Transcript Presentation at NETSPAR conference on rethinking retirement

VI IBM Rotating Chair in Studi del Lavoro
Milan, Italy
24 November, 2012
CRISI ECONOMICA ED EFFETTI
SULL’OCCUPAZIONE NEI PAESI OCSE
Stefano Scarpetta
Deputy Director
Directorate for Employment, Labour and Social Affairs
OECD
What was the LM situation in the OECD prior
to the Great Recession?
• Rather favourable labour market conditions prior to the Great Recession (Q4,
2007)…
– The OECD-average unemployment rate stood at 5.7%
– 2/3 of the working-age population was employed, the highest level reached in the post-war
period
– The youth unemployment rate was 12.6%
• …but a number of structural issues were also clearly present
– Despite low or declining URs, the share of LTU remained high in some (EU) countries
– Female participation was on the rise, but still low in a number of countries
– Significant dualism in the labour market, with growing shares of those in atypical labour
contracts
– Share of youth neither in employment nor in education or training was sizeable (10.8% on
average)
– ¾ of the OECD countries recorded increases in income inequality, largely driven by widening
wage dispersion
Stefano Scarpetta, IBM Rotating Chair on Labour Studies
2
The main reform tendencies prior to the
crisis…
• Strike a better balance between social safety and benefit
dependency
– Many countries have started to put effective activation
strategies in place
– UB systems have been strengthened in some countries, but
tightened up in others
• Reinforce labour market flexibility
– Provisions with respect to temporary contracts have been
relaxed
– Working time flexibility has tended to increase
– Changes in the nature and importance of collective wage
bargaining may have increased wage flexibility
Stefano Scarpetta, IBM Rotating Chair on Labour Studies
3
…and then the crisis hit
•
Rapid rise in unemployment in many OECD countries
– Wide cross-country differences in labour market adjustment during the recession and early
phase of the recovery
– Adjustment on the extensive margin (employment) but also on the intensive (hours) in a
number of countries
•
Limited impact of the (weak) recovery on job creation
– The OECD unemployment rate is still close to the historical peak (7.9% in September 2012)
•
Serious risk of unemployment becoming entrenched
– The share of long-term (LT) unemployment is increasing rapidly, and some of the LT
unemployed are at risk of dropping out of the labour market
•
With a faltering recovery, policy choices become very difficult
– How to tackle budget deficits while, at the same time, sustain the recovery and provide
adequate support to the many unemployed?
Stefano Scarpetta, IBM Rotating Chair on Labour Studies
4
Different patterns of LM adjustment in the downturn and
early phase of the recovery
Percentage change between the real GDP peak and between trough and the real GDP trough to the latest
available quarter
2008-09 recession
%
5
0
Real GDP
Total hours worked
Recovery
%
20
Real GDP
Total hours worked
15
10
-5
5
-10
0
-15
-20
-5
-10
Countries ordered from left to right in terms of drops in GDP during the 2008-09 recession.
Source: OECD estimates based on OECD Main Economic Indicators, OECD Short-term Labour Market Statistics Databases and national
Stefano Scarpetta, IBM Rotating Chair on Labour Studies
sources.
5
Different patterns of LM adjustment in the downturn and
early phase of the recovery
Percentage change between the real GDP peak and between trough and the real GDP trough to the latest
available quarter
2008-09 recession
%
4
Total employment
Average hours worked
Recovery
%
8
2
6
0
4
-2
2
-4
0
-6
-2
-8
-4
-10
-6
-12
-8
-14
-10
Total employment
Average hours worked
Countries ordered from left to right in terms of drops in GDP during the 2008-09 recession.
Source: OECD estimates based on OECD Main Economic Indicators, OECD Short-term Labour Market Statistics Databases and national
Stefano Scarpetta, IBM Rotating Chair on Labour Studies
sources.
6
The unemployment impact has differed greatly across
countries
Unemployment rate before the crisis, at its peak and its latest value* in percentage of total labour force, quarterly data
%
Pre-crisis trough
Peak
Latest
30
25
20
15
10
5
0
Countries are shown in ascending order by the unemployment rate at its peak.
* Trough (peak) dates are defined as the start of the longest spell of consecutive increase (decrease) of the quarterly OECD harmonised
unemployment rates since 2006 Q1.
Stefano
RotatingLabour
Chair on
Labour
StudiesDatabase.
Source: OECD calculations
basedScarpetta,
on OECDIBM
Short-Term
Market
Indicators
7
Job losses among different groups in selected countries
Percentage change in employment, 2007 Q4 to 2012 Q2
Women (aged 15-64)
0.5
-2.7
16.2
13.0
-9.7
-8.1
-18.7
Medium-skilled (aged 25-64)
-4.2
High-skilled (aged 25-64)
Self-employed
Employees
-1.6
Permanent workers (aged 15 and over)
-1.7
Temporary workers (aged 15 and over)
3.6
12.1
-7.5
-2.4
-7.5
-6.7
Germany
Italy
Work status
Education
Age
Sex
-40 -30 -20 -10 0
Overall
Men (aged 15-64)
Women (aged 15-64)
Youth (aged 15/16-24)
Prime-age (aged 25-54)
Older workers (aged 55-64)
Low-skilled (aged 25-64)
Medium-skilled (aged 25-64)
High-skilled (aged 25-64)
Self-employed
Employees
Permanent workers (aged 15 and over)
Temporary workers (aged 15 and over)
10 20 30 40
-40 -30 -20 -10 0
10 20 30 40
Overall
-1.8
4.3
2.8
6.1
Men (aged 15-64)
-4.8
Women (aged 15-64)
2.6
-4.2
Youth (aged 15/16-24)
-22.0
1.6
Prime-age (aged 25-54)
-3.8
26.9
-7.8
24.6
-3.8
Stefano Scarpetta, IBM Rotating Chair on Labour Studies
n.a.: Not available.
Source: OECD Short-Term Labour Market Statistics Database and national Labour Force Surveys.
Medium-skilled (aged 25-64)
4.3
16.7
2.4
5.2
6.8
Older workers (aged 55-64)
Low-skilled (aged 25-64)
-11.6
2.7
Sex
Low-skilled (aged 25-64)
11.5
High-skilled (aged 25-64)
Self-employed
-6.1
-0.2
Employees
-1.4
Permanent workers (aged 15 and over)
7.6
Age
Work status
Education
Older workers (aged 55-64)
Temporary workers (aged 15 and over)
Education
Age
-17.2
Prime-age (aged 25-54)
Overall
Men (aged 15-64)
Women (aged 15-64)
Youth (aged 15/16-24)
Prime-age (aged 25-54)
Older workers (aged 55-64)
Low-skilled (aged 25-64)
Medium-skilled (aged 25-64)
High-skilled (aged 25-64)
Self-employed
Employees
Permanent workers (aged 15 and over)
Temporary workers (aged 15 and over)
-3.9
-5.0
-2.6
-10.1
-6.2
-3.6
Youth (aged 15/16-24)
10 20 30 40
Sex
Men (aged 15-64)
-40 -30 -20 -10 0
Age
-1.8
Work status
Sex
Overall
United States
10 20 30 40
Education
-40 -30 -20 -10 0
Work status
European Union
8
Long-term unemployed has increased in many OECD
countries
Long-term unemployed (more than one year) as a percentage of total unemployeda
%
2007 Q4
2012 Q2
80
70
60
50
40
30
20
10
0
Note: Countries are shown in ascending order of the incidence of long-term unemployment in 2012 Q2.
a) Data are not seasonally adjusted but smoothed using three-quarter moving averages. OECD is the weighted average of 32 OECD countries
excluding Chile and Korea.
Stefano Scarpetta, IBM Rotating Chair on Labour Studies
Source: OECD calculations
based on quarterly national Labour Force Surveys.
9
In general, youth face a much higher risk of unemployment
than adults…
Youth (aged 15/16-24) unemployment rate
Youth and adult unemployment rate, 2012 Q2,a percentages of labour force
60
GRC
ESP
4 times as high
50
2 times as high
40
ITA
30
HUN
POL
SWE
GBR
FIN
LUX
BEL
SVN
NZL
USA
TUR
CHL
DNK
ISR
MEX
AUS ISL
CAN
KOR
NLD
NOR
DEU
JPN
AUT
CHE
20
FRA
IRL
PRT
SVK
Equal
EST
CZE
10
0
0
5
10
15
20
25
Adults (aged 25 and over) unemployment rate
a) 2012 Q2 for Estonia, Greece, Hungary, Italy, Norway, Switzerland, Turkey and the United Kingdom.
Source: OECD calculations based on OECD Short-Term Labour Market Statistics Database.
…and young people have been hard hit by the global crisis…
Youth (aged 15/16-24) unemployment rates before the crisis, at its peak and its latest value* in percentage of the
youth labour force, quarterly data
Pre-crisis trough
%
Peak
Latest
60
50
40
30
20
10
0
Countries are shown in ascending order by the youth unemployment rate at its peak.
* Trough (peak) dates are defined as the start of the longest spell of consecutive increase (decrease) of the quarterly youth unemployment rates
since 2006 Q1.
Stefano
RotatingLabour
Chair on
Labour
StudiesDatabase.
Source: OECD calculations
basedScarpetta,
on OECDIBM
Short-Term
Market
Indicators
11
Labour market difficulties for youth go beyond
unemployment
Youth neither in employment nor in education or training (NEET), percentage of youth aged 15-24
%
25
NEET 2008 breakdown:
Inactive
Long-term unemployed
Short-term unemployed
NEET in 2012 Q1
20
15
10
5
0
Italy
Spain
Ireland
United Kingdom
United States
Source : OCDE (2010), Off
to a good
start! Jobs
forRotating
Youth Chair on Labour Studies
Stefano
Scarpetta,
IBM
OECD
France
Canada
Germany
12
The “quality” of jobs also matters…
The share of working youth in temporary jobs is high in many EU countries
Percentage of employed youth aged 15-24, by reason for temporary status, 2011
%
Involuntary
Others
80
70
60
50
40
30
20
10
0
Note: Countries are shown by ascending order of the incidence of temporary employment among youth.
a) The figures refer to the share of youth who reported being in temporary jobs because they could not find a permanent job.
Stefano
Scarpetta,
IBM Rotating
Chair on
Labour
Studies
Source: OECD calculations
based
on the European
Union Labour
Force
Survey
(EULFS).
13
Policy developments since the start of the crisis
• Temporary measures in response to the jobs crisis
– Increased resources for active labour market policies
– Measures to encourage short-time working
• Structural labour market reforms spurred by the
fiscal crisis
– Employment protection for regular workers has been reduced
and collective bargaining decentralised
Stefano Scarpetta, IBM Rotating Chair on Labour Studies
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Spending on labour market programmes varies a lot
across countries
Harmonised unemployment rates and labour market programme spending as a percentage of GDP, 2007-10
%
%
4.5
4
3.5
27
Total spending in 2007
Total spending in 2010
Active spending in 2007
Active spending in 2010
Unemployment rate in 2007 (right-side scale)
Unemployment rate in 2010 (right-side scale)
24
21
3
18
2.5
15
2
12
1.5
9
1
6
0.5
3
0
0
Countries are shown in ascending order of the unemployment15
rate in 2010.
Stefano
Scarpetta,
IBM
Rotating
Chair
on
Labour Studies
Source: OECD calculations based on the OECD Main Economic Indicators
and OECD Labour Market Programmes Databases.
The responsiveness of ALMPs spending to cyclical changes in
unemployment tends to be very low
Actual and predicted change in ALMP spending since
the start of the crisisa,b
% change between 2007 and 2010
%
25
Actual and predicted change in ALMP resources per
unemployed personsb
% change between 2007 and 2010
%
0
20.7
-5
20
-10
15
-15
10
8.2
-20
-25
-21.4
5
-30
0
Actual change
Predicted change
-29.5
-35
Actual change
Predicted change
a) The predicted change in ALMP spending is obtained by taking the difference between the out-of-sample prediction for 2010 and
the prediction for 2007.
b) Data refer to weighted averages of the countries included in Panel A but excluding Korea and the United Kingdom because of
missing data on ALMP spending for 2010.
Source: OECD estimates
based on IBM
the OECD
Labour
Programmes
Stefano Scarpetta,
Rotating
ChairMarket
on Labour
Studies and OECD Main Economic Indicators Databases.
16
Providing an adequate safety nets while
minimising benefit dependency
• The jobs crisis led to longer average unemployment spells
– Where unemployment benefit durations are short, temporary extension during the crisis
helps reducing the poverty risk among the long-term unemployed. Extension of benefits
in e.g. Canada and especially the United States (with some changes also in Finland,
Japan, Portugal)
• Increasing numbers of ineligible jobseekers due to the increase in non-standard
work in some countries
– Some countries have extended coverage, e.g. Finland, France, Italy, Japan
• 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
17
How to adjust activation strategy during
the crisis
•
Threats to previously successful strategies:
– While generally launched to combat high unemployment, their recent
successes in the context of buoyant LD  activation is facing a hard test
– Risk for intensity of interventions in the unemployment spell (job search
controls; in-depth interviews; action plan follow-up…) to decrease
– Vacancy flows decline, resulting in a lower number of direct referrals.
•
Overriding goal: prevent job losers from becoming
disconnected from the labour market. Consequently:
– Administrative capacity to scale up LM programmes and possible role of
private providers
– How to reach out those who are not (no longer) eligible for first-tier
income support schemes
– Automatic vs. discretionary adjustments: while spending for passive
LM policies increases automatically in downturns, this is not the case for
ALMPs, with a few exceptions.
18
Supporting labour demand: from protecting
existing jobs to boosting job creation
• Many countries have introduced measures to support labour demand during the
crisis:
– Subsidies for the reduction in working time (e.g., 22 OECD countries);
– Reductions in non-wage labour costs (e.g., 16 OECD countries);
– Hiring subsidies and work experience, generally targeted at disadvantaged groups (e.g. 15 OECD
countries).
• In the (very weak) recovery with high and persistent unemployment important
to shift from STWs to (net) hiring subsidies
– By protecting job matches, STWs 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.
19
The use of short-time work during the global crisis
Average monthly short-time work take-up rate, percentage of dependent employment, 2007 Q4-2010 Q4
8
2007 Q4
Peak in STW take-up
2010 Q4
7
6
5
4
3
2
1
0
Note: Countries shown in ascending order of STW take-up rate at its peak.
* OECD estimates basedStefano
on the total
hours used.
Scarpetta,
IBM Rotating Chair on Labour Studies
Source: OECD calculations based on administrative data provided by the National authorities and OECD Main Economic Indicators Database.
20
A key structural reform response:
employment protection legislation
Concentrated in Spain, Greece, Portugal, Italy;
• Motivations:
– Concern that growing LM segmentation between temporary and permanent workers has
hurt job prospects for youth and other new entrants; is a factor behind low productivity
growth
– Strong pressures from international financial markets for EP reforms to help boost
medium-term growth prospects
– Troika made EP reform an integral part of the Greek, Portuguese bailouts; endorsed the
Spanish 2011-2012 reforms; the Irish exception
Stefano Scarpetta, IBM Rotating Chair on Labour Studies
21
RECENT/PROPOSED REFORMS TO EP
(cont.)
• Main focus is on reducing regulation on permanent contracts, contrast with “two-tier” reforms
of the 1990s and early 2000s:
– Reduction in up-front severance costs (GRC, PRT) and compensation for unfair dismissal (PRT, ESP)
– Expansion of definition of fair dismissal (PRT, ESP), alongside improvements in functioning of courts (ESP, ITA)
should allow firms to make dismissals for economic reasons more easily
– GRC and ESP extended the trial period for new hires, likely to be an important measure for encouraging hiring
of youth
• Different approaches to the gap between temporary and permanent workers: GRC and PRT
also reduced regulation on temporary contracts, while ESP and ITA increased it
• GRC, PRT and ESP also reduced scope, cost or complexity of collective dismissals
• Two important implementation issues:
– No grandfathering of entitlements
– Depends on how courts interpret the new rules (ITA, ESP).
Stefano Scarpetta, IBM Rotating Chair on Labour Studies
22
Concluding remarks
• Over the past two decades, many OECD countries have introduced reforms to “activate”
the unemployed and foster labour market adaptability
– Significant differences across countries, but fairly widespread decline in unemployment…
– …although large dualism in countries with flexibility at the margin
• …then the crisis hit, with rapidly rising, and increasingly, persistent unemployment
•
Policies and institutions that conduce for good structural outcomes may also be good for labour market resilience
– Coordinated wage bargaining
– Incidence of temporary work
• Comprehensive approach needs to secure a new “flexicurity-type balance” which includes:
– Reasonably generous social safety net
– Backed by effective activation regime
• Several different routes to reform of EP as part of a comprehensive reform package
• Very important to assess the impacts of the recent reforms
23
Thank you
[email protected]
http://www.oecd.org/els/
Stefano Scarpetta, IBM Rotating Chair on Labour Studies
24