Preventing Unemployment and Underemployment from Becoming Structural

Executive Summary Key challenges In many advanced economies and some emerging economies, the persistence of high levels of unemployment following the crisis, and the build-up of long-term unemployment in particular, have raised concerns around a possible rise in structural unemployment. In emerging economies, there are long-standing concerns about high levels of under-employment, with many workers trapped in low-paid, informal jobs which fail to develop and fully utilise their skills and capacities. Some groups, e.g. the youth and people from migrant backgrounds, are at particular risk. These trends have reinforced social disparities in income and access to productive and rewarding jobs which are causing much hardship for individuals and families and undermining the growth potential of G20 economies. Underlying these trends has been the substantial transformation in the sources of job growth and the types of jobs that are being created as a result of increased globalisation, technological change, economic and social development, and demographic change in all G20 countries. These long-run forces have contributed to skills mismatch and skills shortages and will continue to put pressure on labour markets to be more adaptable but also on policies to provide more effective support to jobseekers to avoid a structural increase in unemployment and under-employment. While the exact choice and combination of measures will depend on each country's specific institutions and circumstances, dealing with these challenges will require a mutually reinforcing approach that seeks to, first, strengthen growth and encourage greater job creation, and, second, tackle structural barriers in the labour market that are preventing individuals from finding productive and rewarding jobs that correspond well with their skills and capacities. In the short-run In order to tackle the negative impact of the crisis on employment and social outcomes, and prevent the large cyclical rise in unemployment from translating into higher structural unemployment, countries should consider:  Boosting stronger aggregate demand and promoting the creation of quality jobs, including through greater investment in productive infrastructure where there is fiscal space and in measures to encourage the development of small and medium-sized enterprises.  Avoiding unnecessary dismissals and stabilising employment by facilitating and encouraging firms' use of internal flexibility instruments.  Providing adequate income support to the unemployed, but combined with effective re-employment services and strict mutual obligations.  Maintaining, and where possible expanding, cost-effective active labour market measures.  Enhancing and, where necessary, improving employment services effectiveness.  Ensuring that the skills of …