A girl looks out of her tent after another night of camping out at Sol square on May 23, 2011, in Madrid. The Spanish rulling Partido Popular party suffered a big blow in Sunday's, May 22, regional elections after a week of protests and occupation of the capital's Puerta del Sol square by people angry with the high youth unemployment and economic policies.Jasper Juinen
Unemployment remains a blight on the global economy, the Organization for Economic Co-operation and Development said Wednesday, warning governments they must act lest high jobless levels become a longer-term scourge.
"Historically high unemployment remains among the most pressing legacies of the crisis," the 34-member OECD said in releasing its latest economic outlook.
"It should prompt countries to improve labour market policies that boost job creation and prevent today's high joblessness from becoming permanent."
Widespread unemployment is affecting more than 50 million people in the OECD countries, the group said.
"Governments must ensure that employment services and training programs actually match the unemployed to jobs," the OECD urged.
"They should also rebalance employment protection towards temporary workers; consider reducing taxes on labour via targeted subsidies for low paid jobs; and promote work-sharing arrangements that can minimize employment losses during downturns."
Only yesterday, Toronto-Dominion bank economists warned that Canada's jobless rate will run at or above 7 per cent through 2014.
As The Globe and Mail's Kevin Carmichael reports, the OECD projects that Canada's economy will expand by 3 per cent this year and 2.8 per cent in 2012.
The OECD's secretary-general, Angel Gurria, issued a harsh warning about the ramifications of failure to ease the problem.
"This is a delicate moment for the global economy, and the crisis is not over until our economies are creating enough jobs again," he said. "There is also some concern that if downside risks reinforce each other, their cumulative impact could weaken the recovery significantly, possibly triggering stagflation in some advanced economies."
The group devoted an entire chapter in its outlook to the problem, and the potential policy solutions. Some countries - it cited Austria, Belgium, Finland and Germany, among others - are not in as deep trouble because they were able to cushion the blow through "labour hoarding" or some type of time-sharing among workers.
And in other countries, such as Canada and the United States, a case can be made to maintain extended jobless benefits until the labour market improves enough so that people don't fall into "persistent poverty," the OECD said.
"A main concern in countries most severely hit is that persistently high levels of unemployment - and a rising share of unemployed workers facing long spells without a job - will eventually result in widespread deterioration of human capital, discouragement and labour market withdrawal," the report said.
"The risk is strongest for youth and less skilled workers who have been disproportionately affected by the rise in unemployment."
Unemployment among young people has been of particular concern given the long timeline projected for a return to pre-crisis levels. In Canada, for example, youth unemployment still tops 14 per cent.
Consider what it will take to bring that down, given that Canada has regained all of the jobs lost to the recession but still suffers an overall jobless rate of 7.6 per cent.