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


Impact of the crisis on the unemployment rate (UR) and the short-term outlook ... Even in recessions firms continue to create many new jobs ... – PowerPoint PPT presentation

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

The Economic Crisis and Flexible
Employment/Intermediaries What Are the
Implications for Employment and Social Policy?
  • Paul Swaim
  • Directorate for Employment, Labour and Social
  • OECD
  • FlexWorkResearch Centre and eurociett Conference
  • 26-27 November 2009, Brussels

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?

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?

Labour market impact and short-term outlook
  • Last years financial crisis turned into a jobs
  • 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
  • Latest OECD projections (19 November)
  • Economic recovery now spreading (the worst was
  • But it is still too timid to halt rising
  • Project a peak of 9.2 in mid-2010, then a slow
  • Nearly a two-thirds rise in under 3 years
  • Previous post-war worst were 50 increases
    following the first 2 oil shock

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

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
  • Long-term challenges
  • How to avoid allowing high unemployment from
  • How to avoid undermining long-run labour supply?
  • How to avoid undermining labour market

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

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

Reinforcing social safety nets
  • Crisis leads to longer average unemployment
  • 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
  • Make sure social assistance is adequate and
  • 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

Unemployment benefits are only one element of
safety nets for job losers Average net
replacement rates over a 5-year unemployment spell
Helping job-seekers find a job
  • Maintain core jobs-search assistance to help
  • 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

How do flexible employment and intermediaries fit
  • 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
  • Modernising UI/UB entitlement rules
  • Concerns about too little coverage for temporary
  • But also about subsidising erratic working
    patterns (e.g. voluntary vacations)
  • Assuring that SA is an adequate backstop

Thank you