Weak recovery creating a lost generation of unemployed youth, says OECD

OTTAWA – The weak global recovery is turning unemployment into a long-term structural problem with the potential to scar youth and some workers the rest of their lives, the OECD warns.

In a new report on employment in the post-recession years, the Paris-based economic think-tank calls on policy-makers in large parts of Europe and in the U.S. to take “urgent action” to prevent a cyclical jobless problem from becoming permanent.

“Quite simply, the fragile economic recovery has not generated sufficient employment opportunities,” the OECD’s Secretary-General Angel Gurria said in a release of the employment outlook Tuesday.

“It is therefore imperative that those countries that can do so, co-ordinate and implement additional fiscal and monetary measures to support demand and boost job creation.”

Gurria singles out youth unemployment at 16.2 per cent in the 34-country area covered by the Organization for Economic Co-operation and Development, and long-term joblessness — workers that have been without a job for periods of one year and longer and two years and longer.

The longer someone is out of work, the harder it will be to find work, the report points out. For youth, a delay in beginning a career can impact earnings for many years afterwards.

“We need to avoid the risk of a lost generation by all means,” he said.

Canada gets mostly a free pass in the report. The OECD notes unemployment sits at 7.2 per cent in Canada, as opposed to 7.9 per cent for the OECD average, and is projected to decline to 6.4 per cent by late 2013.

As for youth unemployment, it uses an index known as NEET which measures unemployed youth not in school or in a training program and here again Canada does well by comparison, with a 13 per cent NEET score as opposed to 16.4 per cent in the rest of the OECD countries.

But while Canada is doing better than many advanced nations since the recovery, TD Bank economist Francis Fong says the situation is not as rosy as the OECD presents it.

In March, Fong reported that while the Canadian job market has fully recovered from the recession, that is not the case for those in the 15-24 age category. Of the 430,000 jobs lost during the 2008-09 slump, more than half were in this youthful age group, and almost none of those jobs had been recovered.

Those numbers haven’t changed since March, in some ways they have gotten worse.

The latest Statistics Canada report shows youth unemployment rose half a point to 14.8 per cent in June, more than twice the national average of 7.2 per cent. And total unemployment has risen by about 27,000 since March.

Last week, the agency also reported that Canadian youth were experiencing recession-level conditions on the summer jobs front.

Employment as a percentage of their population among students aged 20-24 was at a level equal to that of June 2009, at the depth of the slump, and among 17-19 year olds, it was at the lowest level since data became available in 1977, the agency said.

“Youth unemployment is still at a very elevated level in Canada,” Fong said. “The competitive challenges this generation faces is very unique, they are competing with graduates from (other countries), and in addition, they have all these older workers getting back into the labour force.”

Overall, there are still 47 million unemployed people in the OECD area, but some countries are far worse off than others. To get back to pre-crisis levels, 14 million new jobs must be created, the think-tank said.

In youth unemployment, the low is Germany at about eight per cent, whereas Greece and Spain have youth jobless rates above 50 per cent.

As worrying the number of long-term unemployed has skyrocketed. Around 35 per cent of the unemployed in the OECD countries have been out of work for a year or more, while those without a job for two consecutive years and more has tripled to 7.8 million.

In the U.S., long-term unemployment has risen to 30 per cent in 2012, from 10 per cent in 2007.

“These worrying figures emphasize that a growing number of people, the young in particular, are becoming disconnected from labour markets,” Gurria said.