OECD issues 2003 Employment Outlook

In September 2003, the Organisation for Economic Cooperation and Development (OECD) issued its annual Employment Outlook report, in which it stresses the importance of expanding the workforce by integrating under-represented groups. It also states that additional investment in skills is required. Without progress in these areas, the report states that the prospects for economic growth in many countries will be undermined as the population ages, placing more strain on pension schemes and threatening living standards.

The Organisation for Economic Cooperation and Development (OECD) published its annual Employment Outlook for 2003 in mid-September 2003, examining the employment situation in the 30 OECD countries. Entitled Towards more and better jobs, the report provided the analytical background for a meeting of OECD employment and labour ministers held on 29-30 September. It states that if no significant steps forward are made and if no action is taken to encourage more people into employment and existing barriers to job creation are not removed, the annual growth of the workforce in OECD member countries is expected to slow, from an average 1.3% over the past 30 years to 0.3% over the next 30. Some countries, such as Italy and Japan, will experience a net decline in the labour force.

The report examines how to provide more and better jobs for all and starts by noting a mixed employment situation, in which certain groups find it hard to progress. These include people without skills, women, disabled people. immigrants and older workers, who all find themselves trapped in situations of inactivity and are disproportionately affected by periods of global economic weakness. The study reports that even when they are in employment, these groups of people have difficulty advancing their careers.

The study stresses that one of the biggest problems in store for the future is presented by the progressive ageing of the workforce. In 2000, 27% of the total OECD workforce was aged 65 or over – by 2030, this proportion will have increased to 47%. The report states that this is one reason why it is so important to integrate people currently under-represented in the workforce.

Employment and unemployment

Examining labour market developments in OECD countries since 1991, the report finds that employment growth almost came to a halt in 2002, after growth of 1% a year during the previous 10 years. Trends in unemployment were uneven, with a rise in Japan and central and eastern Europe and a fall in the EU, North America, Australia and New Zealand. However, it notes that there are encouraging signs in that the deterioration in the employment situation observed since 2000–1 is less pronounced than during earlier economic downturns.

In 2002, unemployment increased in the OECD area by 0.5 percentage points, to an average of 6.7% of the labour force. Within the EU, the unemployment rate was an average of 7.6%, which was 0.3 points higher than the previous year. The 10-year average for the EU for 1990–2000 was 9%. Including four EU candidate countries (the Czech Republic, Hungary, Poland and Slovakia), unemployment averaged 8.7% of the labour force for 2002 and 8.2% for 2001, while the 10-year average for 1990–2000 was 8.7%. The average statistics mask wide variations in individual countries, with the extreme ends of the scale in relation to unemployment in the EU Member States for 2002 being Spain (11.4% of the total labour force) and Luxembourg (2%).

OECD projections are for an average unemployment rate of 7% across the entire OECD area in 2003, falling back slightly to 6.8% in 2004. For EU Member States, the projected average for 2003 is 8%, followed by a slight drop to 7.9% in 2004. When the abovementioned four candidate countries are included in the calculations, the projections are for 9.1% in 2003 and 9% in 2004.

Labour market inactivity

The OECD report sets out the different reasons for labour market inactivity: it may be through choice, as in cases of parents choosing to stay at home with their young children in preference to working; or it may be on account of various external barriers to labour market participation. However, the study states that to mobilise people into activity, work has to be made to pay, and that the development of certain disincentives to work, such as early retirement schemes, needs to be halted. Non-financial measures also need to be introduced, including subsidising childcare services; promoting flexibility for workers with family responsibilities; and expanding part-time work.

Key groups

Women are identified as one of the key groups with potential for mobilisation. They comprise 71% of the total of employment inactivity. Although female participation has increased in most OECD countries during the past decade, there is still a gender employment gap of, on average, 20 percentage points. The other main group comprises older people aged between 55 and 64, who contribute 29% to the total of employment inactivity. Taking into account any overlap between the two groups, together they represent 83% of 'excess inactivity'.

Disabled people are also believed to be disproportionately disadvantaged. On average, they comprise 21% of 'non-employment' among the working population, with their employment rates varying widely, from over 60% in Norway and Switzerland to 22% in Spain.

Activation strategies

Most non-employed people of working age receive some form of income-replacement benefit, and data from different countries suggest that activation strategies can play an important role in encouraging recipients of various types of benefits to move into employment. These strategies take different forms, such as compulsory training or participation in training programmes for unemployed people or young people. The data show that countries like Denmark and Sweden, where there is a tradition of such schemes, have a high labour market participation rate. By comparison, the UK introduced these types of measures relatively recently and participation remains low.

Upgrading skills

According to the OECD, the upgrading of skills will play a crucial role in improving the employment prospects of under-represented groups, who receive much less training generally than those who are already highly skilled or have a good job. The report points out the inequality of access to continuous vocational training, with women, older workers, low-skilled workers, immigrants and workers in small firms receiving less training.

Commentary

The OECD Employment Outlook 2003 calls for governments to do more to improve job opportunities for groups of workers that are currently under-represented in the workforce as a means of easing the burden on public finances and reducing social exclusion. This will need to be achieved by the utilisation of a range of options, from 'making work pay' to facilitating the integration of different groups through introducing non-financial measures. A key role will be played by the skills upgrading of under-represented groups in the labour force. The report warns that unless urgent steps are taken to address these issues, growth of the labour force in the OECD countries is likely to average only 0.3% over the next 30 years, compared with 1.3% over the past 30, with some countries registering a net decline in the labour force. These recommendations are in keeping with the basic tenets of the the European employment strategy and the EU's 'Lisbon process' (EU0004241F), which both emphasise skills development and the integration of under-represented groups into the labour market as key factors in improving the performance of European labour markets. (Beatrice Harper, IRS)