The jobs crisis : trends and policy challenges, Stefano Scarpetta, Deputy Director Directorate for Employment, Labour and Social Affairs OECD

1. Università Europea di Roma
Gruppo Valorizzazione delle Statistiche
Pubbliche
Società Italiana di Statistica
Roma, 19 Aprile 2012
The jobs crisis : trends and policy
challenges
Stefano Scarpetta
Deputy Director
Directorate for Employment, Labour and Social Affairs
Employment
OECD

2. The jobs crisis
• 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 (8.2% in February
2012)
• Serious risk of unemployment becoming entrenched
– The share of l
h h f long-term ( ) unemployment i i
(LT) l is increasing rapidly, and some of the LT
i idl d f h
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?

3. A weak and uneven economic recovery
Index base 100 = real GDP at the business-cycle trough of the output gap, quarterly data
OECD area Euro area*
E *
Italy United States
* Aggregated real GDP of the 15 OECD countries of the Euro area (excluding Cyprus and Malta).
Source: OECD calculations based on OECD Economic Outlook No. 90.

4. 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 Early recovery
% Real GDP Total hours worked
Real GDP Total hours worked
% 7
0
6
‐2
‐4 5
‐6 4
‐8 3
‐10 2
‐12 1
‐14 0
‐16 ‐1
‐18 ‐2
Countries ordered from left to right in terms of drops in GDP during the “Great recession”

5. 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 Early recovery
Total employment Average hours worked % Total employment Average hours worked
%
4 4
2 3
0 2
‐2
1
‐4
0
‐6
6
‐1
‐8
‐2
‐10
‐3
‐12
‐14 ‐4
Countries ordered from left to right in terms of drops in GDP during the “Great recession”

6. The labour market impact of the crisis and early recovery
periods have been uneven across countries
Unemployment rates before the crisis, at its peak and its latest valuea
f
Note: Countries are shown in ascending order of the jobs gap in 2011 Q4.
a) Counterfactual employment level is obtained by assuming that it has grown as rapidly as the working-age population between the business-cycle peak and
the date considered. Peak (trough) dates are defined as the start of the longest spell of consecutive decreases (increases) in real GDP since 2006 Q1.
b) Weighted averages.
c) The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without
prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law. d) Adjusted series
taking into accounts the break in series due to the introduction of the 2010 Census for Mexico and the change in the LFS questionnaire for Portugal in 2011,
respectively.
Source: OECD calculations based on the OECD Economic Outlook No. 90. .

7. The increase in unemployment was accompanied by growth
of other forms of unemployment and underemployment
Alternative measures of labour market slack, 200 Q3 and 2011 Q3 f selected countriesa
f 2007 for
UR1: Unemployment for one or more years, as a percentage of the labour force.
UR3: ILO unemployment rate. UR5: Unemployed plus persons marginally attached to the labour force, as percentage of the labour force plus persons marginally attached to the labour force.
UR6: Unemployed plus marginally attached to the labour force plus underemployed workers, as a percentage of the labour force plus persons marginally attached to the labour force.
Persons marginally attached to the labour force: persons not in the labour force who did not look for work during the past four weeks, but who wish and are available to work.
Discouraged workers are the subset of marginally attached workers who are not currently searching for a job because they believe none are available.
Underemployed persons are defined as full-time workers working less than a full-week (during the survey reference week) for economic reasons plus part-time workers who wanted but could not
full time full week part time
find full-time work. In the United States, it refers to full-time workers working part-time between 1-34 hours during the survey reference week for economic reasons and part-time workers who could
not find full-time work.
a) The labour market slack measures displayed in this figure have not been adjusted for seasonal variation. As a result, the values for UR3 differ slightly from the seasonally adjusted
unemployment rates shown in the other figures.
b) OECD is a weighted average for 29 OECD countries. Due to data availability, the OECD average excludes the following countries: Chile, Israel, Korea, Mexico and Switzerland.
Source:
So rce OECD estimates based on the European Union Labour Force Survey (EULFS) for E ropean co ntries and national Labour Force Surveys for non E ropean countries.
E ropean Labo r S r e European countries Labo r S r e s non-European co ntries

8. Long-term unemployed has increased in many OECD
countries
Long-term unemployed (
(more than one year) as a percentage of total unemployeda
) f
Note: Countries are shown in ascending order of the incidence of long-term unemployment in 2011 Q4.
a) Data are not seasonally adjusted. OECD is the weighted average of 32 OECD countries excluding Chile and Korea.
Source: OECD calculations based on quarterly national Labour Force Surveys.

9. Falling employment has particularly affected youth, low-
skilled and men
Percentage change in employment, 200 Q 2011 Q
2007 Q4-2011 Q4
OECD averagea Italy
a) Weighted averages of 33 countries (excluding Chile) for statistics by gender/age groups and employees and self-employed; of 31 countries for statistics by education (excluding Australia,
Chile and New Zealand); and 29 countries (excluding Australia, Israel, Mexico and the United States) for statistics on permanent/temporary workers. Statistics by education refers to persons aged
25-54 and to persons aged 15 or more/15-74 (for the European countries) for the statistics by work status.
Source: OECD calculations based on national labour force surveys.

10. Different margins of adjustment for the socio-economic
groups
Percentage changea,b
Average hours worked Employment
A. Crisis
10
5
0
-5
-10
-15
15
Youth Prime-age Old age Low- Medium- High- Permanent Temporary
(15-24) (25-54) (55-64) skilled skilled skilled workers workers
Age groups Education Type of contract
B. Recovery
10
5
0
-5
-10
-15
15
Youth Prime-age Old age Low- Medium- High- Permanent Temporary
(15-24) (25-54) (55-64) skilled skilled skilled workers workers
Age groups Education Type of contract

11. Youth unemployment rates: Impact of the crisis and early
recovery periods
Youth unemployment rates before the crisis, at its peak and its latest valuea
f
*: Smoothed series using centered five-months moving average. Note: Countries are shown in ascending order by the youth unemployment rate at its peak.
a) Trough (peak) dates are defined as the start of the longest spell of consecutive increase (decrease) of the quarterly unemployment rates since January
2006.
Source: OECD calculations based on the Short-term Indicators from Eurostat and various national sources.

12. NEET rates among youth in OECD countries
2007 Q1 2011
200 Q1-2011 Q1a
a) 2007 Q4-2010 Q4 for Canada and Mexico. 2007 Q2-2011 Q2 for Australia. OECD and EU-21 are weighted averages of countries shown.
Source: OECD estimates based on national labour force surveys.

13. NEET status can be very persistent
NEET years (left hand scale) Exit rate (right hand scale)
4,5 80
4,0 70
3,5 60
3,0
50
2,5
25
40
2,0
30
1,5
1,0
10 20
0,5 10
0,0 0
Source : OCDE (2009) Q i ti i and M f di
S Quintini d Manfredi

14. An increased risk that the cyclical rise in unemployment
becomes structural
Beveridge curves provide mixed picture across countries
2001 Q1-2011 Q4
Germany United States
1,2 3,8
Vacanc rate (% of labour force)
Vacanc rate (% of labour force)
2011 Q4 2001 Q1
f
f
1,1 2001 Q1
3,4
1
cy
cy
3
0,9
0,8 2,6
0,7
2,2
2011 Q4
0,6
1,8
0,5
0,4 1,4
,
5 6 7 8 9 10 11 12 3,5 4,5 5,5 6,5 7,5 8,5 9,5 10,5
Harmonised unemployment rate (% of labour force) Harmonised unemployment rate (% of labour force)
Source: OECD estimates based on OECD Main Economic Indicators Database and US Bureau of Labor Statistics’ Job Openings and Labor
Turnover Survey (JOLTS).

15. Matching frictions may have increased in some countries
Comparing actual and predicted job-finding, 2001 Q1-2011 Q4
Germany
y Spain
United States
⎛v ⎞
yf t = α 0 + α1 ln⎜ t
⎜u ⎟ + εt
⎟
⎝ t ⎠
Source: OECD estimates.

16. Hiring rates by worker groups, 2007 Q2-2011 Q2
Base 100 in 2007 Q2, dependent employment
2009 Q2 2011 Q2
European Union (EU-27)a Italy
A. Workers typesc B. Firm typesd A. Workers typesc B. Firm typesd
160 120 160 120
110 110
140 140
100 100
120 120
90 90
100 80 100 80
70 70
80 80
60 60
60 60
50 50
40 40 40 40
Men
Men
Medium-skilled
Medium-skilled
High-skilled
High-skilled
w-skilled
w-skilled
Total
Youth
Total
Youth
Prime-ag men
Prime-ag men
Women
Women
Prime-age women
Prime-age women
Older workers
Older workers
Distributive services
Distributive services
uction
uction
Good-producing sector
Good-producing sector
rvices
rvices
rvices
rvices
ge
ge
W
W
w
w
Constru
Constru
w
w
s
s
Producer ser
Producer ser
Social and personal ser
Social and personal ser
Low
Low
Gender Age groups Education Gender Age groups Education
a) European Union is a weighted average.
b) Statistics by gender, age groups, educational attainment and industry refer to persons aged 15-64 and to persons aged 25-64 for statistics by education.
c) Industries based on NACE Rev. 1.1. before 2009 and to NACE Rev. 2. afterwards. "Good-producing sector" corresponds to Mining, manufacturing and electricity, gas and water supply,
"Distributive services" to Wholesale and retail trades, hotels and restaurants, transports, storage and communication, "Producer services" to Financial intermediation and real estate and business
services, and "Social and personal services" to all the remaining service industries.
Source: OECD calculations b d on th European Union Labour Force Survey (EULFS)
S l l ti based the E U i L b F S (EULFS).

17. Key policy challenges
Short-term labour market challenges vary a lot across
countries:
• Promote job creation when pressure to cut large budget deficits is high and
growing
i
• Provide an adequate safety net to the unemployed, including the many LTU
• Adapt active labour market programmes
• Tackle dualism in the labour market
17

18. Spending on labour market programmes varies a lot across
countries
Harmonised unemployment rates and labour market programme spending as a percentage of GDP, 2007-2009
Total spending 2007 Total spending 2009
Countries are shown
Active spending 2007 Active spending 2009
in ascending order of
Unemployment rate (right‐side scale) 2007 Unemployment rate (right‐side scale) 2009 %
% the unemployment
5 20 rate in 2009.
4.5 18 Source: OECD
calculations based on
4 16
the OECD Main
3.5 14 Economic Indicators
3 12 and OECD Labour
Market Programmes
2.5 10
Databases.
2 8
1.5
15 6
1 4
0.5 2
0 0
18

19. Greater resources for labour market policy, 2009 to 2011
Percentage of responses
Reduction No change Increase
Anticipated change in 2010 relative to 2009 Anticipated change in 2011 relative to 2010
Job subsidies
Public Sector
job creation
Short‐time work
Job search
assistance
Training
programmes
Work experience
Job finding and business
Job‐finding and business
start‐up incentives
Training programmes
for existing workers
Support for
apprentices
Unemployment
benefits
Social assistance
benefits
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

20. Grazie della vostra attenzione
Stefano.scarpetta@oecd.org
www.oecd.org/els