Recession left ‘significant scars’ in labour market

THE Government has been accused by a top international think-tank of not doing enough to help the long-term unemployed.

The Organisation for Economic Co-operation and Development (OECD) said the Irish economy is now stabilising but the recession left “significant scars” in the labour market that will take time to heal.

The OECD believes that wage flexibility has a crucial role to play in boosting the demand for Irish workers and to prevent unemployment from persisting at high levels.

“While cutting pay is painful for workers and households, this may well be necessary to spur an export-led recovery that is sufficiently strong to reabsorb the slack in the labour market and to prevent the current hike in unemployment from becoming structural,” it said, adding that there are clear signs that wages have already started to adjust.

The latest OECD projections on employment suggest that in Ireland the expected recovery is unlikely to be “sufficiently vigorous” to reabsorb rapidly the current high levels of unemployment.

“Indeed, there is a significant risk that the temporary hike in unemployment becomes structural and discouraged job losers grow permanently disconnected from the labour market,” the OECD said.

Throughout 2007, 2008 and 2009, the OECD said that number of hours worked in Ireland fell by 11.8%. It said that unlike other European countries, that was almost entirely due to job losses rather than shorter working hours.

The OECD said it believes this is due to the relatively low cost of hiring and firing in Ireland and what had been a large amount of jobs in construction.

It does praise the reduction in social welfare payments, adding that this will make it more attractive to work.

It said however that in order to avoid growing benefit dependency job-search incentives need to be strengthened.

It said job-search requirements need to be enforced more effectively.

It notes that despite “significant fiscal tightening”, the Irish Government has taken a number of initiatives targeted at the long-term unemployed.

“Amongst others, it has substantially expanded the number of training options available to unemployed jobseekers and has introduced a new work-experience programme targeted at unemployed for over three months,” the OECD said.

It said these initiatives play a “crucial role” in ensuring the long-term unemployed stay in touch with the labour market in a context where their prospects of regaining employment are restricted due to the competition for limited vacancies.


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