OECD wants safety nets for long-term unemployed to be strengthened

The Organization for Economic Cooperation and Development (OECD) on Tuesday predicted that unemployment in Spain along with Greece would remain the highest in the 34 industrialized countries that make up the OECD, and called for safety-net systems for the long-term unemployed no longer entitled to unemployment benefits to be beefed up.

In its Employment Outlook for 2013, the Paris-based multilateral agency said it expected the harmonized rate of unemployment in Spain to continue to move above the 26.9 percent posted in May, just below Greece at 27 percent, to around 28 percent in 2014 — well above the OECD’s current level of 8.0 percent. By contrast, it expects the rate in the OECD to fall to 7.8 percent.

The number of people out of work in Spain has risen by more than four million since the start of the crisis in 2008 to over six million, and by 11 million in the OECD to 48 million.

“The social scars of the crisis are far from healed,” said the OECD’s secretary general, José Ángel Gurría, at the presentation of the report in Paris. “Many of our countries continue to struggle with high and persistent unemployment, particularly among youth.”

The unemployment rate among workers aged under 25 in Spain is around 55 percent. The OECD noted that the employment rate for young people in Spain has fallen 21 percentage points since the start of the crisis, five times more than the OECD average. At the same time the ratio of young people who are not in employment, education or training (Neets) rose by seven percentage points. “Youths in this group are particularly vulnerable to having their future work careers scarred by a prolonged period of unemployment or inactivity,” the report says.

The organization also noted that long-term unemployment as a share of total unemployment jumped from 19.1 percent in the last quarter of 2007 to 47.0 percent at the end of 2012. “This large increase is of concern because it may be harder for the long-term unemployed to return to work because of skills depreciation and a loss of motivation, leading to a rise in structural unemployment that may be difficult to unwind,” the OECD said.

Hence the need to reinforce safety nets for the long-term unemployed: “Minimum income benefits may need to be strengthened to support families in hardship, especially where long-term unemployment remains very high.”

The agency welcomed the overhaul of the legislation introduced in February of last year by the administration of Prime Minister Mariano Rajoy that has made it cheaper and easier to sack workers. It said this had brought Spain closer in line to practices in most European countries. At the same time, it acknowledged that an excessive relaxation of laws on individual and collective layoffs could lead to an increase in the number of people dismissed, which has been the case in Spain.

“The Spanish reform (…) is expected to increase labor reallocation and boost labor productivity and job creation when economic growth picks up,” the report said.