Transcript Presentation at NETSPAR conference on rethinking retirement

Organisation for Economic Co-operation and Development
InterTrade Ireland Economic Forum
25 November 2011
The jobs crisis: stylised facts and
policy challenges
John P. Martin
Director for Employment, Labour and Social Affairs,
OECD
OECD, Directorate for Employment, Labour and Social Affairs
The jobs crisis


An unprecedented crisis
OECD-area UR jumped from 25-year low of 5.8% at the
end of 2007 to a post-war high of 8.8% in October 2009.
Since then, it has dropped but has been stuck at around
8.2% since January 2011
•
And it is far from over
Part I

What are the labour market impacts of the crisis?
The unemployment impact so far differs greatly across countries
Percent of the labour force
%
December 2007
September 2011
24
22
20
18
16
14
12
10
8
6
4
OECD
G7
European Union
Euro Area
OECD Europe
0
Korea
Norway
Switzerland
Austria
Japan
Netherlands
Luxembourg
Australia
Mexico
Israel
Germany
New Zealand
Czech Republic
Belgium
Denmark
Canada
Iceland
Sweden
Chile
Northern Ireland
Finland
Slovenia
United Kingdom
Italy
Turkey
United States
Poland
France
Hungary
Portugal
Estonia
Slovak Republic
Ireland
Greece
Spain
2
Note: All data are seasonally adjusted.
Latest data: July 2011 for Greece, Norway and Turkey; July-September 2011 for Northern Ireland; August 2011 for Chile and the United
Kingdom; 2011 Q2 for Estonia, Israel and Switzerland; 2011 Q3 for Iceland and New Zealand (OECD harmonised unemployment rate data
are not available on a monthly basis for the last five of these countries).
Source: OECD Main Economic Indicators and Northern Ireland Statistics & Research agency.
Different margins of adjustment in the labour market:
Employment vs. hours
Total percentage change from GDP peak to 2010 Q4
%
10
Change in total employment
8
6
4
2
0
-2
-4
-6
-8
-10
-12
-14
-16
5
Change in average hours worked
Who have suffered the most during the jobs crisis?
Percentage change of employment over 2008 Q2 to 2011 Q2
Ireland
OECD
Gender
Age groups
Education
Workforce
groups
20
15
7.2
10
6.3
5
0
-1.5 -2.3 -0.6
-1.9
-1.9 -0.9 -1.4
-3.0
-6.7
-8.8
-5
-10
Gender
Age groups
Education
Temporary workers
Permanent workers
Self-employed
High-skilled
Medium-skilled
Low-skilled
Older workers (55-64)
Prime-age (25-54)
Youth (15-24)
Women
Men
-15
Both sexes
Temporary workers
Permanent workers
Self-employed
High-skilled
Medium-skilled
Low-skilled
Older workers (55-64)
Prime-age (25-54)
Youth (15-24)
Women
Men
Both sexes
60
50
40
30
20
9.2
5.5
10
1.0
0
-10
-8.1
-9.9
-20 -14.0
-15.0 -15.4
-16.5
-18.7
-30
-40
-36.5
-50
-48.9
-60
Workforce
groups
Data are not seasonally adjusted. OECD is the weighted average of the OECD countries excluding Chile. Australia, Japan and New
Zealand are also excluded for statistics by education and also Australia, New Zealand and the United States for statistics on permanent and
temporary workers.
Source: OECD calculations based on quarterly national Labour Force Surveys.
-20
Who have suffered the most during the job crisis? (cont.)
Percentage change of employment over 2008 Q2 to 2011 Q2
United Kingdom
Northern Ireland
20
15
20
15.7
14.5
13.0
15
10
10
3.9
3.1
5
3.3
0.8
0.1
5
n.a. n.a. n.a.
0
-1.8 -2.2 -1.2
-1.6
-1.9
-2.7
-10
-5
-3.3
-5.6
-8.1
-11.1
-15
-12.0
Age groups
Education
Workforce
groups
Gender
Age groups
Education
Temporary workers
Permanent workers
Self-employed
High-skilled
Medium-skilled
Low-skilled
Older workers (50-64)
Prime-age (25-49)
Youth (16-24)
Women
Men
Both sexes
Temporary workers
Permanent workers
Self-employed
High-skilled
Low-skilled
Older workers (55-64)
Prime-age (25-54)
Youth (15-24)
Women
Both sexes
Men
Gender
-10
-15
-16.0
-20
Medium-skilled
-5
0
-0.2
Workforce
groups
n.a.: Not available.
Data are not seasonally adjusted. OECD is the weighted average of the OECD countries excluding Chile.
Australia, Japan and New Zealand are also excluded for statistics by education and also Australia, New Zealand
and the United States for statistics on permanent and temporary workers.
Source: OECD calculations based on quarterly national Labour Force Surveys.
-20
Recessions not only hurt lots of people, but also take
a long time to fix
Harmonised unemployment rates (% of total labour force) in Ireland, January 1970 to September 2011
18
16
7 years
14
3 years
12
5 years
4 years
3 years
2 years
10
8
6
4 years
1 months
4
11 years
8 months
8 years
2
0
Jan-70
Jan-75
Jan-80
Jan-85
8
Jan-90
Jan-95
Jan-00
Jan-05
Jan-10
UK has succeeded in cutting structural UNR
Harmonised unemployment rates (% of total labour force) in the United Kingdom, January 1970 to September 2011
12
10
8
7 years
10 years
5 years
6
2 years
5 months
5 years
4 years
7 months
3 years
10 months
4 years
4
31 years
8 months
2
0
Jan-70
37 years
10 months
Jan-75
Jan-80
Jan-85
9
Jan-90
Jan-95
Jan-00
Jan-05
Jan-10
Northern Ireland has been very successful in cutting UNR
Harmonised unemployment rates (% of total labour force) in Northern Ireland, 1970 Q1 to 2011 Q2 (calendar quarters)
18
16
14
12
10
8
6
4 years
4 months
4
18 years
5months
2
0
Jan-70
Jan-75
Jan-80
Jan-85
10
Jan-90
Jan-95
Jan-00
Jan-05
Jan-10
Long-term unemployment is rising rapidly in the countries with the
biggest unemployment crisis
Share of long-term unemployed (more than one year) in total unemployment, second quarters of 2008 and 2011
%
2008 Q2
2011 Q2
80
70
60
50
40
30
20
10
0
Data are not seasonally adjusted. OECD is the weighted average of 32 OECD countries excluding Chile and Korea. 2007
Q4-2010 Q4 for Israel and Mexico.
Source: OECD calculations based on quarterly national Labour Force Surveys.
Youth unemployment is a major concern
Percent of labour force, persons aged 15-24*
Ireland
United Kingdom
Northern Ireland
OECD
32
30
28
26
24
22
20
18
16
14
12
10
8
6
*16-24 for Northern Ireland and the United Kingdom. The series for Northern Ireland is not seasonally adjusted.
OECD is the weighted average for 32 OECD countries.
Source: OECD calculations based on quarterly national Labour Force Surveys.
Bottomline on the stylised facts

Ireland has a massive UNR challenge to overcome

NI has not

But both parts of the island share some common LM
challenges:
• High long-term unemployment
• High youth UNR
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Part II

How have OECD countries responded to the crisis on
the labour market policy front?
Resources available for LM policies differ across OECD countries
Passive and active labour market programmes (expenditures as a % of GDP) in OECD countries, 2009
%
3.5
OECD
3
Minimum
2.5
2
Ireland
1.5
United
Kingdom
1
Maximum
0.5
Passive measures
Integration
of disabled
Direct job
creation
Employment
incentives
Training
PES and
administration
Total active
measures
Early
retirement
Unemployment
benefits
Total passive
measures
0
Active measures
OECD is the unweighted average for 32 OECD countries.
Minimum value calculated excluding Mexico.
Employment incentives corresponds to the sum of expenditures for employment incentives, job rotation and job sharing, and start-up
incentives.
Source: OECD Labour Market Programmes Database.
Part III

SOME KEY CHALLENGES FACING LABOUR
MARKET POLICIES IN BOTH PARTS OF THE
ISLAND
THE NEED TO ADAPT ACTIVATION POLICIES TO THE
JOBS CRISIS/EMERGING RECOVERY


17
Over the past decade, major efforts made in many OECD countries
to implement activation policies to get jobseekers off benefits and
into work. Where they were well-designed and implemented
effectively, they worked (e.g. UK, Neth, GER).
But the jobs crisis presents important threats to activation
strategies:
- Risk of reduced intensity of interventions in the unemployment
spell (less job-search controls; fewer in-depth interviews; less
action plan follow-up etc.) as PES resources do not keep step
with rising UN inflows and stocks
- Vacancy flows decline, resulting in a lower number of direct
referrals to jobs
THE NEED TO ADAPT ACTIVATION POLICIES (Cont.)

Overriding goal: prevent job losers from becoming disconnected
from the labour market
-
-
18
Core element of activation regimes and mutual obligation
principle should not be allowed to lapse or be overly diluted
For those at risk of LTU, re-employment services need to be
adapted to specific conditions of slack LM
Shift somewhat from a “work-first” to a “train-first”
approach (OECD evidence suggests that the benefits to
investing in training programmes for the unemployed rise in a
deep recession)
Training for the unemployed should remedy basic skill
deficiencies and have a strong workplace component
CHALLENGES FACING IRELAND, NI ON THE
ACTIVATION FRONT




OECD (2009) showed that the intensity of activation in Ireland was
relatively weak prior to the crisis;
The FAS debacle was a disaster.
Recent creation of the National Employment and Entitlements Service
(NEES) is a potentially important step in the right direction but a long hard
road lies ahead
High LTU share in NI suggests that activation is not very effective there
either
• It has a relatively high B/U ratio, well above UK average

19
NI has not opted for the new Work Programme model of sub-contracting
with private employment service providers like rest of UK in order to
improve its activation record
CHALLENGES FACING IRELAND, NI ON THE VET
FRONT



Main burden of rising unemployment has fallen on youth and the lowskilled (many of whom have weak literacy and numeracy skills).
While the weak labour market is encouraging many youth to stay on
longer in education and training, this poses a huge challenge to our
VET system to cope with rapidly rising demand and maintain/improve
quality.
Need a fundamental rethink of the apprenticeship system in both parts
of the island:
•
•
•

20
Too narrow in terms of occupations (e.g. dominant focus on construction,
few services)
Too few women apprentices
Inappropriate sharing of the costs between apprentices, firms and the public
purse.
A fundamental redesign of the apprenticeship system could be inspired
by the good practices in Australia and Switzerland
CHALLENGES FACING IRELAND, NI ON THE VET FRONT
(Cont.)


Need to expand the role of on-the-job training in many
VET programmes.
Much greater emphasis needs to be put into remedying
basic skills deficiencies among working-age adults.
• This will require much more systematic screening of potential
clients for potential literacy and numeracy training
• For those diagnosed with insufficient literacy/numeracy skills,
basic skills support will need to be an integral part of their VET
courses.
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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 stalling, governments must not reduce
their efforts to tackle high and persistent UNR and some
countries may have to do more
Ireland faces a massive challenge to cut high and persistent
UNR and lower youth UNR; NI’s challenges are to cut LTU
and high youth UNR
The crisis is an opportunity to radically rethink its LM and
training policies and institutions in order to promote more
and better jobs.
FURTHER READING
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FURTHER READING (Cont.)
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