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News : International Last Updated: Sep 17, 2009 - 7:08:44 AM


OECD warns job losses in high-income countries from financial crisis may rise to 25 million
By Finfacts Team
Sep 16, 2009 - 3:17:12 PM

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The OECD member countries are: Australia, Austria, Belgium, Canada, the Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Korea, Luxembourg, Mexico, the Netherlands, New Zealand, Norway, Poland, Portugal, the Slovak Republic, Spain, Sweden, Switzerland, Turkey, the United Kingdom and the United States.

The recession could mean 25 million people in high-income countries will have lost their jobs by the end of next year as the unemployment rate approaches a record 10%, the Organisation for Economic Co-operation and Development (OECD) warned on Wednesday.

The OECD said the downturn was destroying more jobs than other recessions since the early 1970s, but fiscal stimulus packages may save between 3.2 million and 5.5 million jobs next year in the 19 countries included in the analysis.

As many as 21 countries have introduced policies to save jobs by introducing or expanding short-time working schemes such as the German Kurzarbeit, which currently involves about 1.5m workers. However, the Paris-based think-tank for governments warns these must be focused on companies where demand is only temporarily depressed, otherwise they could hamper the recovery by putting a brake on the required reallocation of workers from declining to expanding companies.

TheOECD said governments must act fast and decisively to prevent the recession turning into a long-term unemployment crisis. OECD Secretary-General Angel Gurría. said:“Employment is the bottom line of the current crisis. It is essential that governments focus on helping jobseekers in the months to come,” at the launch of the Employment Outlook 2009. He also argued for a co-ordinated policy response to the crisis and urged policy makers not to forget the plight of those in the developing world that often cannot benefit from well-designed social protection systems.

Despite early signs of economic recovery, in most countries unemployment will rise further next year and remain high for the immediate future. The unemployment rate has already reached a post-war record high at 8.5% in the OECD area, corresponding to an increase in more than 15 million in the ranks of the unemployed since the end of 2007. If the recovery fails to gain momentum, the OECD unemployment rate could even approach a new post-war high of 10%, with 57 million people out of work.

In light of this, the report argues, governments must urgently reassess and adapt their labour market and social policies in order to prevent people from falling into the trap of long-term unemployment.

Most OECD countries have introduced measures to support labour demand. These include temporary cuts in employers’ social security contributions and short-time working subsidies to compensate workers for working fewer hours or to encourage firms to hire. In the short-term, the OECD acknowledges that these measures are playing a positive role.

But, the report warns, they must be temporary and well-targeted, otherwise they could become an obstacle to recovery by propping up declining firms and making it harder for expanding ones to hire new workers. As part of an overall strategy to tackle the jobs crisis, the OECD also recommends governments to:

  • Help young people who have been hardest hit by the crisis, especially those with few or no qualifications. Targeting this group will reduce the risk of a “lost generation” of young people falling into long-term unemployment and losing touch with the job market.
  • Reinforce social safety nets to avoid jobless people falling into poverty: on average in the OECD area, 37% of individuals living in jobless households are poor - five times higher than for individuals living in a household where at least one person has a job.
  • Increase spending on active labour market policies, such as job search assistance and training, to help the unemployed back to work. Spending on these policies has risen in many countries over the past year, but only modestly compared with the magnitude and pace of job losses. In Ireland, Spain and the United States, which have seen the fastest rise in unemployment in OECD countries, spending per unemployed person on active labour market policies has fallen by 40% or more over the past year.
  • Foster skill formation to ensure that workers are well-equipped with the appropriate skills for emerging jobs, including green jobs.

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