Down to work and better jobs

Reflections on the OECD meeting of Employment and Eabour Ministers, 29-30 September 2003

Towards more and better jobs" may seem like a rather obvious theme for an important conference of OECD employment and labour ministers, chaired by Francois Fillon, the French employment and social affairs minister. After all, unemployment has been rising in almost all countries over the past two years and our economies need to start creating more jobs if they are to cut the unemployment rolls.

But there is another pressing reason for the emphasis on "more" and "better" jobs. For beyond the eternal fight against unemployment, ministers are starting to grapple with employment itself, and more specifically how to raise participation in the workforce. Getting more people into work has become a target of OECD labour market policy for two pertinent, though less obvious, reasons. One is to improve productivity and so lift economic potential economies with higher employment rates tend to be better off; a second is that ageing populations are forcing countries to find ways of mobilising more labour to reduce the burden on working populations of funding social protection for dependent, non-working people.

Boosting participation makes perfect sense. The participation rate of men aged 25-54 is broadly the same across the OECD. The differences in overall participation and employment rates are concentrated among certain underrepresented groups. Iceland has the highest labour force participation rate overall because it has more youth, women and older workers in employment; its prime age male participation rate is average. France, for example, has an average participation rate, but it wants to do better. How?

Fine goals are all very well, yet ministers from some 30 countries at the September meeting were also lucid about the difficulties. First, there is the matter of how to activate into jobs the most commonly cited non-employed groups: older workers, women, lone parents and people with disabilities. Then there is the question of what exactly is meant by "better" jobs. Jacques Delors, who participated in a public forum on "good job/bad job" as a leadin to the ministerial meeting, even wondered whether the notion of "job quality" was in fact a meaningful policy objective in its own right, outside of the narrow area of health and safety standards.

Lord Richard Layard of the London School of Economics presented the forum with some straightforward logic. For him, the unemployed were significantly less happy than the employed; the employed with a "bad" job were happier than the unemployed; so it was more important to get the unemployed into a job than to worry about the "quality" of the jobs in question. For Lord Layard, a tough approach, with sticks as well as carrots, was the best way to help the non-employed find work and he cited evidence to back up this assertion.

This argument laid the tone for the ministers' discussion the following day. As the situation stands, some 35% of the OECD working-age population is either unemployed or inactive, including 25% for the prime age group of 25-54 years. And the majority of these receive some kind of income benefit. Mobilising a significant proportion of this labour reserve into jobs may be ambitious, but it is necessary.

One crucial area ministers agreed on to help achieve this goal would be to phase out early retirement schemes and to tighten up access to long-term sickness and disability benefits which often provide other ways of retiring early. Incentives like workplace improvements would also be needed to entice older people to work longer. In addition, new attitudes would be needed all round. A "cultural change" is how business representatives to the OECD put it; the Business and Industry Advisory Committee to the OECD admitted that firms were having great difficulty turning these principles into practice. Labour representatives agreed: the Trade Union Advisory Committee to the OECD acknowledged that when firms have to lay off workers, their members tend to negotiate the most favourable redundancy packages for older workers.

So, what of those carrots and sticks cited by Lord Layard? The jargon OECD ministers prefer is "mutual obligation", a contract whereby quality career guidance, job-search assistance, training and other in-work rewards would be provided as long as benefit recipients took real steps to find a job or course to improve their employability. If they did not, then their benefits would be affected. The approach seems to work, since countries with higher participation and activity rates, like Canada, Denmark and Sweden, offer decent out-of-work benefits but attach strict job-seeking conditions to receiving them.

Whether mutual obligations could be applied equally to all groups on the margins of the labour market is another matter. After all, some lone parents might face high costs of child care that their income barely covers, or may simply wish to spend time with their children. And older workers may retire early to be with their already retired spouses, and so on. Also, some groups need more training, others more adaptable worktime arrangements.

Nor can people with disabilities be placed in the same basket: being blind is quite a different matter than being unable to walk. This raises an ethical question: should activation policies focus on those most likely to generate returns, or on groups that are at greater risk of exclusion?

It is a sensitive issue, though there is an overall appreciation that work, social inclusion and prosperity go hand in hand. Still, for some countries, the aim is to make a "suitable job offer", rather than making benefit recipients accept the first job that comes their way. Others prefer a more vigorous approach to activation, combining in-work benefits and/or subsidies to create additional jobs for low-skilled workers, while accepting the risk of a proliferation of low-paid and precarious jobs.

But there is no disagreement that incentives to facilitate access to the labour market must be part of any activation strategy, from expanding part-time work to investing in learning. Crediting women with pension entitlements to cover career breaks for their children would, ministers noted, also help.

A subject of hot debate among ministers is who exactly should provide employment services for job seekers. Job placement services are no longer a cosy public sector monopoly, with private agencies confined to a few niche markets like temporary work agencies or managerial head-hunters. Australia and the Netherlands are two countries that have abolished their public employment services, and now contract out to private suppliers. Some distrust contracting out, fearing that profit-driven agencies might favour employers' needs, rather than those of job seekers. Some countries like Britain and Germany are now seeking to develop partnerships between the public and private employment agencies. So far, the jury is out on these innovations, but the OECD is monitoring them closely.

The labour market has changed since the 1990s, and though unemployment is lower now than 10 years ago, jobs are often less secure. Skills become obsolete more quickly nowadays, and new tasks must be learned fast, as anyone working in an office will testify. People have to be "ready" for work. Hence, the importance of lifelong learning, which OECD employment ministers reiterated in the September meeting, in particular in light of ageing populations.

Going beyond rhetoric is not easy. Ministers can provide a regulatory framework to encourage a learning culture and monitor the quality of training services. But the private sector must take its share of the responsibility, as there is evidence that businesses invest in skilled workers first, less in women than in men, and less in small firms than in large firms. Changing this by co-operating closely with employers, as the US is trying to do, is one way forward.

Another way forward is the co-financing route whereby all players - employers, workers and governments - contribute to financing the costs of training investments. This may well involve financial contributions but it could also involve workers giving up their time in order to train. What works, for whom and why: these are questions we need to know more about. Ministers asked the OECD to help find answers.

In addition, ministers draw attention to the fact that the OECD Jobs Strategy is now almost a decade old and it is timely to review its continued relevance, especially in the light of recent experience and the looming challenge posed by an ageing work force. They gave the OECD two years to provide such a major reassessment.

References

* OECD (2003), OECD Employment Outlook, Paris.

* Spotlight on Employment, in OECD Observer No. 239, September 2003; available at www.oecdobserver.org

John P. Martin, Director, OECD Employment, Eabour and Social Affairs Directorate

Copyright Organisation for Economic Cooperation and Development Dec 2003
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