ILO Report – Eurozone risks losing a further 4.5 million jobs

Unemployment in the Eurozone could reach almost 22 million over the next four years, up from 17.4 million, unless policies change course in a concerted manner, the ILO says in a report entitled “Eurozone job crisis: trends and policy responses” .

The study warns that without a shift in policy direction all countries in the Eurozone – both those currently under stress and their healthier counterparts – will suffer.

“It’s not only the Eurozone that’s in trouble, the entire global economy is at risk of contagion,” said ILO Director-General Juan Somavia.

“Unless targeted measures are taken to increase real economy investments, the economic crisis will deepen and the employment recovery will never take off. We also need a global consensus on a new path for job-intensive growth and globalization. This is a major leadership responsibility of the United Nations, the Bretton Woods system and the G-20,” he added.

The consequences of a lengthier labour market recession would be particularly dire in the short term for young jobseekers.

Unemployment has risen in more than half of the region’s 17 countries since 2010 and over three million youth aged 15-24 are unemployed. More than one third of working-age people in the Eurozone are either unemployed or excluded from the labour market, and long-term unemployment is on the rise…

… and a further 4.5 million jobs may be lost

The report shows that by embracing a Eurozone growth strategy with jobs at its core,  recovery is still possible within a single-currency setting. Repairing the financial system, promoting productive investment, reinforcing effective employment programmes, maintaining social protection, fostering social dialogue and undertaking job-friendly fiscal plans would bring the Eurozone out of the austerity trap and pave the way for a sustainable recovery with social cohesion. 

If the current policy course does not change quickly, however, it is possible that a further 4.5 million jobs will be lost over the next four years. This would risk further feeding social unrest and eroding citizen’s confidence in national governments, the financial system and European institutions.

Mounting evidence points to the fact that a prolonged labour market recession may be in the making. Long-term unemployment is on the rise and many workers are becoming excluded from the labour market. At the beginning of 2012, around 31.5 per cent of the working-age population in the Eurozone were either unemployed or inactive –an increase of 1.5 percentage points from 2007. And 44 per cent of unemployed people had been without work for more than one year.

Young people are increasingly at risk of a scarring first experience in the world of work, which could affect them for the rest of their life. In April 2012, the youth unemployment rate in the Eurozone was over 22 per cent. It exceeded 30 per cent in Italy, Portugal and Slovakia and was over 50 per cent in Greece and Spain. Youth unemployment rates also remained relatively high in successfully performing countries, such as Belgium and Malta.

Without a prompt policy turn – to address the crisis and to regain the trust and support of workers and enterprises – it will be difficult to implement the reforms necessary to put the Eurozone back onto a path of stability and growth.

… effective employment programmes, notably youth guarantees

Employment policies, notably well-designed active labour market programmes, could play an instrumental role in promoting job recovery. Making sure that young people are not trapped in precarious jobs is important as well. Some countries, such as Austria, have found ways to ensure that temporary jobs are stepping stones to more stable arrangements – instead of a dead-end. This requires careful design of regulations.

A prolonged recession is typically associated with growing long-term unemployment. Labour market policies, if effective, can reduce the risk of demoralization and labour market exclusion of long-term unemployed workers. They are also key for preparing for the recovery; for example, by providing retraining and upgrading skills. Support of this nature is at the core of a competitiveness strategy.

Yet, spending on active labour market policies – measured per unemployed person – has tended to decrease in recession-hit Eurozone countries (figure 7). The opposite holds true in relatively better off countries.

In a number of Eurozone countries, such as Austria, Belgium and the Netherlands, new training programmes have facilitated school-to-work transition and ensure that young women and men remain connected to the labour market. Here, the successful delivery of these programmes will hinge on the availability of well-resourced public employment services.

The launch of a special programme for youth unemployment, along the line of the “youth guarantees” in Nordic countries, is particularly urgent. Under such guarantees, the government commits itself to offer young women and men in a defined target group – unemployed, not in education or with a short employment experience – a place in an education, training or work programme or special job-search support. No young person would thus be left behind, for a budget cost estimated at less than 0.5 per cent of Eurozone government spending. In Sweden, 46 per cent of young jobseekers had successful job outcomes as a result of the guarantee…

via Eurozone risks losing a further 4.5 million jobs. (Adapted by JMM)

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