Long-term unemployment almost double pre-financial crisis level – OECD

The number of long-term unemployed in the world's major economies has increased by 85% since the financial crash, according to the latest employment monitor by the Organisation of Economic Cooperation & Development (OECD).

More than 16 million people have been out of work for at least a year in the first quarter of 2014, up from 8.7 million before the crisis, or more than one in three of all unemployed across the OECD's 34 member countries, the report said.

The Paris-based forum gave a stark warning to countries such as Spain, Portugal and Greece, which recorded the biggest increases in unemployment after the 2008 crash. It said there is growing evidence that part of what was originally a cyclical increase in unemployment has become structural and "will thus be more difficult to reverse during the economic recovery".

It said: "Therefore, tackling unemployment where it remains high and driving down long-term unemployment remain key policy priorities."

The OECD has become increasingly worried about growing inequality in the major economies and the knock-on effects for social cohesion and productivity.

Almost 45 million people are without work in the OECD area, 11.9m more than just before the crisis. According to the most recent OECD economic projections from May 2014, unemployment among its members, which include the UK, the US and most developed countries, will continue to decline but will remain well above its pre-crisis level for the rest of this year and throughout 2015.

The main message from the report is that governments need to work harder to equip workers with the skills needed to cope with a fast-changing economic landscape.

Unemployment is one of the key measures of inequality, it said, along with wages, which in most countries have declined on average in relation to inflation.

The OECD was a supporter of workers in southern European countries taking a hit to their wage packets and argues that "wage adjustments have played an important role in helping the labour market weather the deep cyclical downturn, reducing job losses in the downturn and promoting employment growth in the recovery".

But in a thinly veiled warning to the European Central Bank (ECB), which has hinted at the need for further cuts in wages in Spain, Portugal and Greece, it said "further downward adjustments in wages in the hardest-hit countries risk being counterproductive".

The ECB has lobbied for hard-hitting structural reforms that include wage cuts to make local economies more competitive. The OECD said this will prove more difficult in places such as Europe where there is near-zero inflation.

"It may be difficult to achieve in the first place; or it may do little to create jobs while increasing the risk of poverty and depressing aggregate demand," it said.

Powered by Guardian.co.ukThis article was written by Phillip Inman, economics correspondent, for theguardian.com on Wednesday 3rd September 2014 12.32 Europe/London

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