Global jobs crisis potentially scarring youth for life OECD

OTTAWA — The OECD is urging governments to take swift action to address stubbornly high unemployment, warning the slow recovery is creating conditions that could scar youth and some workers the rest of their lives.The Paris-based think-tank says the social costs of high levels of youth unemployment in some advanced nations are already large, but the situation threatens to transform from a cyclical to a structural problem.The Organization for Economic Co-operation and Development says governments must do all they can to avoid a lost generation of youth who become disconnected from labour markets.Not all countries have been affected, but some, like Greece and Spain, have seen youth unemployment rise to above 50%.Equally concerning is that the duration workers remain unemployed is rising, with 35% of the jobless being out of work for a year or more, and 7.8 million remaining in the OECD area without a job for two years or more.The think-tank cites Canada as having done a better job on the jobs front, predicting the jobless rate would shrink 6.4% by the end of 2013, or close to its pre-recession levels.However, the latest Statistics Canada report shows unemployment among the 15-24 year group rose half a point to 14.8% in June, more than twice the national average of 7.2%.[np-related]Last week, the agency also reported that Canadian youth were experiencing recession-level conditions on the summer jobs front.Employment as a percentage of their population among students aged 20-24 was at a level equal to that of June 2009, and among 17-19 year olds, it was at the lowest level since data became available in 1977, the agency said.The recent deterioration in the economic outlook was very bad news for the labour market, OECD Secretary-General Angel Gurria said. “It is imperative that governments use every possible means at their disposal to help jobseekers, especially young people, by removing barriers to job creation and investing in their education and skills,” said Gurria. He presented the report in Paris, where the think tank is headquartered.Countries needed to tackle the jobs crisis with appropriate macroeconomic policy measures, including immediate steps to stabilize Europe’s banking system. There was also a case for some easing of fiscal policy if governments retain room for budgetary manouevre, the OECD said.The challenges facing policymakers were in some respects unprecedented, according to the report:– Almost three years into the recovery from the trough of the global financial crisis, the May jobless rate was just 0.6 percentage points below the post-war high of 8.5% touched in October 2009.– Youth employment has declined by almost seven percentage points, relative to overall employment, since the start of the crisis, while low-skilled employment has dropped almost five percentage points.– What’s more, temporary employment has picked up strongly because of firms’ reluctance to rehire workers on open-ended contracts given the uncertain economic outlook.– Long-term unemployment has jumped to 35% of the jobless total from 27% before the crisis, raising the spectre that the increase becomes structural as skills erode.INEQUALITYDespite the grim environment, the OECD called for bold structural reforms in labour and product markets. For example, governments could tap a rich seam of job growth by opening the retail trade and professional services to greater competition.Economists have pointed to still restrictive shop opening times in a raft of European countries and international lenders have demanded that Greece and Italy loosen closed-shop practices, whether it be by pharmacies, law firms or taxi drivers.The report examines a plunge in the share of national income taken by wages and benefits, which has been dropping steadily across most of the OECD for the past 20 to 30 years.The median labour share fell to 61.7% in the late 2000s from 66.1% in the early 1990s.The report attributes 80% of the fall to improved total factor productivity and to capital deepening – the key drivers of economic growth as a result of the spread of information and communication technologies.This has led to unprecedented advances in innovation and the invention of new capital goods and production processes, enriching society as a whole but also replacing workers with machines for many routine tasks.Indeed, the OECD is worried that the drop in low-skilled jobs is a permanent, structural phenomenon that will not be reversed when growth resumes.Increased competition due to globalisation accounts for at least 10 percent of the decline in the labour share, the OECD estimates.Furthermore, by creating incentives to maximise profits, privatisation explains as much as a third of the drop in the labour share in formerly state-owned network industries such as energy, transport and communication.By contrast, the report finds no evidence that increased foreign direct investment had squeezed labour’s share of income.The OECD advocated further investment in education and training to equip workers to win the “race against the machine” and repeated its support for tax measures to temper the sharp rise in income inequality that has accompanied technological change and globalisation.On average, the wage income share of the top 1% of earners increased by 20% over the past two decades, while those at the foot of the skills ladder saw their wages slump.“The growing share of income going to top earners suggests that this group now has a greater capacity to pay taxes than before” the OECD said.The Canadian Press, with files from Reuters read more