OECD urges help for long-term jobless

Saskatchewan’s unemployment rate lowest in country for June, has highest employment gains in past year.
There will be 12,000 new jobs in Winnipeg in the next three years, BMO Economics predicts. File / Global News

OTTAWA – The federal government is being urged to provide targeted assistance for Canada’s long-term unemployed, a problem the OECD says remains unacceptably high despite the improving jobs picture.

And in a new forecast released Tuesday morning, it projects Canada’s labour market advantage over the United States will all but vanish by the end of 2014, when both countries will post unemployment rates of 6.7 per cent.

The report on unemployment among advanced economies by the Paris-based Organization for Economic Co-operation and Development largely gives high marks to Canada for jobs growth since the devastating 2008-09 recession.

It notes the unemployment rate has dropped from a recession peak of 8.5 per cent to the current 7.1 per cent, and projects it will fall further to 6.7 per cent by the end of 2014.

The U.S. currently reports a 7.6 per cent jobless rate, and it too will fall to 6.7 per cent by the end of next year, the organization predicts.

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But in a section dealing with Canada, the OECD points out that long-term unemployment — those who have lost and been unable to find work for at least one year — has yet to decline.

Those out of work for 53 weeks or more numbered just over 40,000 prior to the 2008-09 recession, but hovered between 92,000 and 112,000 this year, according to the latest Statistics Canada data.

A possible reason, the OECD said, is that employers often prefer to hire new labour market entrants and the short-term unemployed.

“The (report) argues that public labour market programs need to provide targeted assistance to the long-term unemployed to help them find new jobs or access to training that will improve their employability,” the OECD states.

Bank of Montreal chief economist Doug Porter says long-term unemployment is a concern, but notes that it was even higher following the recession in the early 1990s. The worry, however, is that long-term joblessness will become permanent, he said.

“It’s always an issue. It’s an area that policy-makers and all of us should be concerned about,” he said.

During the slump, the Harper government extended the duration under which jobless Canadians could collect worker benefits, but has since discontinued the program. Recent initiatives have moved to restrict access to employment insurance benefits, forcing the jobless to look further afield for work and to accept less pay or face being cut off.

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The government has said the changes were needed because of the existence of pockets where employers have difficulty finding qualified workers.

The OECD notes that job losses during the recession hit young and low-skilled workers hardest, saying it was important to improve their participation in the labour market since with the coming retirement of the baby boom generation, “this demographic transition could otherwise weaken the economic outlook” of the country.

The organization, which issues regular economic reports on its 34-member states, also cites Canada as offering among the least protection for both full-time workers and part-time workers in the industrialized world.

“Only New Zealand and the United States provide a lower level of protection for permanent workers,” it states.

For part-time workers, Canada has the least protections of any OECD country, it adds.

But the OECD offers that lower levels of protection, while creating more risk for some workers, also helps ensure that labour markets are more flexible to economic change.

“We’re like the United States where we have an easy come easy go job market where it’s easy to dismiss employees,” said labour economist Erin Weir of the United Steelworkers’ union.

“Given their membership, the OECD would likely be looking to Europe where there are restrictions in the ability on employers to dismiss their workers. (In some countries) employers would have to go through a regulatory process to gain permission to lay off large numbers of workers.”

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Mainstream economists say the freer hand given to employers has resulted in better labour markets in North American, particularly in terms of generally lower jobless rates.

But that is not true in all circumstances. As the OECD report notes, in Germany — which offers far greater protection to workers — the unemployment rate stood at 5.3 per cent in May and is expected to decline further next year. Scandinavian countries also tend to have low jobless rates despite strong worker protection regulations.

Overall, however, Canada still fares better than most OECD countries on the level of employment.

For the grouping overall, unemployment is projected to fall slightly next year to 7.8 per cent from the current eight per cent, the group forecasts.

Countries in the troubled eurozone are faring worse, however, with the jobless rate projected to rise from the current 12.2 to 12.3 per cent by the end of next year. And many Southern European countries, like Greece, Spain and Portugal, have significantly higher rates of joblessness.