"Politicians must heed this warning against a brutal phasing out of the support schemes which would mean that billions of euros have already been spent for nothing. Recovery plans should focus on the real economy and full, quality employment and be tailored to the sectors that have been hit the hardest"

The impact of COVID-19, both on health and the economy, continues to be worrying. Published in July, the OECD’s annual employment outlook paints a grim picture of the current situation and prospects for the labour market. The improvement of the labour market recorded since 2009 has been wiped out in just three months. 

We are witnessing a sharp fall in economic activity caused by lockdowns and by consumers and companies curtailing their spending. GDP in the OECD area in the second quarter of 2020 was around 15% lower than in the fourth quarter of 2019. This is also being reflected in employment and hours worked.

A severe jobs crisis is looming. In the first months of the crisis, new unemployment claims have soared in many countries and OECD projections indicate that the unemployment rate will be much higher than at the peak of the global financial crisis about a decade ago. The average OECD-wide unemployment rate stood at 8.4% in May 2020, a sharp rise from the February level of 5.2%. The unemployment level will reach nearly 10% in the OECD by the end of 2020 and go as high as 12% should a second pandemic wave hit. A downward trend is not expected until after 2021. 

In addition to the soaring levels of joblessness, the key trends in the labour market since the outbreak of the crisis are:

• A massive shift towards telework among white-collar workers
• A freeze in recruitment
• Non-standard workers being the first to be kicked out in hard times
• Parts of the workforce on hold through subsidised job-retention schemes
• Vulnerable groups – the low skilled, youth and migrants – as well as women are paying the heaviest toll of the crisis.

The OECD report recognises the role of social dialogue and coordinated bargaining during the crisis. It shows that the social partners contribute to reducing income losses via collective agreements on paid leave, solidarity funds, and by claiming extensions to non-standard workers. Furthermore, the report confirms that when social partners work co-operatively, required responses are effectively designed through tailor-made agreements. 

The Outlook speaks in favour of youth guarantees and strongly emphasises the need for vocational education and training in close co-operation with social partners. This is a good approach to requalification of the workforce that of course presupposes employer commitment to work-based learning and public funding of retraining. It is fundamentally important to upgrade skills to meet future challenges linked to the digital transformation and the green economy and to move away from precarious work and false self-employment. 

Social security, including unemployment benefits and paid sick leave, are among the key instruments providing protection against earnings falls resulting from job losses. Yet many workers do not meet the criteria to receive adequate support. There are minimum thresholds and other qualification criteria that exclude people from claiming their rights to a decent living. The Corona crisis has laid bare shortcomings and gaps in social protection and accessibility to benefits that increase the risk of falling into poverty for large numbers of workers. On that, the Outlook recommends extending the length of unemployment benefits. This would be one positive step in the right direction, but much more is needed. 

On the other hand, the OECD suggests phasing out support to jobs that are non-viable. This would be a risky path to go down as it would be premature to start picking winners and losers, given the extreme economic uncertainty still prevailing. Conditionality should apply to businesses that benefit from massive public support, for example on hiring and re-hiring. Job retention schemes and support to sectors still affected by containment measures should be maintained. Health and safety must come first. 

Luc Triangle, General Secretary of industriAll Europe, stated: "Politicians must heed this warning against a brutal phasing out of the support schemes which would mean that billions of euros have already been spent for nothing. Recovery plans should focus on the real economy and full, quality employment and be tailored to the sectors that have been hit the hardest".

Link to full OECD report here

Contact: Erlend Hansen