CRISI ECONOMICA ED EFFETTI SULL’OCCUPAZIONE NEI PAESI OCSE Stefano Scarpetta Deputy Director...

CRISI ECONOMICA ED EFFETTI SULL’OCCUPAZIONE NEI PAESI OCSE

Stefano Scarpetta

Deputy Director

Directorate for Employment, Labour and Social AffairsOECD

VI IBM Rotating Chair in Studi del LavoroMilan, Italy

24 November, 2012

• Rather favourable labour market conditions prior to the Great Recession (Q4, 2007)…– The OECD-average unemployment rate stood at 5.7%

– 2/3 of the working-age population was employed, the highest level reached in the post-war period

– The youth unemployment rate was 12.6%

• …but a number of structural issues were also clearly present– Despite low or declining URs, the share of LTU remained high in some (EU) countries

– Female participation was on the rise, but still low in a number of countries

– Significant dualism in the labour market, with growing shares of those in atypical labour contracts

– Share of youth neither in employment nor in education or training was sizeable (10.8% on average)

– ¾ of the OECD countries recorded increases in income inequality, largely driven by widening wage dispersion

What was the LM situation in the OECD prior to the Great Recession?

2Stefano Scarpetta, IBM Rotating Chair on Labour Studies

• Strike a better balance between social safety and benefit dependency– Many countries have started to put effective activation

strategies in place

– UB systems have been strengthened in some countries, but tightened up in others

• Reinforce labour market flexibility– Provisions with respect to temporary contracts have

been relaxed

– Working time flexibility has tended to increase

– Changes in the nature and importance of collective wage bargaining may have increased wage flexibility

3

The main reform tendencies prior to the crisis…

Stefano Scarpetta, IBM Rotating Chair on Labour Studies

• Rapid rise in unemployment in many OECD countries

– Wide cross-country differences in labour market adjustment during the recession and early phase of the recovery

– Adjustment on the extensive margin (employment) but also on the intensive (hours) in a number of countries

• Limited impact of the (weak) recovery on job creation

– The OECD unemployment rate is still close to the historical peak (7.9% in September 2012)

• Serious risk of unemployment becoming entrenched

– The share of long-term (LT) unemployment is increasing rapidly, and some of the LT unemployed are at risk of dropping out of the labour market

• With a faltering recovery, policy choices become very difficult

– How to tackle budget deficits while, at the same time, sustain the recovery and provide adequate support to the many unemployed?

…and then the crisis hit


Different patterns of LM adjustment in the downturn and early phase of the recovery

Percentage change between the real GDP peak and between trough and the real GDP trough to the latest available quarter

2008-09 recession Recovery

Countries ordered from left to right in terms of drops in GDP during the 2008-09 recession.Source: OECD estimates based on OECD Main Economic Indicators, OECD Short-term Labour Market Statistics Databases and national sources.

-20

-15

-10

-5

0

5

Real GDP Total hours worked%

-10

-5

0

5

10

15

20

Real GDP Total hours worked%


Different patterns of LM adjustment in the downturn and early phase of the recovery

Percentage change between the real GDP peak and between trough and the real GDP trough to the latest available quarter

2008-09 recession Recovery

Countries ordered from left to right in terms of drops in GDP during the 2008-09 recession.Source: OECD estimates based on OECD Main Economic Indicators, OECD Short-term Labour Market Statistics Databases and national sources.

-14

-12

-10

-8

-6

-4

-2

0

2

4

Total employment Average hours worked%

-10

-8

-6

-4

-2

0

2

4

6

8

Total employment Average hours worked%


The unemployment impact has differed greatly across countries

Unemployment rate before the crisis, at its peak and its latest value* in percentage of total labour force, quarterly data

Countries are shown in ascending order by the unemployment rate at its peak.* Trough (peak) dates are defined as the start of the longest spell of consecutive increase (decrease) of the quarterly OECD harmonised unemployment rates since 2006 Q1. Source: OECD calculations based on OECD Short-Term Labour Market Indicators Database.

0

5

10

15

20

25

30

Pre-crisis trough Peak Latest%


Job losses among different groups in selected countries

Percentage change in employment, 2007 Q4 to 2012 Q2European Union United States

Germany Italy

n.a.: Not available.Source: OECD Short-Term Labour Market Statistics Database and national Labour Force Surveys.

Overall

Men (aged 15-64)

Women (aged 15-64)

Youth (aged 15/16-24)

Prime-age (aged 25-54)

Older workers (aged 55-64)

Low-skilled (aged 25-64)

Medium-skilled (aged 25-64)

High-skilled (aged 25-64)

Self-employed

Employees

Permanent workers (aged 15 and over)

Temporary workers (aged 15 and over)

Sex

Age

Educ

ation

Work

statu

s

-40 -30 -20 -10 0 10 20 30 40

-1.8

-3.6

0.5

-17.2

-2.7

16.2

-18.7

-4.2

12.1

-7.5

-1.6

-1.7

-6.7

OverallMen (aged 15-64)Women (aged 15-64)Youth (aged 15/16-24)Prime-age (aged 25-54)Older workers (aged 55-64)Low-skilled (aged 25-64)Medium-skilled (aged 25-64)High-skilled (aged 25-64)Self-employedEmployeesPermanent workers (aged 15 an...Temporary workers (aged 15 an...

Sex

Age

Educ

atio

nW

ork

stat

us

-40 -30 -20 -10 0 10 20 30 40

-1.8-4.8

2.6-22.0

-3.824.6

-11.64.3

11.5-6.1

-0.2-1.4

7.6

OverallMen (aged 15-64)Women (aged 15-64)Youth (aged 15/16-24)Prime-age (aged 25-54)Older workers (aged 55-64)Low-skilled (aged 25-64)Medium-skilled (aged 25-64)High-skilled (aged 25-64)Self-employedEmployeesPermanent workers (aged 15 and over)Temporary workers (aged 15 and over)

Sex

Age

Educ

ation

Work

status

-40 -30 -20 -10 0 10 20 30 40

-3.9-5.0

-2.6-10.1

-6.213.0

-9.7-8.1

3.6-7.5

-2.4

OverallMen (aged 15-64)

Women (aged 15-64)Youth (aged 15/16-24)

Prime-age (aged 25-54)Older workers (aged 55-64)

Low-skilled (aged 25-64)Medium-skilled (aged 25-64)

High-skilled (aged 25-64)Self-employed

EmployeesPermanent workers (aged 15 and over)Temporary workers (aged 15 and over)

Sex

Age

Educ

atio

nW

ork

stat

us

-40 -30 -20 -10 0 10 20 30 40

4.32.8

6.1-4.2

1.626.9

-7.82.7

16.72.4

5.26.8

-3.8


Martin_S

The OECD average is not available for this quarter (I have to update all the non-EU countries for that.At this point I replace the OECD average with Germany.

Note: Countries are shown in ascending order of the incidence of long-term unemployment in 2012 Q2. a) Data are not seasonally adjusted but smoothed using three-quarter moving averages. OECD is the weighted average of 32 OECD countries excluding Chile and Korea.Source: OECD calculations based on quarterly national Labour Force Surveys.

Long-term unemployed has increased in many OECD countries

Long-term unemployed (more than one year) as a percentage of total unemployeda

Mexico

Israe

l*

Canad

a

New Zea

land

Sweden

Norway

Austral

ia

Finland

Turkey

Austria

Icelan

d

Denmark

United S

tates

Luxem

bourg

Switzerla

ndOECD

United K

ingdo

m G7

Netherl

ands

Japan

Poland

France

Spain

Czech R

epub

lic

Europe

an Unio

n

Belgium

Hunga

ry

German

y

Euro ar

ea

Portug

al

Sloven

ia

Estonia Ita

ly

Greece

Irelan

d

Slovak

Repub

lic0

10

20

30

40

50

60

70

80

2007 Q4 2012 Q2%


In general, youth face a much higher risk of unemployment than adults…

Youth and adult unemployment rate, 2012 Q2,a percentages of labour force

a) 2012 Q2 for Estonia, Greece, Hungary, Italy, Norway, Switzerland, Turkey and the United Kingdom.Source: OECD calculations based on OECD Short-Term Labour Market Statistics Database.

0 5 10 15 20 250

10

20

30

40

50

60

11.90842

9.7

18.13333

14.7

15.2866

19.03333

14.33333

22.26667

18.5

25.3

8.033334

54.3

28.23333

13

34.26667

13.63333

34.46667

7.733333

8.928739

18.5

9.078429

9.433333

18.04031

8.066667

26.06667

35.7

29.73333

17.2

53.83333

23.93333

6.097561

15.56667

21.06667

16.23333

Adults (aged 25 and over) unemployment rate

Yout

h (a

ged

15/1

6-24

) une

mplo

ymen

t rat

e

2 times as high

Equal

4 times as high

Countries are shown in ascending order by the youth unemployment rate at its peak.* Trough (peak) dates are defined as the start of the longest spell of consecutive increase (decrease) of the quarterly youth unemployment rates since 2006 Q1. Source: OECD calculations based on OECD Short-Term Labour Market Indicators Database.

0

10

20

30

40

50

60

Pre-crisis trough Peak Latest%

…and young people have been hard hit by the global crisis…

Youth (aged 15/16-24) unemployment rates before the crisis, at its peak and its latest value* in percentage of the youth labour force, quarterly data


12

Labour market difficulties for youth go beyond unemployment

Youth neither in employment nor in education or training (NEET), percentage of youth aged 15-24

Source : OCDE (2010), Off to a good start! Jobs for Youth

Italy Spain Ireland United Kingdom United States OECD France Canada Germany0

5

10

15

20

25

Inactive Long-term unemployed Short-term unemployed

% NEET 2008 breakdown:

NEET in 2012 Q1


The “quality” of jobs also matters…The share of working youth in temporary jobs is high in many EU countries

Percentage of employed youth aged 15-24, by reason for temporary status, 2011

Note: Countries are shown by ascending order of the incidence of temporary employment among youth. a) The figures refer to the share of youth who reported being in temporary jobs because they could not find a permanent job.Source: OECD calculations based on the European Union Labour Force Survey (EULFS).

United K

ingdo

mTurk

ey

Slovak

Repub

lic

Denmark

Czech R

epub

lic

Hunga

ry

Norway

Greece

Irelan

d

Belgium

Luxem

bourg

Austria

Europe

an Unio

n

Finland

Netherl

ands Ita

ly

Switzerla

nd

Euro ar

eaFran

ce

German

y

Portug

al

Sweden

Spain

Poland

Sloven

ia0

10

20

30

40

50

60

70

80

Involuntary Others%


• Temporary measures in response to the jobs crisis– Increased resources for active labour market policies

– Measures to encourage short-time working

• Structural labour market reforms spurred by the fiscal crisis– Employment protection for regular workers has been

reduced and collective bargaining decentralised

14

Policy developments since the start of the crisis


15

Spending on labour market programmes varies a lot across countries

Harmonised unemployment rates and labour market programme spending as a percentage of GDP, 2007-10

Countries are shown in ascending order of the unemployment rate in 2010.Source: OECD calculations based on the OECD Main Economic Indicators and OECD Labour Market Programmes Databases.

Japa

n

German

y

United

Kingdo

mCan

ada

Italy

United

States

France

Irelan

dSpa

in0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

0

3

6

9

12

15

18

21

24

27

Total spending in 2007 Total spending in 2010

Active spending in 2007 Active spending in 2010

Unemployment rate in 2007 (right-side scale) Unemployment rate in 2010 (right-side scale)

% %


The responsiveness of ALMPs spending to cyclical changes in unemployment tends to be very low

a) The predicted change in ALMP spending is obtained by taking the difference between the out-of-sample prediction for 2010 and the prediction for 2007.b) Data refer to weighted averages of the countries included in Panel A but excluding Korea and the United Kingdom because of missing data on ALMP spending for 2010.Source: OECD estimates based on the OECD Labour Market Programmes and OECD Main Economic Indicators Databases.

Actual and predicted change in ALMP spending since the start of the crisisa,b

% change between 2007 and 2010

Actual and predicted change in ALMP resources per unemployed personsb

% change between 2007 and 2010

Actual change Predicted change0

5

10

15

20

25

20.7

8.2

%

Actual change Predicted change-35

-30

-25

-20

-15

-10

-5

0

-21.4

-29.5

%


17

• The jobs crisis led to longer average unemployment spells – Where unemployment benefit durations are short, temporary extension during the crisis

helps reducing the poverty risk among the long-term unemployed. Extension of benefits in e.g. Canada and especially the United States (with some changes also in Finland, Japan, Portugal)

• Increasing numbers of ineligible jobseekers due to the increase in non-standard work in some countries– Some countries have extended coverage, e.g. Finland, France, Italy, Japan

• Extensions should be temporary and targeted to the most vulnerable with enforcement of job-search requirements

• The crisis can also be an opportunity to reform unemployment benefits to provide a more adequate safety nets to vulnerable groups, conditional on job search, and participation in ALMPs

Providing an adequate safety nets while minimising benefit dependency

18

• Threats to previously successful strategies:– While generally launched to combat high unemployment, their recent

successes in the context of buoyant LD activation is facing a hard test

– Risk for intensity of interventions in the unemployment spell (job search controls; in-depth interviews; action plan follow-up…) to decrease

– Vacancy flows decline, resulting in a lower number of direct referrals.

• Overriding goal: prevent job losers from becoming disconnected from the labour market. Consequently:– Administrative capacity to scale up LM programmes and possible role

of private providers

– How to reach out those who are not (no longer) eligible for first-tier income support schemes

– Automatic vs. discretionary adjustments: while spending for passive LM policies increases automatically in downturns, this is not the case for ALMPs, with a few exceptions.

How to adjust activation strategy during the crisis

19

• Many countries have introduced measures to support labour demand during the crisis:

– Subsidies for the reduction in working time (e.g., 22 OECD countries);

– Reductions in non-wage labour costs (e.g., 16 OECD countries);

– Hiring subsidies and work experience, generally targeted at disadvantaged groups (e.g. 15 OECD countries).

• In the (very weak) recovery with high and persistent unemployment important to shift from STWs to (net) hiring subsidies

– By protecting job matches, STWs have reduced socially and economically inefficient job losses …

– …but risk increasing dualism (U highly concentrated on already disadvantaged groups and new entrants)...

– ….and slow-down efficiency-enhancing labour reallocation

– Hiring subsidies may help promoting employment for disadvantaged groups, but have to be well targeted and with strict conditions for employers.

Supporting labour demand: from protecting existing jobs to boosting job

creation

The use of short-time work during the global crisisAverage monthly short-time work take-up rate, percentage of dependent employment, 2007 Q4-2010 Q4

Note: Countries shown in ascending order of STW take-up rate at its peak. * OECD estimates based on the total hours used.Source: OECD calculations based on administrative data provided by the National authorities and OECD Main Economic Indicators Database.

Poland

Portug

al

Canad

a

Denmark

Spain

Norway

Hunga

ry

Netherl

ands

France

Austria

Irelan

d

Slovak

Rep.

Finland

Czech

Rep.

Switzerl

and

Italy*

Luxe

mbourg

German

yJa

pan

Belgium

0

1

2

3

4

5

6

7

8

2007 Q4 Peak in STW take-up 2010 Q4


Martin_S

Data for Italy have been revised with the hours used provided by INPS instead of authorized hours. Consequently the STW take-up rate for Italy is divided by a factor of 2.

Concentrated in Spain, Greece, Portugal, Italy;

• Motivations:

– Concern that growing LM segmentation between temporary and permanent workers has hurt job prospects for youth and other new entrants; is a factor behind low productivity growth

– Strong pressures from international financial markets for EP reforms to help boost medium-term growth prospects

– Troika made EP reform an integral part of the Greek, Portuguese bailouts; endorsed the Spanish 2011-2012 reforms; the Irish exception

21

A key structural reform response: employment protection legislation


• Main focus is on reducing regulation on permanent contracts, contrast with “two-tier” reforms of the 1990s and early 2000s:

– Reduction in up-front severance costs (GRC, PRT) and compensation for unfair dismissal (PRT, ESP)

– Expansion of definition of fair dismissal (PRT, ESP), alongside improvements in functioning of courts (ESP, ITA) should allow firms to make dismissals for economic reasons more easily

– GRC and ESP extended the trial period for new hires, likely to be an important measure for encouraging hiring of youth

• Different approaches to the gap between temporary and permanent workers: GRC and PRT also reduced regulation on temporary contracts, while ESP and ITA increased it

• GRC, PRT and ESP also reduced scope, cost or complexity of collective dismissals

• Two important implementation issues:

– No grandfathering of entitlements

– Depends on how courts interpret the new rules (ITA, ESP).

22

RECENT/PROPOSED REFORMS TO EP (cont.)


23

• Over the past two decades, many OECD countries have introduced reforms to “activate” the unemployed and foster labour market adaptability

– Significant differences across countries, but fairly widespread decline in unemployment…– …although large dualism in countries with flexibility at the margin

• …then the crisis hit, with rapidly rising, and increasingly, persistent unemployment

• Policies and institutions that conduce for good structural outcomes may also be good for labour market resilience– Coordinated wage bargaining– Incidence of temporary work

• Comprehensive approach needs to secure a new “flexicurity-type balance” which includes:

– Reasonably generous social safety net

– Backed by effective activation regime

• Several different routes to reform of EP as part of a comprehensive reform package

• Very important to assess the impacts of the recent reforms

Concluding remarks

Thank you

[email protected]://www.oecd.org/els/


mailto:[email protected]

http://www.oecd.org/els/

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