Reply #80: OECD warns 25m jobs at risk from crisis

[Demeter]

http://www.ft.com/cms/s/0/6e17059c-a2ab-11de-ae7e-00144feabdc0.html

Up to 25m people in high-income countries will have lost their jobs by the end of next year as the recession pushes the unemployment rate towards a record 10 per cent, the Organisation for Economic Co-operation and Development forecast on Wednesday.

The Paris-based OECD said that, while recent signs of economic recovery might mean unemployment peaked earlier and at a slightly lower level than its forecast, governments must intervene “quickly and decisively” to prevent the sharp rise turning into long-term joblessness.

A woman in Germany looks for job openings

A woman in Germany looks for job openings
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Its annual employment outlook underlines fears that a recovery without jobs might be in prospect, even if the return to economic growth seen in some countries in the third quarter is sustained.

“Most OECD countries are already facing a jobs crisis. This is likely to get worse before it gets better,” said Stefano Scarpetta, the report’s lead author and head of the organisation’s employment division.

The OECD said 15m jobs were lost between the end of 2007 and July this year and 10m more could go by the end of next year in the 30-nation area if the recovery failed to gain momentum. A total increase of that magnitude would be equivalent to the population of a country larger than Australia.

In 2007 the unemployment rate in the OECD hit a 25-year low of 5.6 per cent, but it rose to a postwar high of 8.5 per cent this July. The US, Spain and Ireland, where the banking crisis has been accompanied by a housing market collapse, have been worst hit. The rise in unemployment has been slower in European economies such as Germany and Italy.

Joblessness in the UK, which has reached 7.9 per cent of the workforce, would continue to rise and remain at a high level next year, the OECD said.

The downturn was destroying more jobs than other recessions since the early 1970s, it said but fiscal stimulus packages might save between 3.2m and 5.5m jobs next year.

Unemployment ratesThe report suggested that while Ireland, Japan, Spain and the US might have already seen most of their likely job losses, in countries such as France, Germany and Italy the largest part of the increase might be yet to come.

As many as 21 countries have sought to save jobs by introducing or expanding short-time working schemes such as the German Kurzarbeit, which involves about 1.5m workers. But the OECD warned that such schemes must be focused on companies where demand was only temporarily depressed, otherwise they could hamper the recovery by putting a brake on the required reallocation of workers from declining to expanding companies.

“History says that jobs lag the recovery and the deeper and faster the jobs were lost, the more it lags,” Angel Gurría, OECD secretary-general, told a news conference in Paris. “Employment is the bottom line in the current crisis. We cannot claim victory simply because we see indicators of a recovery picking up and we should not just assume that growth will take care of this.”

The report said governments must urgently adapt their labour market and social policies to prevent people falling into the trap of long-term unemployment. Measures should be focused on helping young people, who have been hardest hit by the crisis, to reduce the risk of producing a “lost generation”.

Social safety nets should be reinforced to avoid jobless people falling into poverty, the OECD said. It also urged an increase in 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 increased in many countries but has not kept pace with the scale of job losses.