OECD jobless rates forecast to remain stubbornly high

The OECD's annual employment outlook for Spain and Greece predicts the jobless rate to rise to 28 per cent.

Story highlights

  • OECD's annual employment outlook said average jobless rates would fall only slightly over the next 18 months
  • Unemployment is predicted to grow to 11.2% in France, 12.6% in Italy and close to 28% in Spain and Greece
  • Losses of jobs and earnings have been concentrated in low-skilled, low-income households

Unemployment will remain high in developed countries next year, with young people and the low-skilled hit hardest, according to the OECD, a club of mostly rich nations.

The OECD's annual employment outlook said average jobless rates would fall only slightly over the next 18 months, from 8 per cent of the workforce in May 2013 to 7.8 per cent at the end of 2014, leaving 48m people out of work in its 34 member countries.

Disparities between countries will widen, the OECD said. It forecast that unemployment in the US will fall from 7.6 per cent to 6.7 per cent and in Germany from 5.3 per cent to 4.7 per cent.

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But in much of the rest of Europe, it forecast that joblessness would remain flat or increase. Unemployment is predicted to grow to 11.2 per cent in France, 12.6 per cent in Italy and close to 28 per cent in Spain and Greece. The UK rate is forecast to rise slightly from 7.7 per cent to 7.8 per cent.

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"The social scars of the crisis are far from being healed," said Angel Gurría, OECD secretary-general. "Many of our countries continue to struggle with high and persistent unemployment, particularly among youth."

Losses of jobs and earnings have been concentrated in low-skilled, low-income households. Young people continue to face record unemployment levels in many countries, with rates exceeding 60 per cent in Greece, 55 per cent in Spain and about 40 per cent in Italy and Portugal.

Read more: Europe's politicians tackle unemployment

People on insecure, short-term contracts, especially young people and the low-skilled, were often the first to be fired as the crisis hit and have since struggled to find a new job.

Older workers have fared much better, with job rates rising or falling only modestly. Many are retiring later for a variety of reasons, including better health, the closure of access to early retirement schemes and also financial pressures.

The OECD said there was new evidence that this had not been at the expense of the young. Bringing back early retirement schemes or relaxing rules for disability or unemployment benefits for older workers would be a costly mistake, it added.

It said governments should tackle the jobs crisis with a combination of macroeconomic policies and structural reforms to strengthen growth and boost job creation. Over the past few years, countries including Greece, Italy, Mexico Portugal and Spain, have introduced reforms to reduce the gap in employment protection between workers on temporary contracts and those on permanent contracts.

The OECD said these reforms had the potential, if fully implemented, to promote a more inclusive labour market and a better allocation of resources leading to enhanced productivity performance.

It said a growing number of people, having been unemployed for a long time in the crisis, risked losing entitlement to unemployment benefits and having to fall back on less generous social assistance. Minimum income benefits might need to be strengthened to support families in hardship, especially where long-term unemployment remained high.

The report said adequate resources should be devoted to active labour market policies, such as help with job hunting and training, and ensuring that these were sufficiently funded. Spending per jobseeker has fallen sharply since the crisis, by almost 20 per cent on average in the OECD, as pressures on public budgets have risen.