SOCIETY Employment
The trouble is, the jobs recovery is likely to lag substantially behind any pickup in economic growth, because employers tend to be cautious about hiring new staff in the early stages of a recovery when business conditions are still affected by uncertainty. Also, firms usually have scope to increase production without new hiring, especially if they restore working hours that were trimmed during the downturn.
Employment policy
Passing the stress test Stefano Scarpetta and Paul Swaim, OECD Directorate for Employment, Labour and Social Affairs
The main victims of severe economic downturns tend to be workers and their families, so governments are rightly stepping in to help job losers weather the storm. But while the severity of the unfolding jobs crisis may require extraordinary policy responses, how can governments avoid the wrong ones? 54
OECD Observer
No 273 June 2009
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ore than 11 million workers joined the ranks of the unemployed in the OECD area in the year to April 2009, as companies cut production, closed factories and offices, and dismissed thousands of workers. Despite recent hopeful signs that the recession may be easing off, with small improvements in home sales and manufacturing orders in the US and a modest uptick in business confidence in Germany and Japan, output is likely to continue to fall for some time, affecting large and small firms both in industry and services. The OECD sees a substantial contraction in OECD area output in 2009, close to 4% of GDP on average, and even when growth returns in 2010 it is expected to be mild. (For an update on these forecasts, see OECD Economic Outlook No 85, June 2009).
Consistent with this historical tendency, unemployment for the OECD area is projected to continue to rise through 2010, approaching 10% in the second half of the year, an all-time high. If that projection should materialise, the number of persons unemployed would increase by almost 26 million over the course of the recession, representing an increase of 81% from the recent unemployment low registered at the end of 2007. And experience shows that, even if economic growth becomes vigorous late in 2010 and 2011, it will still take years to reabsorb this large pool of unemployed. Some countries have still not managed to regain their pre-crisis unemployment rates, even many years after the steep recessions in the 1980s and 1990s. Most governments are responding vigorously to the current jobs crisis by strengthening their safety nets for the unemployed, scaling up measures to assist them finding a new job, and also propping up labour demand. But this also means most governments face hard choices. Obviously, prompt help is needed to prevent the recession from becoming a full-blown social crisis. However, it is also essential that governments avoid repeating mistakes of the past, in particular by not allowing protections to become barriers to restoring high employment rates after economic growth resumes. While it is too soon to assess how well employment policy is performing in the current crisis, it is clear that governments have moved vigorously to reinforce their policies. Of the 28 countries responding to an OECD survey on new policy measures to assist workers in surmounting the crisis, all report having undertaken multiple initiatives to plug gaps in the safety net for job losers and reinforce the assistance to help the unemployed to find new jobs. Twenty-one
