Countries must take stronger action to ward against the risk of persistently high unemployment rates as they rebound from the global economic crisis, according to new OECD research.
“Persistence of High Unemployment – What Risks? What Policies?” reviews how OECD labour markets have evolved during the recent recession and continuing developments during the early phase of recovery.
The OECD addresses concerns that persistently high levels of unemployment – and a rising share of workers without a job – could eventually result in discouragement and permanent withdrawal from the labour force. The risk is strongest for youth and low-skilled workers who have been disproportionately affected by the rise in unemployment, according to the report, which was presented in Brussels by OECD Chief Economist Pier Carlo Padoan during a seminar hosted by The Lisbon Council.
The report identifies a range of policy responses that can facilitate a swift return to work to minimize long-term risks. It says that boosting labour demand remains a key short-term priority in many countries, and finds that measures which reduce labour costs through temporary and targeted tax wedge reductions are likely to be most effective.
Potential reforms to unemployment insurance systems, employment protection regulations and training schemes are also discussed.
The report is a special chapter in the OECD’s forthcoming Economic Outlook, which will be published 25 May 2011 during the OECD’s annual ministerial meeting and Forum.
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