John P. Martin Director for Employment, Labour and Social Affairs, OECD

OECD, Directorate for Employment, Labour and Social Affairs

Organisation for Economic Co-operation and Development

InterTrade Ireland Economic Forum

25 November 2011

The jobs crisis: stylised facts and policy challenges

John P. Martin Director for Employment, Labour and Social Affairs, OECD

The jobs crisis

An unprecedented crisis•OECD-area UR jumped from 25-year low of 5.8%

at the end of 2007 to a post-war high of 8.8% in October 2009. Since then, it has dropped but has been stuck at around 8.2% since January 2011

And it is far from over

Part I

What are the labour market impacts of the crisis?

The unemployment impact so far differs greatly across countriesPercent of the labour force

Note: All data are seasonally adjusted.Latest data: July 2011 for Greece, Norway and Turkey; July-September 2011 for Northern Ireland; August 2011 for Chile and the United Kingdom; 2011 Q2 for Estonia, Israel and Switzerland; 2011 Q3 for Iceland and New Zealand (OECD harmonised unemployment rate data are not available on a monthly basis for the last five of these countries).Source: OECD Main Economic Indicators and Northern Ireland Statistics & Research agency.

0

2

4

6

8

10

12

14

16

18

20

22

24

Kore

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Switz

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Japa

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Germ

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and

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King

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Italy

Turk

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Pola

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ance

Hung

ary

Port

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Esto

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Slov

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epub

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land

Gree

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ain

OECD G7

Euro

pean

Uni

onEu

ro A

rea

OECD

Eur

ope

% December 2007 September 2011

Different margins of adjustment in the labour market: Employment vs. hours

Total percentage change from GDP peak to 2010 Q4

5

-16

-14

-12

-10

-8

-6

-4

-2

0

2

4

6

8

10% Change in total employment Change in average hours worked

Who have suffered the most during the jobs crisis?Percentage change of employment over 2008 Q2 to 2011 Q2

Ireland OECD

-1.5 -2.3-0.6

-8.8

-1.9

7.2

-6.7-3.0

6.3

-1.9 -0.9 -1.4

-20

-15

-10

-5

0

5

10

15

20

Both

sexe

s

Men

Wom

en

Yout

h (1

5-24

)

Prim

e-ag

e (2

5-54

)

Olde

r wor

kers

(55-

64)

Low

-skill

ed

Med

ium

-skill

ed

High

-skill

ed

Self-

empl

oyed

Perm

anen

t wor

kers

Tem

pora

ry w

orke

rs

Gender Age groups Education Workforce groups

-14.0-18.7

-8.1

-48.9

-9.9

1.0

-36.5

-16.5

5.5

-15.0 -15.4

9.2

-60-50-40-30-20-10

0102030405060

Both

sexe

s

Men

Wom

en

Yout

h (1

5-24

)

Prim

e-ag

e (2

5-54

)

Olde

r wor

kers

(55-

64)

Low

-skill

ed

Med

ium

-skill

ed

High

-skill

ed

Self-

empl

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Perm

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Tem

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Data are not seasonally adjusted. OECD is the weighted average of the OECD countries excluding Chile. Australia, Japan and New Zealand are also excluded for statistics by education and also Australia, New Zealand and the United States for statistics on permanent and temporary workers. Source: OECD calculations based on quarterly national Labour Force Surveys.

Who have suffered the most during the job crisis? (cont.)Percentage change of employment over 2008 Q2 to 2011 Q2

United Kingdom Northern Ireland

n.a.: Not available.Data are not seasonally adjusted. OECD is the weighted average of the OECD countries excluding Chile. Australia, Japan and New Zealand are also excluded for statistics by education and also Australia, New Zealand and the United States for statistics on permanent and temporary workers. Source: OECD calculations based on quarterly national Labour Force Surveys.

-1.8 -2.2 -1.2

-11.1

0.1

-1.6

-16.0

-8.1

14.5

-2.7

3.1

15.7

-20

-15

-10

-5

0

5

10

15

20

Both

sexe

s

Men

Wom

en

Yout

h (1

5-24

)

Prim

e-ag

e (2

5-54

)

Olde

r wor

kers

(55-

64)

Low

-skill

ed

Med

ium

-skill

ed

High

-skill

ed

Self-

empl

oyed

Perm

anen

t wor

kers

Tem

pora

ry w

orke

rs


0.8

-1.9

3.9

-12.0

-0.2

13.0

n.a. n.a. n.a.

-3.3

3.3

-5.6

-20

-15

-10

-5

0

5

10

15

20

Both

sexe

s

Men

Wom

en

Yout

h (1

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)

Prim

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)

Olde

r wor

kers

(50-

64)

Low

-ski

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-skill

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High

-skill

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Self-

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Perm

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Recessions not only hurt lots of people, but also take a long time to fix

Harmonised unemployment rates (% of total labour force) in Ireland, January 1970 to September 2011

8

0

2

4

6

8

10

12

14

16

18

Jan-70 Jan-75 Jan-80 Jan-85 Jan-90 Jan-95 Jan-00 Jan-05 Jan-10

7 years 5 years

3 years3 years 4 years 2 years

8 years 11 years 8 months

4 years 1 months

UK has succeeded in cutting structural UNR

Harmonised unemployment rates (% of total labour force) in the United Kingdom, January 1970 to September 2011

9

0

2

4

6

8

10

12


10 years 7 years

2 years5 months

5 years 5 years 4 years7 months

31 years8 months

37 years 10 months

3 years 10 months

4 years

Northern Ireland has been very successful in cutting UNR

Harmonised unemployment rates (% of total labour force) in Northern Ireland, 1970 Q1 to 2011 Q2 (calendar quarters)

10

0

2

4

6

8

10

12

14

16

18


18 years5months

4 years 4 months

Long-term unemployment is rising rapidly in the countries with the biggest unemployment crisis

Share of long-term unemployed (more than one year) in total unemployment, second quarters of 2008 and 2011

Data are not seasonally adjusted. OECD is the weighted average of 32 OECD countries excluding Chile and Korea. 2007 Q4-2010 Q4 for Israel and Mexico.Source: OECD calculations based on quarterly national Labour Force Surveys.

0

10

20

30

40

50

60

70

80

% 2008 Q2 2011 Q2

Youth unemployment is a major concernPercent of labour force, persons aged 15-24*

*16-24 for Northern Ireland and the United Kingdom. The series for Northern Ireland is not seasonally adjusted.OECD is the weighted average for 32 OECD countries.Source: OECD calculations based on quarterly national Labour Force Surveys.

6

8

10

12

14

16

18

20

22

24

26

28

30

32

Ireland United Kingdom Northern Ireland OECD

Bottomline on the stylised facts

Ireland has a massive UNR challenge to overcome

NI has not

But both parts of the island share some common LM challenges:

•High long-term unemployment•High youth UNR

13

Part II

How have OECD countries responded to the crisis on the labour market policy front?

Resources available for LM policies differ across OECD countriesPassive and active labour market programmes (expenditures as a % of GDP) in OECD countries, 2009

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Passive measures Active measures

%

OECD

Minimum

Ireland

United KingdomMaximum

OECD is the unweighted average for 32 OECD countries.Minimum value calculated excluding Mexico.Employment incentives corresponds to the sum of expenditures for employment incentives, job rotation and job sharing, and start-up incentives.Source: OECD Labour Market Programmes Database.

Part III

SOME KEY CHALLENGES FACING LABOUR MARKET POLICIES IN BOTH PARTS OF THE ISLAND

THE NEED TO ADAPT ACTIVATION POLICIES TO THE JOBS CRISIS/EMERGING RECOVERY

Over the past decade, major efforts made in many OECD countries to implement activation policies to get jobseekers off benefits and into work. Where they were well-designed and implemented effectively, they worked (e.g. UK, Neth, GER).

But the jobs crisis presents important threats to activation strategies:

- Risk of reduced intensity of interventions in the unemployment spell (less job-search controls; fewer in-depth interviews; less action plan follow-up etc.) as PES resources do not keep step with rising UN inflows and stocks- Vacancy flows decline, resulting in a lower number of direct referrals to jobs

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THE NEED TO ADAPT ACTIVATION POLICIES (Cont.)

Overriding goal: prevent job losers from becoming disconnected from the labour market

- Core element of activation regimes and mutual obligation principle should not be allowed to lapse or be overly diluted- For those at risk of LTU, re-employment services need to be adapted to specific conditions of slack LM- Shift somewhat from a “work-first” to a “train-first” approach (OECD evidence suggests that the benefits to investing in training programmes for the unemployed rise in a deep recession)- Training for the unemployed should remedy basic skill deficiencies and have a strong workplace component

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CHALLENGES FACING IRELAND, NI ON THE ACTIVATION FRONT

OECD (2009) showed that the intensity of activation in Ireland was relatively weak prior to the crisis;

The FAS debacle was a disaster.

Recent creation of the National Employment and Entitlements Service (NEES) is a potentially important step in the right direction but a long hard road lies ahead

High LTU share in NI suggests that activation is not very effective there either• It has a relatively high B/U ratio, well above UK average

NI has not opted for the new Work Programme model of sub-contracting with private employment service providers like rest of UK in order to improve its activation record19

CHALLENGES FACING IRELAND, NI ON THE VET FRONT

Main burden of rising unemployment has fallen on youth and the low-skilled (many of whom have weak literacy and numeracy skills).

While the weak labour market is encouraging many youth to stay on longer in education and training, this poses a huge challenge to our VET system to cope with rapidly rising demand and maintain/improve quality.

Need a fundamental rethink of the apprenticeship system in both parts of the island:•Too narrow in terms of occupations (e.g. dominant focus on construction,

few services)•Too few women apprentices• Inappropriate sharing of the costs between apprentices, firms and the

public purse.

A fundamental redesign of the apprenticeship system could be inspired by the good practices in Australia and Switzerland

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CHALLENGES FACING IRELAND, NI ON THE VET FRONT (Cont.)

Need to expand the role of on-the-job training in many VET programmes.

Much greater emphasis needs to be put into remedying basic skills deficiencies among working-age adults.

•This will require much more systematic screening of potential clients for potential literacy and numeracy training

•For those diagnosed with insufficient literacy/numeracy skills, basic skills support will need to be an integral part of their VET courses.

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Concluding remarks

Governments are intervening actively to minimise the scale of the jobs crisis

Some have been more successful to date than others With the recovery stalling, governments must not

reduce their efforts to tackle high and persistent UNR and some countries may have to do more

Ireland faces a massive challenge to cut high and persistent UNR and lower youth UNR; NI’s challenges are to cut LTU and high youth UNR

The crisis is an opportunity to radically rethink its LM and training policies and institutions in order to promote more and better jobs.

FURTHER READING

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FURTHER READING (Cont.)

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Documents

John P. Martin Director for Employment, Labour and Social Affairs, OECD