trade-off here!
That’s why the needs, prospects and opportunities of people are firmly at the centre of the OECD’s agenda. They indeed form the overarching theme of our next Council Ministerial Meeting, entitled, “It’s all about people: Jobs, Equality and Trust.” This will be held in Paris on May 29-30 under Norway’s chairmanship. I am sure that this panel will make a solid contribution in this direction and help citizens of all countries find stable work.
Thank you very much.