Transcript 22-3-2010_martin__Agora ergasias

Organisation for Economic Co-operation and Development
The Greek Labour Market: Features,
Developments and Challenges
Bank of Greece Conference
Athens, 22 March 2010
Tackling the jobs crisis:
An OECD perspective
John P. Martin
Director of Employment, Labour and Social Affairs
OECD
OECD, Directorate for Employment, Labour and Social Affairs
The jobs crisis



An unprecedented jobs crisis
•
OECD-area UR jumped from 25-year low of 5.8% at the end of 2007 to a
post-war high of 8.7% in January 2010
While recovery is underway, the jobs crisis is far from over
•
OECD UR expected to rise to 9.1% by end 2010, but still be at 8.6% by end
2011.
Bold action needed to tackle high and persistent unemployment
•
•
•
Individuals in jobless households 5x more likely to be poor on average
Social costs go well beyond the loss of income (e.g. health, crime etc.)
High risk of hysteresis effects
Part I

What are the labour market impacts of the crisis?
• Historical patterns and recent trends
The unemployment impact so far
differs greatly across countries
Percent of the labour force
December 2007
20
18
16
14
12
10
8
6
4
2
0
January 2010*
Different responses of employment to
output declines
Total percentage change, 2007Q3 to 2009Q3
change in GDP
8
6
4
2
0
-2
-4
-6
-8
-10
-12
-14
Change in total hours worked
Different margins of adj. in the labour
market: employment vs. hours
Total percentage change, 2007Q3 to 2009Q3
Change in total employment
6
4
2
0
-2
-4
-6
-8
-10
-12
Change in average hours worked
The current crisis is the worst
in recent decades
Index base 100 = unemployment rate at the preceding business-cycle peak
(based on output gap), OECD area, quarterly data
1973:Q2
1979:Q2
1990:Q1
2000:Q2
2007:Q3
projected
180
160
140
120
100
80
Q0
Q1
Q2
Q3
Q4
Q5
Q6
Q7
Q8
Q9 Q10 Q11 Q12
Quarters elapsed since the beginning of the recession
Source: OECD Economic Outlook, November 2009.
Recessions not only hurt lots of people,
but also take a long time to fix
Harmonised unemployment rates in Greece, January 1970 – January 2010
14
12
10
16 years
6 months
8
8 years
6
8 years
6 months
19 years
3 months
4
2
0
1970M1
1975M1
1980M1
1985M1
1990M1
1995M1
2000M1
2005M1
2010M1
Recessions not only hurt lots of people,
but also take a long time to fix
Harmonised unemployment rates in the United Kingdom, January 1970 - January 2010
12
10
8
7 years
10 years
5 years
6
5 years
2 years
5 months
4 years
7 months
24 years
4 years
4
2
0
1970M1
1975M1
1980M1
1985M1
1990M1
1995M1
2000M1
2005M1
2010M1
Recessions not only hurt lots of people,
but also take a long time to fix
Harmonised unemployment rates in the United States, January 1970 - January 2010
12
10
8
9 years
6
3 years
7 months
26 years
4
2
0
5 years
5 months
8 years
3 years
3 months
4 years
9 months
4 years
3 years
2 months
Recessions not only hurt lots of people,
but also take a long time to fix
Harmonised unemployment rates in Germany, January 1970 - January 2010
12
10
8
5 years
2 years 2 years
8 months 4 months
6
4
2
0
7 years
6 months
4 years
3 years
6 months
Recessions not only hurt lots of people,
but also take a long time to fix
Harmonised unemployment rates in France, January 1970 - January 2010
12
10
6 years
8
6
4
2
0
3 years
3 years
10 years
5 years
4 years
6 years
Historically, disadvantaged groups bear
the brunt of falling labour demand
EULFS data, index of relative business-cycle volatility (national average=100)
250
200
150
100
50
0
A similar pattern holds in the current
downturn
Percentage change of employment over 2008 Q2 to 2009 Q2
6
4
3.5
2.9
2
0
-0.3
-1.7
-1.8
-2.9
-4
-2.1
-2.5
-6
-5.4
Age
Education
Work status
Temp
Perm
Self-emp
High
Low
55-64
-7.0
25-54
Women
Total
Men
Gender
15-24
-6.8
-8
Medium
-2
-0.5
In addition to job losses, hours reductions
and LF withdrawals also account for
falling LD
Unweighted average across countries, 1983-2007
Share of total variance explained by variation of the cyclical component of:
Hours per employee
Employment rate of
labour force
Labour force
participation rate
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Total
Youth (15-24)
Prime-age (25-54) Older workers (55+)
Men
Women
Part II

What are the policy challenges?
• Strategic choices and policy response
LM policy challenges
 Short-term challenges
• Should labour demand policies play a major role?
• Is the social safety net adequate?
• Is the work-first approach recession-proof?
 Long-term challenges
• How to avoid high unemployment from persisting?
• How to avoid undermining long-run labour supply?
• How to avoid undermining long-term labour market efficiency?
Resources available for LM policies differ
across OECD countries
On average, 1.3% of GDP of which: 0.8% passive and 0.6% active
But large differences across countries: e.g. from 0.4% in US to 2.8% in DEN
Spending on UBs exceeds spending on ALMPs in almost all countries
2.5
%
OECD average
2
Minimum
1.5
1
Greece
0.5
Passive measures
Active measures
Integration of disabled
Direct job creation
Employment incentives*
Training
PES and administration
Total active measures
Early retirement
0
Unemployment benefits
Maximum
Total passive measures



Governments have taken many types of
measures in response to the jobs crisis
Labour demand
Job subsidies, recruitment incentives or public sector job creation
Reductions in non-wage
labour costs
Short-time work
schemes
Measures to help unemployed find work
Activation requirements
Job search assistance and matching
Job-finding and business start-up incentives
Work experience programmes
Training programmes
Income support for job losers and low paid
Generosity or coverage of unemployment benefits
Social assistance
Other payments or in-kind support
Fiscal measures for low earners
Other training measures
Training for existing workers
Apprenticeship schemes
Number of OECD countries that
have taken different types of
measures
Number of EU-19 countries that
have taken different types of
measures
15
12
16
11
22
14
11
21
8
11
23
8
14
6
6
15
17
5
15
15
10
3
9
12
14
10
13
7
Supporting labour demand

Vigorous macro-economic policy response, including large fiscal
packages, to boost AD
•
Estimated to save 3.2 to 5.5 jobs in 2010 in the 19 OECD countries
included in the analysis
101
Projected
employment
100
99
Scenario 1
98
Scenario 2
97
96
Scenario 3
95
2007
2008
2009
2010
Ensuring that S-T measures to support labour demand
are well targeted and temporary

Most OECD countries have introduced measures to support labour
demand:
•
•
•

S-T labour demand should be unwound when recovery becomes
firmly established
•
•
•
•
21
Subsidies for the reduction in working time (22 countries)
Reductions in non-wage labour costs, in some cases targeted at SMEs,
disadvantaged groups (16 countries)
Hiring subsidies and work experience, generally targeted at disadvantaged groups
(16 countries)
By protecting job matches these measures have reduced socially and economically
inefficient job losses …
…but risk increasing dualism (U highly concentrated on already disadvantaged
groups and new entrants)...
….and slow-down efficiency-enhancing labour reallocation
Hiring subsidies may help promoting employment for disadvantaged groups, but have
to be well targeted and with strict conditions for employers.
Providing an adequate safety net while
minimising benefit dependency
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The jobs crisis leads to longer average unemployment spells
•
Extensions should be temporary and targeted to the most
vulnerable with enforcement of job-search requirements
The crisis can also be an opportunity to reform
unemployment benefits to provide a more adequate safety
nets to vulnerable groups, conditional on job search, and
participation in ALMPs
•
22
Where unemployment benefit durations are short, temporary extension of
benefits during the crisis helps cut the poverty risk among LTU (CAN, FIN, JAP,
PORT, US)
For temporary and other non-standard workers, benefit eligibility has been
loosened (FIN, FRA, JAP)
Helping job-seekers find a job
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
Maintain core jobs-search assistance to help jobseekers
•
•
•
•
Even in recessions firms continue to create many new jobs (see EmO 2009, Ch. 2)
Cost of job loss increases due to longer expected unemployment duration and loss of
human capital
Many countries made good progress prior to the crisis in implementing effective back-towork policies
Don’t relax activation strategies; adapt them
For those at risk of LTU, re-employment services need to be adapted to
specific conditions of slack LM
•
•
•
Some shift in emphasis from “work-first” approach to “train-first approach” through training
and work-experience programmes: Negative effects of programme participation on jobsearch less of an issue in recessions
Helps provide jobseekers with “the new skills for the new jobs” in the recovery
Is there a need for a public sector job creation scheme as a backstop for an “adapted”
activation regime in a steep downturn?
Requires more resources for ALMPs
Discretionary funds for ALMPs limited
with some notable exceptions
Average annual planned additional expenditure in response to the economic downturn
As a % of GDP (left-side scale)
% of GDP
0.50%
As a % of 2007 ALMP expenditures (right-side scale)
484%
% of 2007 ALMP expenditure
100%
0.45%
90%
0.40%
80%
0.35%
70%
0.30%
60%
0.25%
50%
0.20%
40%
0.15%
30%
0.10%
20%
0.05%
10%
0.00%
0%
Inappropriate government
responses can undermine LS in LR


Allowing the unemployed to drift into LTU and inactivity
•
Early retirement schemes and exemptions from job search of
older UB recipients
•
•

Essential to maintain mutual-obligations approach (“bend but not break”)
Did not free up jobs for youth and took a long time to unwind
So far so good?
More recently, large inflows of WA persons into sickness and
disability programmes
•
•
Some countries have made reforms aimed at promoting employment and
employability of people with remaining work capacity
Will they stay the course?
Helping youth
“ride out the storm”

Youth unemployment has increased disproportionately in
many countries
• Youth E twice as sensitive to cycle as that of prime-age workers
• Youth UR much higher than other groups (e.g. 1/3 Spain; 1/4 Ireland)

Need for decisive actions targeted on at-risk youth
• Efforts to prevent youth entering the LM without qualifications should
•
be redoubled (e.g. second-chance school, subsidies for
apprenticeships for un-skilled youth)
Out-of-school youth should have access to appropriate ALMPs even
if they do not qualify for UB
The youth unemployment crisis in
Greece: what helps?


More than 1 in 4 Greek youth unemployed in Q3 2009
•
•
•
Ensure that Greek youth can access effective ALMPs:
•
•
•
27
Part of the increase due to the crisis (3 pp since Q3 2008)
Youth unemployment likely to have risen further in Q4 2009 + Q1 2010
But youth LM outcomes already dismal prior to the crisis (in 2008, UR
7pp higher than OECD average ; ER 20pp below OECD average)
Require youth to participate in job-search training early in the UN spell,
reserve more costly interventions for those who fail to find work;
Target job subsidies on: long-term unemployed youth; unemployed
early-school leavers; and youth who have been NEET for over 6m
(outreach services required, see Connexions in UK);
Set up rigorous evaluations of cost-effectiveness.
The youth unemployment crisis in
Greece: what helps? (cont.)

To ensure youth enter LM with valued skills:
•
•

28
Create a single vocational route in secondary school combining
class-based and work-based learning;
Expand apprenticeship training to include more professions and
encourage SMEs to join forces to provide apprenticeship places.
In the longer run, an overhaul of the education system?
•
•
•
Expand ECEC;
Raise compulsory schooling requirement to at least 16 (OECD
median);
Change entry system to tertiary education (preparatory year; national
exam at end of HS; universities free to manage admissions).
Concluding remarks




Governments are intervening actively to minimise the scale of the jobs
crisis
Some have been more successful to date than others
With the recovery in sight, governments must not reduce their efforts to
tackle high and persistent U and some countries may have to do more
Governments must tackle the jobs crisis without undermining LM
inclusion in the long-run
•
•

Discretionary LM policy measures should be timely, temporary and targeted
A severe recession such as currently underway also a requires a sufficiently strong
response
Need to pursue reforms in labour and product markets.
•
•
Spain is a classic example: it needs to reform its EPL so as to lessen duality in the LM;
A much stronger benefit activation stance (little control of ALMPs in regions, a benefit
system which allows temporary workers to qualify relatively easily for up to 2 years of
wage-related benefit with no activation, etc.).
But is there sufficient political will?
Thank you!
www.oecd.org/els/employment/youth