The Jobs Crisis and the Recovery

The tripartite International Labour Organization (ILO) has released it’s flagship 2010 World of Work Report. It offers a useful partial counterpoint to the economic analysis of other international organizations such as the IMF and the OECD.

The ILO argues that the employment rate in advanced countries will not return to pre crisis levels until well after 2015, and perhaps not even late in the decade given the turn to co-ordinated fiscal austerity. They are rightly concerned about an associated increase in long term unemployment and continuing very high youth unemployment.

The key argument presented in Chapter 3 is that unemployment can be lowered significantly at a low fiscal cost through carefully targeted labour market measures.  The first round of fiscal stimulus by the G20 countries was highly concentrated  on tax cuts and infrastructure investments, with both passive and active labour market measures combined accounting for only about 5% of total spending.

The report argues that unemployment benefits sustain demand and have a big employment impact, as do work sharing measures, and some targeted hiring subsidies.

I am struck by how little we talk in Canada of the need for policies to combat rising long term unemployment and  high youth unemployment. As the ILO argues, some very targeted interventions – such as extended EI benefits for long tenure workers, or hiring subsidies for lon term unemployed youth – could make a big difference at modest cost.