How to Help the Long Term Unemployed

 The OECD have weighed in on what policy measures are needed to limit the damage of long term unemployment in the aftermath of the Great Recession.

I would judge the NDP platform – which includes a significant job creation tax credit and increased EI benefits – to be closest to the OECD prescription.

The OECD note in a pre release of a paper to be published in the next Economic Outlook that outflows from unemployment are low in many countries (notably the US) due to a weak economic recovery, and that the proportion of the unemployed who have been out of work for a long time is rising in most countries.

Perhaps surprisingly, one key finding is that young workers have been much harder hit than older workers, and that it is younger workers who are now most at tisk of chronic long term unemployment. A major concern is that some will find themselves excluded from the job market on a permanent basis, at a major social and economic cost.

While the incidence of long term unemployment in Canada is low in an OECD context, unemployment is high among young workers, and the incidence of long term unemployment has risen well above pre recession levels.

The OECD make three major policy proposals which deserve a wider hearing in the election campaign.

First, temporarily extend unemployment benefits in countries where such systems are weak so as to provide needed income support:

“In the United States, Canada and other countries where unemployment benefit duration has been extended, the case can be made for maintaining the extension until labour market prospects have sufficiently improved to prevent individuals from falling into persistent poverty.”

Second, consider providing temporary hiring subsidies:

“Where job prospects remain bleak, the policy focus in the short term should be to continue to boost labour demand so as to increase unemployment outflows. Among the policies that can stimulate labour demand, measures to reduce labour costs through temporary and targeted tax wedge reductions are likely to be most effective. Indeed, such measures have already been put in place in several countries,though not always in a cost-efficient way.”

Third, invest in training:

“In parallel to boosting labour demand, and to offset the risks that unemployed workers see their skills eroding to the point of losing attachment to the labour market (through so-called unemployment duration dependence or hysteresis effects), more could be done to improve the matching of workers and jobs, including through measures to strengthen public employment services and training programmes.

As the risk of missing a job opportunity by suspending job search to enrol in training is lower in periods of labour market slack, there is a case for strengthening vocational training given the high rate of unemployment among youth and the low skilled.”

4 comments

  • Labour market adjustment after a recession of this proportion needs to have a national encompassing strategy. The three planks you mention are a great start, but I would go further. I would need a long post to outline that, but it is Easter morning. Let’s just say a national sector strategy with fully funded and expanded that engage all actors within a sector council strategy would be a start. Potentially that falls within your third option.

    But so much more could, and should have been done. That is the part that needs to be outlined in this election, the Tories did very little for jobs loss and adjustment, and now look at the result. High long term, high younger worker, massive loss of high quality employment. Sure the unemployment rate has come down a bit, but that is masking many other pain full social dislocations with employment, and it is the silent tragedy that much of this election that harper has avoided. ( I imagine that as something go do with his obsessive avoidance of democratic engagement with the public. What country is this any way? I swear I have never seen such outright undemocratic behavior.

  • I notice a key possibility, used to great effect during the Great Depression for instance, is not among your list of three:
    4. Create Jobs!
    The private sector seems deeply reluctant to do so lately, and incentives only go so far. Training is of little help if there are already lots of qualified applicants for every opening. And meanwhile, there are numerous tasks direly in need of doing which for one reason or another are not likely to be profitable, or at least not profitable enough soon enough. What can be done for the long term unemployed? How about “give them jobs”?

  • Jobs.Try forcing retired government employees to stop double dipping.There is approximatly 350,000 or 10% of government employees who think they are entitled to this perk.The educational business across Canada is rot with with this practice. Goverment has to fix this abuse.

  • The government found jobs for people during the depression and made great accomplishments. Most of the people given jobs did not have college or university. In fact lots came from the farms and often could hardly read (although many companies offered reading classes off- hours or through Churches). I am not saying to go back to the dark ages, but to train everyone to be IT specialists is not very productive.

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