Long-term Unemployment Almost Double Pre-financial Crisis Level – OECD
Respected forum says there are 45m unemployed across major economies and warns that cyclical rise has become structural
Phillip Inman, economics correspondent
The Guardian, Wednesday 3 September 2014 14.23 EDT
Latest Figures Show UK Unemployment Has Risen Above 2 Million
There are 85% more long-term unemployed in the major economies than before the financial crisis
The number of long-term unemployed in the world's major economies has increased by 85% since the financial crash, according to the latest employment monitor by the Organisation of Economic Cooperation & Development (OECD).
More than 16 million people have been out of work for at least a year in the first quarter of 2014, up from 8.7 million before the crisis, or more than one in three of all unemployed across the OECD's 34 member countries, the report said.
The Paris-based forum gave a stark warning to countries such as Spain, Portugal and Greece, which recorded the biggest increases in unemployment after the 2008 crash. It said there is growing evidence that part of what was originally a cyclical increase in unemployment has become structural and "will thus be more difficult to reverse during the economic recovery".
It said: "Therefore, tackling unemployment where it remains high and driving down long-term unemployment remain key policy priorities."
The OECD has become increasingly worried about growing inequality in the major economies and the knock-on effects for social cohesion and productivity.
Almost 45 million people are without work in the OECD area, 11.9m more than just before the crisis. According to the most recent OECD economic projections from May 2014, unemployment among its members, which include the UK, the US and most developed countries, will continue to decline but will remain well above its pre-crisis level for the rest of this year and throughout 2015.
The main message from the report is that governments need to work harder to equip workers with the skills needed to cope with a fast-changing economic landscape.
Unemployment is one of the key measures of inequality, it said, along with wages, which in most countries have declined on average in relation to inflation.
The OECD was a supporter of workers in southern European countries taking a hit to their wage packets and argues that "wage adjustments have played an important role in helping the labour market weather the deep cyclical downturn, reducing job losses in the downturn and promoting employment growth in the recovery".
But in a thinly veiled warning to the European Central Bank (ECB), which has hinted at the need for further cuts in wages in Spain, Portugal and Greece, it said "further downward adjustments in wages in the hardest-hit countries risk being counterproductive".
The ECB has lobbied for hard-hitting structural reforms that include wage cuts to make local economies more competitive. The OECD said this will prove more difficult in places such as Europe where there is near-zero inflation.
"It may be difficult to achieve in the first place; or it may do little to create jobs while increasing the risk of poverty and depressing aggregate demand," it said.
ECB president Mario Draghi has responded to the lack of growth in the eurozone with cheaper credit for banks in the hope they will increase their lending to businesses and consumers. However, declining real wages have made consumers reluctant to borrow, undermining efforts to increase consumer spending.
The OECD noted that most workers had seen a decline in incomes folowing cuts in overtime and bonuses rather than hourly wage rates. Nevertheless, it urged governments to promote demand by creating more jobs with better wages.
"Promoting aggregate demand and job creation remains a key policy priority going forward," it said.
This is all the more urgent because of the growing risk that for the many who have accumulated long jobless spells, discouragement and loss of human capital make their reintegration more difficult, that is, their unemployment risks becoming structural in nature.
"This latter risk also suggests that policies to stimulate demand should be accompanied by reinforced measures to overcome structural obstacles to finding work. In particular, governments should give priority to providing employment and training measures for the long-term unemployed who experience a range of difficulties in finding jobs and are most likely to drop out of the labour force," it added.
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| Black-led Rebellion in London during Aug. 2011. |
Phillip Inman, economics correspondent
The Guardian, Wednesday 3 September 2014 14.23 EDT
Latest Figures Show UK Unemployment Has Risen Above 2 Million
There are 85% more long-term unemployed in the major economies than before the financial crisis
The number of long-term unemployed in the world's major economies has increased by 85% since the financial crash, according to the latest employment monitor by the Organisation of Economic Cooperation & Development (OECD).
More than 16 million people have been out of work for at least a year in the first quarter of 2014, up from 8.7 million before the crisis, or more than one in three of all unemployed across the OECD's 34 member countries, the report said.
The Paris-based forum gave a stark warning to countries such as Spain, Portugal and Greece, which recorded the biggest increases in unemployment after the 2008 crash. It said there is growing evidence that part of what was originally a cyclical increase in unemployment has become structural and "will thus be more difficult to reverse during the economic recovery".
It said: "Therefore, tackling unemployment where it remains high and driving down long-term unemployment remain key policy priorities."
The OECD has become increasingly worried about growing inequality in the major economies and the knock-on effects for social cohesion and productivity.
Almost 45 million people are without work in the OECD area, 11.9m more than just before the crisis. According to the most recent OECD economic projections from May 2014, unemployment among its members, which include the UK, the US and most developed countries, will continue to decline but will remain well above its pre-crisis level for the rest of this year and throughout 2015.
The main message from the report is that governments need to work harder to equip workers with the skills needed to cope with a fast-changing economic landscape.
Unemployment is one of the key measures of inequality, it said, along with wages, which in most countries have declined on average in relation to inflation.
The OECD was a supporter of workers in southern European countries taking a hit to their wage packets and argues that "wage adjustments have played an important role in helping the labour market weather the deep cyclical downturn, reducing job losses in the downturn and promoting employment growth in the recovery".
But in a thinly veiled warning to the European Central Bank (ECB), which has hinted at the need for further cuts in wages in Spain, Portugal and Greece, it said "further downward adjustments in wages in the hardest-hit countries risk being counterproductive".
The ECB has lobbied for hard-hitting structural reforms that include wage cuts to make local economies more competitive. The OECD said this will prove more difficult in places such as Europe where there is near-zero inflation.
"It may be difficult to achieve in the first place; or it may do little to create jobs while increasing the risk of poverty and depressing aggregate demand," it said.
ECB president Mario Draghi has responded to the lack of growth in the eurozone with cheaper credit for banks in the hope they will increase their lending to businesses and consumers. However, declining real wages have made consumers reluctant to borrow, undermining efforts to increase consumer spending.
The OECD noted that most workers had seen a decline in incomes folowing cuts in overtime and bonuses rather than hourly wage rates. Nevertheless, it urged governments to promote demand by creating more jobs with better wages.
"Promoting aggregate demand and job creation remains a key policy priority going forward," it said.
This is all the more urgent because of the growing risk that for the many who have accumulated long jobless spells, discouragement and loss of human capital make their reintegration more difficult, that is, their unemployment risks becoming structural in nature.
"This latter risk also suggests that policies to stimulate demand should be accompanied by reinforced measures to overcome structural obstacles to finding work. In particular, governments should give priority to providing employment and training measures for the long-term unemployed who experience a range of difficulties in finding jobs and are most likely to drop out of the labour force," it added.
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