Job creation to remain 'anemic,' OECD says

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Canada's labour market is healing faster than in other industrialized nations, but a faltering global recovery may temporarily prevent the country from returning to pre-crisis unemployment levels.

An employment outlook published Thursday by the Organization for Economic Co-operation and Development shows several soft spots linger in Canada's labour market.

Youth and low-skilled workers are lagging the broader recovery. Social assistance programs for the unemployed haven't been adapted to elevated jobless rates, leaving the unemployed vulnerable to financial difficulties once jobless benefits run out. And income inequality is growing.

Its findings for Canada are part of a sobering overview of the jobs picture among industrialized countries, which finds a stalled recovery is dimming employment prospects. As of July, 44.5 million people were unemployed in the OECD area – 13.4 million more than before the crisis and a number roughly equivalent to the entire population of Spain.

The organization predicts job creation will remain "anemic" in the near term.

"This is the human face of the crisis," said Paris-based OECD Secretary-General Angel Gurría in prepared remarks. "Governments cannot stand still. The challenges of tackling high and persistent unemployment, improving job opportunities and ensuring adequate social safety nets should be at the top of the political agenda."

In Canada, Prime Minister Stephen Harper last week signalled a shift in economic priorities towards job creation. His comments came a day before a report showed hiring in the country had stalled in July and August.

The OECD highlighted several strong areas for Canada. Its jobless rate is lower than the OECD average. Enhancements to employment insurance helped cushion many newly jobless people in the crisis. And the country's long-term unemployment rates are among the lowest of industrialized nations. (In the first quarter of this year, 13 per cent of unemployed Canadians had spent more than a year looking for work compared with almost 35 per cent in the OECD).

Still, weak spots exists. Social assistance programs showed "limited responsiveness" to rising joblessness during the recession amid stringent eligibility criteria. This could spark financial difficulties for people who have been unemployed for a long time and are no longer eligible for EI.

Youth and low-skilled workers were hit hard in the recession and have "yet to benefit" as much from the recovery as other groups. The young unemployed in Canada are less likely to receive support from employment insurance and more at risk of having to rely on alternative sources of revenue, such as welfare, than their counterparts in other countries, it said.

The recession may also have exacerbated the wage gap between low- and high-skilled workers. The gap stems from a relative decline in the wages of low-skilled workers compared with high-skilled workers, it said.

The global jobs picture is mixed. At one extreme, seven OECD countries – Australia, Austria, Japan, Korea, Luxembourg, Norway, Switzerland – have maintained jobless rates in the 3.5 per cent to 5.5 per cent range. At the other end, six countries still had double-digit unemployment rates as of July: Estonia, Greece, Ireland, Portugal, the Slovak Republic, Spain, while the U.S. unemployment rate remained stuck at over 9 per cent.

"The stalling recovery is a major concern for the latter group of countries," it said.

Sound policies can make a difference, it added. Some countries, such as Australia, Japan, Korea and the Netherlands have managed to contain the increase in unemployment, while Germany has actually reduced unemployment during the crisis.

"The focus should be on cost-effective measures – such as well-designed hiring subsidies – and on the most vulnerable groups," said Mr Gurría.

Income support for the unemployed should be maintained or bolstered where assistance is low, tough to access and where the long-term unemployed face a serious risk of falling into poverty and exclusion, the OECD said. It should be combined with re-employment programs to avoid benefit dependence.

Young people are a main concern. In the first quarter of this year, the jobless rate for youth was 17.4 per cent in the OECD area, compared with 7 per cent for adults. Targeting youth will reduce the risk of young people falling into long-term unemployment and losing touch with the job market, it said.

"Tackling the large human cost of unemployment, especially for those youth who fail to get a permanent foothold in the labour market, must be a priority," said Mr Gurría. "A better match must be achieved between the skills youth acquire at school and those needed in the labour market."