A more inclusive labour market

OECD Observer

Why should countries care about underemployed groups such as the unskilled, lone parents, women, immigrants and older workers?

A harsh question, perhaps, but it is one of the key issues which will be examined by OECD Employment and Labour Ministers at their meeting of 29-30 September, under the title “Towards more and better jobs”.

Many people in these disaffected groups are trapped in situations of inactivity. They are disproportionately affected in periods of economic weakness like the current one. And if they manage to re-enter the labour market, they have difficulty moving up the career ladder.

These concerns are not new. Yet, there is a renewed interest in these issues because of a recognition that better mobilisation of such underutilised resources is crucial to meeting the challenges of ageing. Pension reform is an obvious response to ageing, but it is not enough: unless under-employed groups are better mobilised, population ageing will entail labour shortages, hurt growth and increase public welfare bills.

Ministerial discussions will focus on what works and what doesn’t in a bid to utilise more labour resources. A comprehensive policy strategy will be considered. This involves, first, greater emphasis on employment-conditional benefits and targeted reductions in social security contributions. Moreover, access into paid employment of under-employed groups should be facilitated, e.g. through wider part-time opportunities and more child care facilities. Individuals on social benefits who can work should be “activated” with the help of effective support services, with penalties for those that refuse.

Mobilising older workers demands not only reforming early retirement schemes and disability benefits, but taking action to change social attitudes towards older workers. Also, it demands better investment in training, especially in new technology. This is the best way to enhance the employment prospects of unskilled workers and upgrade abilities in general.

Some have argued that maintaining some individuals in inactivity can help reduce unemployment and improve employment prospects for the young. Experience shows that such approaches have been counter-productive, hurting employment generally. A more inclusive labour market is possible, and the upcoming labour ministerial aims to provide a stepping stone to reach this goal.

©OECD Observer No 237, May 2003

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