OECD, Directorate for Employment, Labour and Social Affairs

Organisation for Economic Co-operation and Development

Presentation to the Labour Party

Pre-Budget Seminar, Dublin27 November 2010

The jobs crisis in OECD countries: How Ireland

Compares John P. Martin Director for Employment, Labour and Social Affairs, OECD

The jobs crisis

An unprecedented crisis

• OECD-area UR jumped from 25-year low of 5.8% at the end of 2007 to a post-war high of 8.8% in October 2009. Since then, it has dipped slightly (8.5% in September 2010)

While recovery is underway, the jobs crisis is far from over

• Latest OECD projections (released 18 November) show the UR declining slowly over the coming two years, but only to 7¼ in Q4 2012

• For Ireland, export-led recovery next year but UR may only decline slightly to 12¼% in Q4 2012

Part I

THE JOBS CRISIS: HOW IRELAND COMPARES?

The unemployment impact so far differs greatly across

countriesPercent of the labour force

Note: All data are seasonally adjusted.June 2010 for Estonia, Greece and Turkey; July 2010 for Chile, Norway and the United Kingdom; 2010 Q2 for Israel and Switzerland; and 2010 Q3 for Iceland and New Zealand (OECD harmonised unemployment rate data are not available on a monthly basis for the last three of these countries).

0

2

4

6

8

10

12

14

16

18

20

22

% December 2007 September 2010

Recessions not only hurt lots of people, but also take a long time to fix

Harmonised unemployment rates in Ireland, January 1970 – December 2012*

0

2

4

6

8

10

12

14

16

18

1970M1 1975M1 1980M1 1985M1 1990M1 1995M1 2000M1 2005M1 2010M1

7 years 5 years

3 years3 years 4 years 2 years

8 years 9 years 7 months

3 years 2 months

* Data from October 2010 to December 2012 are extrapolated using the latest OECD Economic Outlook projections (18 November 2010).

Long-term unemployment is rising rapidly in the countries with the biggest unemployment

crisis

0

5

10

15

20

25

30

35

40

45

50

55

60

65

70

75

80

% 2007 Q2 2010 Q2

•Data are not seasonally adjusted. OECD is the weighted average of 26 OECD countries excluding Chile, Iceland, Israel, Korea, Luxembourg, Slovenia and Switzerland.Source: OECD estimates based on national Labour Force Surveys.

Share of long-term unemployed in total unemployment, second quarters of 2007 and 2010Long-term unemployed (more than one year) as a percentage of total unemploymenta

Part II

SOME KEY CHALLENGES FACING LABOUR MARKET POLICIES IN IRELAND

CHALLENGES FACING IRELAND ON THE ACTIVATION FRONT

OECD (2009) showed that the intensity of activation in Ireland was relatively weak prior to the crisis.

The FÁS debacle came at just the worst moment when we most needed a high-performing PES.

However, the recent amalgamation of FÁS Employment Services with the benefit agency under DSP is a potentially important step forward so long as an effective governance system is put in place with clear quantifiable objectives and a performance management system that rewards good employment/career outcomes.

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CHALLENGES FACING IRELAND ON THE ACTIVATION FRONT (cont.)

DSP needs to set targets for the ratios of benefit recipients to unemployed (B/U) and benefit recipients to population (B/P)•a B/U ratio > 1 is symptomatie of problems; requires tightening of benefit

administration and strengthening of activation to bring B/U ratio well below 1. DSP must ensure the principle that benefit recipients have to take

up work opportunities or training or be sanctioned.• If this is done, expenditure on ALMPs will yield a net budgetary saving.

• To support activation measures, make persistent non-compliance with DSP procedures grounds for sanction.

Consider opening up the employment services market to a foreign provider who should be paid by results.

Gatekeeping for disability benefits should be under constant surveillance: ensure that permanent DBs granted only to people with permanent inability to work.

Don’t expect too much in the short-term – this reform is for the long-haul.

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CHALLENGES FACING IRELAND ON THE VET FRONT

Main burden of rising unemployment has fallen on youth and the low-skilled (many of whom have weak literacy and numeracy skills).

While the weak labour market is encouraging many youth to stay on longer in education and training, this poses a huge challenge to our VET system to cope with rapidly rising demand and maintain/improve quality.

Need a fundamental rethink of the apprenticeship system:•Too narrow in terms of occupations (e.g. dominant focus on

construction, few services)•Too few women apprentices•Inappropriate sharing of the costs between apprentices, firms

and the public purse.

A fundamental redesign of the apprenticeship system could be inspired by the good practices in Australia and Switzerland

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CHALLENGES FACING IRELAND ON THE VET FRONT (Cont.)

Need to expand the role of on-the-job training in many VET programmes.

Much greater emphasis needs to be put into remedying basic skills deficiencies among working-age adults.

•This will require much more systematic screening by DSP/ Training Agency/training providers for potential literacy and numeracy training

•For those diagnosed with insufficient literacy/numeracy skills, basic skills support will need to be an integral part of their VET courses.

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Concluding remarks

Ireland faces a massive challenge to cut high and persistent UNR

The crisis is an opportunity to radically rethink its LM and training policies and institutions in order to promote more and better jobs.

It is vital to get this right for the long-haul.

FURTHER READING

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FURTHER READING (Cont.)

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