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Jobs outlook improving but millions risk being trapped at bottom of economic ladder, says OECD

The jobs recovery is slowly gathering pace, but employment will remain well below pre-crisis levels in many countries, especially in Europe, through to the end of 2016, according to a new OECD report.

The OECD Employment Outlook 2015 says that around 42 million people are currently without work across the OECD, down from 45 million in 2014 but still 10 million more than just before the crisis.

Unemployment in the 34 OECD countries is projected to continue declining over the next 18 months to reach 6.5% in the last quarter of 2016. It will remain above 20% in Greece and Spain.

“Time is running out to prevent the scars of the crisis becoming permanent, with millions of workers trapped at the bottom of the economic ladder,” said OECD Secretary-General Angel Gurría, launching the report in Paris. “If that happens, the long-run legacy of the crisis would be to ratchet inequality up yet another notch from levels that were already far too high. Governments need to act now to avoid a permanent increase in the number of workers stuck in chronic joblessness or moving between unemployment and low-paid precarious jobs.”

The Outlook finds that long-term unemployment remains unacceptably high. More than one in three jobseekers in the OECD have been out of work for 12 months or more, equivalent to 15.7 million people. This is an increase of 77.2% since the end of 2007. More than half of these people have been without work for two years or more, and their chances of finding work again are shrinking.

The high and persistent youth joblessness level also remains a major concern. While levels have peaked in the worst hit countries of Southern Europe, youth unemployment remains above pre-crisis level in nearly every OECD country. The share of young people neither employed nor in education or training, the so-called NEETs, is still higher than in 2007 in more than three quarters of OECD countries among 20-24 year-olds and nearly two thirds of countries among 25-29 year-olds.

Moreover, the Outlook finds evidence that a person’s long-term career prospects are largely determined in the first ten years of working life. This suggests that many of the youth who finished school during the crisis and have struggled to find work since may find their future career opportunities limited.

The jobs mix has also shifted towards more part-time work, says the report. The share of workers employed part-time has risen from 18.6% before the crisis to 20.6% currently. It is highest in The Netherlands (51.7%), Switzerland (36.8%) and is more than 25% in Austria, Belgium, Denmark, Germany, Norway, Sweden and the United Kingdom. In many countries, people have chosen to work part-time, but in countries, such as Greece, Italy and Spain, many part-timers are looking for full-time jobs.

At the same time, the share of temporary employment has changed little since the start of the crisis. It fell sharply in the recession but has increased again during the recovery when many employers prefer to expand their workforce through temporary contracts.

Wage growth has slowed, falling from an annual 1.8% between 2000 and 2007 to 0.5% since. Wage restraint helped limit job losses during the recession and encourage a rebound in employment after, but slower wage growth and real declines in some countries has also reduced the incomes of many households, further contributing to economic hardship.

Policy makers should scale up efforts to assist jobseekers and, in particular, get the long-term unemployed and youth back into work, says the OECD. In some countries, re-employment and retraining programmes have borne too large a share of fiscal consolidation and more resources are required. Real expenditure on active labour market programmes per unemployed person fell between 2007 and 2013 by more than 50% in Ireland, Italy, Spain and the United Kingdom, and by over 40% in Australia.

Effective and efficient labour market institutions and policies, including effective public-private partnerships in the placement and training of job seekers, are essential to help motivate job-seekers, especially the long-term unemployed, improve their employability and expand their opportunities to be placed and retained in appropriate jobs.

Evidence presented in the Outlook shows that, when set at an appropriate level, minimum wages tend to have only a small adverse effect on employment and help raise living standards for low-earners. But minimum wages should be closely coordinated with the tax/benefit system to ensure that it results in higher disposable income for those that need it most.

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