- Unemployment will remain well above its pre-crisis levels next year in most OECD countries, despite modest declines over the rest of 2014 and in 2015, according to a new OECD report.
- Organisation for Economic Co-Operation and Development
The Employment Outlook 2014 says that average jobless rates will decrease slightly over the next 18 months in the OECD area, from 7.4% in mid-2014 to 7.1% at the end of 2015. Almost 45 million people are out of work in OECD countries, 12.1 million more than just before the crisis. Globally, an estimated 202 million people are unemployed, with many more in low-paid and precarious jobs.
The Outlook also analyses the impact of the crisis on wages. It finds that real wage growth has come to a virtual standstill since 2009 and wages actually fell in a number of countries by between 2% and 5% a year on average, including in Greece, Portugal, Ireland and Spain.
This slowdown has been fairly evenly spread across the earnings distribution. However, slower real wage growth, and cuts in wages in some cases, result in real hardship for low-paid workers, the report warns.
“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,” OECD Secretary-General Angel Gurría said while launching the report in Paris (Read the full speech). “Governments around the world, including the major emerging economies, must focus on strengthening economic growth and the most effective way is through structural reforms to enhance competition in product and services markets. This will boost investment, productivity, jobs, earnings and well-being.”
Policy makers must ensure in particular that any further wage adjustments are not concentrated among low-earners. This is also relevant in countries where unemployment has fallen sharply since the crisis, such as Germany and the United States where the proportion of low-earners exceeds the OECD average and concerns one-fifth and one-quarter of workers respectively.
Mandatory minimum wages, which now exist, or are being implemented, in 26 OECD countries and a number of emerging economies, as well as in-work benefits, can help underpin the wages of low-paid workers.
Long-term unemployment has likely peaked but remains a major concern, says the report. Just over 16 million people – over one in three of the unemployed – had been out of work for 12 months or more in the first quarter of 2014, almost double the number at the start of the crisis.
In countries hardest hit, notably in Southern Europe, this has led to a rise in structural unemployment which will not be automatically reversed by a pick-up in economic growth, warns the OECD. Policy makers should prioritise efforts on helping the long-term unemployed back to work through more personalised job-search assistance and training programmes.
The Outlook also includes a new framework for assessing job quality, looking in particular at earning levels and distribution, job security and the quality of the work environment. It reveals wide differences between countries and between socio-economic groups, with youth and low-skilled having lower quality jobs. But it finds no evidence of a trade-off between job quantity and quality.
The Outlook highlights that an important dimension of job quality is the stability of the employment contract. In particular, efforts are needed to address the gap in employment protection between permanent and temporary workers. Temporary jobs are often not an automatic stepping-stone to a permanent job. In Europe, for example, less than half of temporary workers in a given year had full-time permanent contracts three years later.
It is encouraging that some countries have embarked on reforms in this area, says the report. These will take time to deliver results and it is essential that countries stay the course. Others should follow their lead. In emerging economies, informal employment looms large and major efforts are needed to promote job creation in the formal sector with adequate employment protection, while broadening the scope and coverage of social protection.
The jobless outlook for 2015 diverges widely among countries, with unemployment falling but still remaining very high in Spain (around 24%) and Greece (around 27%). The euro area will see joblessness decline to 11.2% at the end of 2015, from 11.6% in mid-2014, and above 10% in Italy, Portugal, the Slovak Republic and Slovenia. Unemployment is forecast to fall below 5% by the end of 2015 in Austria, Germany, Iceland, Japan, Korea, Mexico, Norway and Switzerland.