By Nick Mann | 10 July 2012
The unemployment rate in the world’s leading economies will continue to average over 7% until at least the end of 2013, the Organisation for Economic Co-operation and Development said today.
Across the 34 OECD countries, the unemployment rate in May was 7.9%, equivalent to around 48 million people out of work and in its Employment outlook 2012 the OECD said the rate was not expected to fall below 7.7% throughout next year.
Projections indicate that job creation will continue to be weak in many OECD countries, with a particularly ‘discouraging’ situation in the eurozone, where unemployment is rising again – it reached an all-time peak of 11.1% in May. Spain recorded the highest unemployment rate in May – 24.6%, followed by Portugal (15.2%) and Ireland (14.6%).
Angel Gurria, OECD secretary general, said: ‘The fragile economic recovery has not generated sufficient employment opportunities and recently we have seen clear signs of a further deterioration in global economic prospects.’
In May, the OECD forecast growth across its member countries of 1.6%, but Gurria said these projections could now prove ‘overly optimistic’.
He called for ‘urgent action’ to address high unemployment. ‘It is therefore imperative that those countries that can do so coordinate and implement additional fiscal and monetary measures to support demand and boost job creation,’ he said.
Improvements in labour markets are largely dependent on a broader economic recovery, and as such the ‘quick resolution’ of the eurozone crisis would be crucial to a recovery in employment prospects.
But labour market policies could also play an important ‘supportive role’ in helping to boost job creation. In particular, the OECD called for action to be taken to address the increasing number of long-term unemployed and those who have dropped out of the labour force altogether.
In previous recessions, countries saw early retirement or a switch to long-term sickness as a way to reduce high unemployment figures. ‘It is essential to avoid repeating that mistake by helping jobless workers to maintain contact with the labour market and to get back into employment as soon as possible,’ the report said.
‘It is also important to ensure that the skills and motivation of jobless workers, especially those who are young and not in education, are not degraded through prolonged spells of unemployment, as this would be detrimental to their future earnings and employment prospects,’ it added.
Gurria also called for broader structural reforms which, he said, would address rising income inequality and the shift to greener economies. Worker’s share of national income has fallen sharply as a result of technological advancements and a decline in their bargaining power, he explained. ‘Enhanced investment in education and skills and better targeted tax and transfer programmes can help to ensure that the fruits of economic growth are shared more broadly,’ he said.
