Towards more and better jobs

Secretary-General of the OECD

After a decade of rising employment, innovative start-ups and widespread business euphoria, unemployment has started to increase again across the OECD. It seems that the rise in unemployment is less pronounced than was the case in previous bouts of economic weakness, and this reflects encouraging improvements in structural employment. Still, it is a stark reminder that the fight against high and persistent joblessness must remain at the top of the policy agenda.

The deterioration of labour market conditions in the last couple of years could affect some groups more than others, with older workers, women, lone parents, people with disabilities, immigrants and disadvantaged youth bearing the brunt. The trouble is, these groups are already under-represented in employment. Mobilising them into jobs would surely boost employment potential, as well as helping to combat exclusion and poverty. Indeed, several countries have shown they can raise employment by increasing the participation rate of these under-represented groups.

For years, governments have been concerned with fighting unemployment, and though this battle must continue, it must be reinforced by measures to attract more non-employed people into the workforce. After all, higher labour market participation, and not lower unemployment, is the main driver behind employment gains. This is a fact our ageing populations cannot afford to overlook. Population ageing brings pressures on welfare costs and so requires urgent action to boost employment activity. Unless participation rates are increased, population ageing will put a brake on labour force expansion, undermining growth and prosperity. In sum, the returns on fostering greater participation are high.

Reducing non-employment – and not just unemployment – serves social objectives as well as economic ones. Many badly-designed policies that have attempted to reduce unemployment through subsidising the withdrawal of people from the labour market have proved to be counterproductive. Yet, with the right encouragement and assistance, many working-age recipients of social benefits could work. Both they and society would benefit from their greater integration into the labour market.

Non-employment is frequently the result of individual choice. Some parents prefer to take care of their children themselves, for instance. Retirement too can be a household decision: when one partner retires, it is often the case that the other partner withdraws from the labour market, even if this means a loss of income. Clearly, these decisions have to be respected and supported.

But there are barriers to participation also. High minimum wages and regulations setting minimum quality thresholds for jobs have the potential to limit employment opportunities, especially for women, older workers and so on. The tax system may also influence the decision to participate in the labour market, creating inactivity or poverty “traps”. Moreover, public pension systems and early retirement schemes often create strong financial disincentives to remain in employment until the official retirement age.

In other words, far from being a choice, many groups feel the labour market is beyond their reach. Even when these people manage to get a job, this feeling of detachment persists. Women do not receive as much in-work training as men, for instance, and many have difficulty moving up the career ladder.

The importance of job-related training to improve career prospects cannot be emphasised enough. Education reduces the risk of workers falling into low-wage traps and helps them improve their productivity and earnings potential. Still, under-represented groups receive far too little training. This situation must be addressed, as policies that help people move up the career ladder should be part of any medium-term employment strategy.

In short, moving beneficiaries from non-employment benefits into jobs has to be a central goal of employment activation policies. Employment services should maintain close and constructive contact with people looking for work, delivering adequate support and counselling, and working to prevent them from slipping out of the labour market altogether. Many governments could do more with the likes of in-work benefits and tax credits to make work pay. They should reduce employer charges where they can. Access to jobs should also be backed by a variety of services and flexible arrangements to help reconcile work and family life. Workplace reorganisation could take account of the reduced capacity of disabled persons. More flexible retirement schemes could be introduced, together with action to ensure that disincentives to hire or retain older workers are removed.

There are many issues on the table and the meeting of OECD employment and labour ministers on 29-30 September 2003 will consider them in relation to a clear target: “Towards More and Better Jobs”. A difficult question is whether policy should emphasise groups which suffer the greatest labour market disadvantage, such as persons with disabilities, or those offering the largest economic potential, like women and older workers. It is a fine distinction. Neither approach can be ignored, for as employment ministers know, to promote a more inclusive society, we need a more prosperous one as well.

©OECD Observer No 239, September 2003

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