The Economic Crisis and Flexible EmploymentIntermediaries: What Are the Implications for Employment

1
The Economic Crisis and Flexible
Employment/Intermediaries What Are the
Implications for Employment and Social Policy?

• Paul Swaim
• Directorate for Employment, Labour and Social
  Affairs
• OECD
• FlexWorkResearch Centre and eurociett Conference
• 26-27 November 2009, Brussels

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Outline of Talk

• The labour market impact of the crisis
• Impact so far and short-term outlook
• Have flexible employment and intermediaries made
  a difference?
• Employment and social policy responses
• Policy responses to date
• Are flexible employment and intermediaries making
  a difference?

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Part I Labour market impact

• Impact of the crisis on the unemployment rate
  (UR) and the short-term outlook
• Which workers have been hardest hit?
• Which countries have been hardest hit?
• Have flexible employment and intermediaries made
  a difference?

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Labour market impact and short-term outlook

• Last years financial crisis turned into a jobs
  crisis
• OECD area UR rose from 25-year low at 5.6 in
  2007 to a post-war high of 8.6 in September
  (nearly 17 million more unemployed)
• No group spared, but men, youth, immigrants and,
  especially, workers in temporary jobs hardest hit
• UR up in all OECD countries this year, but large
  differences in how sharply (e.g. Germany versus
  Spain)
• Latest OECD projections (19 November)
• Economic recovery now spreading (the worst was
  averted)
• But it is still too timid to halt rising
  unemployment
• Project a peak of 9.2 in mid-2010, then a slow
  decline
• Nearly a two-thirds rise in under 3 years
• Previous post-war worst were 50 increases
  following the first 2 oil shock

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The unemployment impact so far differs greatly
across countries
Percent of the labour force
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Recessions not only hurt lots of people, but
also take a long time to fix
Unemployment rates, Finland
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Already disadvantaged groups bear the brunt of
falling labour demand
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A similar pattern holds in the current downturn
Percentage change of employment over 2008 Q2 to
2009 Q2
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Have flexible employment and intermediaries made
a difference?

• Implications for the evolution of overall
  unemployment
• More shock amplification, but less shock
  persistence (in theory)
• Might fit the Spanish case so far, but not the
  German case
• Other factors can dominate (e.g. kurzarbeit)
• Implications for the distribution of the social
  costs of recessions
• Very strong concentration of job losses on
  temporary workers
• Contributes to vulnerability of youth,
  low-skilled and immigrants
• But other factors also matter (e.g. industry mix
  explains why men are harder hit than women)
• Is the combination of partial EPL reform and
  short-time schemes increasing labour market
  segmentation? Danger of a lost generation of
  youth?

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Part II Labour market policy challenges

• Short-term challenges
• Should labour demand policies play a major role?
• Are social security systems appropriate? Should
  unemployment benefits (UBs) be expanded?
• Is the work-first approach recession-proof? How
  to activate the unemployed when labour demand is
  weak?
• Long-term challenges
• How to avoid allowing high unemployment from
  persisting?
• How to avoid undermining long-run labour supply?
• How to avoid undermining labour market
  efficiency?

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Resources available for LM policies differ
across OECD countries

• On average, 1.5 of GDP of which 0.9 passive
  and 0.6 active
• But large differences across countries e.g.
  from 0.4 in US to 4.5 in DEN
• Spending on UBs exceeds spending on ALMPs in
  almost all countries

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Governments have taken many types of measures in
response to the jobs crisis
Number of OECD countries that have taken
different types of measures
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Discretionary funds for ALMPs limited with some
notable exceptions
Average annual planned additional expenditure in
response to the economic downturn
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Supporting labour demand

• Vigorous macro-economic policy response,
  including large fiscal packages, to boost AD
• Estimated to save 3.2 to 5.5 jobs in 2010 in the
  19 OECD included in the analysis
• Important not to withdraw too soon, but also to
  restore fiscal balance
• Most OECD countries have introduced targeted
  measures to support labour demand
• Reduction in social security contributions
  (estimated cost per additional job 1.7 times
  average job costs in SR 7 times in LR )
• Short-time work schemes (e.g. Kurzarbeit in
  Germany counts more than 1.4 million participants
  corresponding to about 1 of LF)
• LD measures play a positive role, but have to be
  temporary and well-targeted

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Reinforcing social safety nets

• Crisis leads to longer average unemployment
  spells
• Where UB durations are short, temporary extension
  during the crisis helps reducing the poverty risk
  among the long-term unemployed
• Countries that have temporarily extended benefits
  durations are Canada, Finland, Japan, Portugal
  and United States
• Increasing numbers of ineligible jobseekers due
  to the increase in non-standard work in some
  countries
• Make sure social assistance is adequate and
  accessible
• Consider extending coverage if adequate
  enforcement can be provided
• Countries that have extended coverage are
  Finland, France, Japan and United States
• Any extensions should be temporary and targeted
  to the most vulnerable and not undermine
  job-search requirements

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Unemployment benefits are only one element of
safety nets for job losersAverage net
replacement rates over a 5-year unemployment spell
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Helping job-seekers find a job

• Maintain core jobs-search assistance to help
  jobseekers
• Even in recessions firms continue to create many
  new jobs
• Cost of job loss increases due to longer expected
  unemployment duration and loss of human capital
• Many countries have made good progress in recent
  years in implementing back-to-work policies
• For those at risk of long-term unemployment,
  re-employment services need to be adapted to low
  labour demand
• Shift in emphasis from work-first approach to
  train-first approach through training and
  work-experience programmes
• Negative effects of programme participation on
  job-search less of an issue in recessions
• Helps provide jobseekers with the new skills for
  the new jobs in the recovery

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How do flexible employment and intermediaries fit
in?

• A growing role for private intermediaries in
  providing back-to-work services
• EC endorsement for PES to cooperate with private
  employment agencies (PEAs), especially around the
  job placement function
• Country examples of good practices (growing list)
• NLD local cooperative agreements (e.g. post
  intermediaries in WERKplein offices)
• GER national agreement under which e.g. job
  listings are shared
• DNK sharing vacancies candidates, PES
  outsourcing tasks to PEAs
• Social protection systems need to be adapted to
  flexible and other non-standard forms of
  employment
• Modernising UI/UB entitlement rules
• Concerns about too little coverage for temporary
  workers
• But also about subsidising erratic working
  patterns (e.g. voluntary vacations)
• Assuring that SA is an adequate backstop

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Thank you