Bringing everyone along: facilitating labour market adjustment Integration versus isolation: strengthening communications on the impacts of trade OECD, Paris, 25-26 April 20176 Bringing everyone along: facilitating labour market adjustment Mark Keese Head of the Skills and Employability Division Directorate for Employment, Labour and Social Affairs

Overview of presentation Helping displaced workers (DWs): general insights Are special measures needed for trade-displaced workers? Taking a broader approach to fostering labour market inclusiveness Helping displaced workers (DWs): general insights Nearing end of multi-year project on displaced workers Will summarise key policy lessons Are special measures needed for trade-displaced workers? Are trade-displaced workers different from other job losers? What is the experience with specialised measures for trade-displaced workers? Taking a broader approach to fostering labour market inclusiveness More comprehensive and pro-active range of policies required The new OECD Jobs Strategy

OECD review on displaced workers Phase 1: Analytical report focusing on comparable statistics on job displacement and its consequences (chapter in the Employment Outlook 2013) Phase 2: 9 country policy case studies: Australia, Canada, Denmark, Finland, Japan, Korea, New Zealand, Sweden and the United States Phase 3: Policy synthesis (chapter in the Employment Outlook 2018) Definition of job displacement: Workers with at least one year of job tenure dismissed from their jobs for economic reasons such as plant closures, business downturns and changes in production technology

Around 2-7% of workers are displaced each year Percentage of workers aged 20-64 displaced from one year to the next, averages 2000-10 Source: OECD (2013), Employment Outlook, Chapter 4

Large differences in re-employment rates Percentage of displaced workers reemployed within one year, averages 2000-2010 Source: OECD (2013), Employment Outlook, Chapter 4

Job quality worsens after displacement: Persistent declines in wages Earnings changes before and after displacement Percentage of pre-displacement earningsa DY: Displacement year. a) Pre-displacement earnings refer to average earnings in the year prior to displacement (-1 in figure). Source: OECD (2013), Employment Outlook, Chapter 4

And more precarious employment Changes in employment shares between pre-and-post-displacement jobs Percentage points Source: OECD (2013), Employment Outlook, Chapter 4

Key policy messages for assisting displaced workers Avoid excessive displacement Respond early when jobs are no longer economically viable Make sure ALMPs are well adapted to meet the needs of displaced workers Ensure adequate income support for DWs, while not discouraging re-employment Avoid excessive displacement (judicious use of EPL and STW to protect jobs that are viable in long-run) Respond early when jobs are no longer economically viable (advance notification leading rapidly to counselling, re-training etc.) Make sure ALMPs are well adapted to meet the needs of displaced workers (who have distinct needs compared with other jobseekers who are more distant from the labour market) Ensure adequate income support for DWs, while not discouraging re-employment (UI is the first line of defence, but also a role for SA and maybe even “wage insurance”)

Effective activation policies are essential Key elements of successful activation policies INSTITUTIONS AND POLICIES Opportunities Inclusive and resilient labour markets Well-designed activation policies can help and encourage job losers back into work and reduce the costs of displacement. Successful activation strategies are built on three key pillars: i) maintaining and strengthening the motivation of jobseekers to look actively for work; ii) increasing employability; and iii) expanding employment opportunities. With effective labour market institutions and policies as the keystone. Motivation Employability

Good practice policy examples for assisting displaced workers Job Security Councils: Sweden Effective coordination of severance payments with activation: Germany & Switzerland Skills audits and skills gap training: Australia Job Security Councils (Sweden): Set up through collective bargaining by social partners Provide job search assistance, re-training, etc. beginning during the notice period Stand out for very rapid re-employment and constructive employer engagement Effective coordination of severance payments with activation: Severance can help avoid excessive displacement while providing compensation for long-tenure displaced workers But often delays adjustment, especially where UI eligibility is delayed until the severance allowance has been spent Germany and Switzerland reduce the delay in starting job search by requiring workers notified they will be laid-off to register with the PES and begin job search Skills audits and gap training (Australia): DWs’ skills are documented and matched against the skill requirements of available jobs, including jobs they could qualify for with a little upskilling Offering training modules to workers that fill their skills gaps in the minimum time possible.

Are trade-displaced workers (TDWs) different from other DWs? Trade only one of many drivers of job losses TDWs represent only a modest share of all DWs Only 2-3% of mass lay-offs in US because of trade But difficult to assess role of trade behind each lay-off Longer spells out of work & greater wage loss in new job TDWs represent only a modest share of all DWs: Trade only one of many drivers of labour market restructuring (new technologies, shifting consumer demands, etc.) US data for mass layoffs – Managers attributed only 2.3% of job losses to increased imports or overseas relocation Often difficult to assess how big a role increased international competition plays in causing any particular layoff TDWs experience greater adjustment difficulties on average than other DWs: Longer average time to re-employment and greater wage losses once re-employed Largely reflects concentration of TDWs in declining industries and regions, so that few openings for similar jobs are available TDWs also tend to be older manual workers with relatively low educational attainment TDWs experience greater adjustment difficulties TDWs concentrated in declining sectors and regions TDWs often manual workers with few qualifications

What role for adjustment assistance programs targeted to TDWs? DWs can face different barriers to finding work than most other PES clients Use general labour market programs but some role for specialised measures for DWs Specialised services for DWs particularly useful when mass layoffs occur TAA in the US illustrates benefits and drawbacks Delays in eligibility, arbitrary decisions Inequity in giving more assistance to TDWs than to other DWs General labour market programmes should be used as much as possible, but there is some role for specialised measures for DWs: DWs face somewhat different barriers than most other PES clients to re-entering employment (e.g. the need to document skills learned on the lost job) Specialised services for DWs are particularly pertinent when mass layoffs occur The case for special measures targeted on TDWs appears to be much weaker: The Trade Adjustment Assistance programme in the US illustrates both the benefits and drawbacks of this type of programme Two main drawbacks: Eligibility determination creates delay and cannot avoid arbitrary decisions Evident inequity in providing more assistance to TDWs than to other DWs facing the same difficulties Could be a second-best case for targeted programmes for TDWs, especially as a first step to developing good adjustment assistance for all DWs. Case weaker for special measures targeted on TDWs Second-best case for targeted programs, especially as step towards assistance for all DWs

Trade just one factor behind economic and social discontent Global-isation Digital-isation Ageing societies Rising inequality Stagnant real wage growth Greater job insecurity

A broader approach is needed to facilitate LM adjustment Direct Indirect Industry redevelopment or rationalisation programs( tax subsidies, public-private partnerships , etc.) Special adjustment assistance or income support for all displaced workers Targeted Local economic development Special adjustment assistance for specific groups, e.g. in firms/sectors facing intense import competition More “social” trade policy measures (but potentially high efficiency costs if very restrictive) Macroeconomic policies conducive to strong growth and high employment Unemployment insurance and other benefits available to all unemployed workers under common rules General Framework conditions to facilitate labour mobility (EPL, wage-setting institutions, housing policies, etc.) Active labour market programs available to all unemployed workers under common rules Education and life-long learning programs to upskill the work force

The new OECD Jobs Strategy framework Enhance inclusive growth and well-being Objective Dimensions of labour market performance More & better jobs Resilience & adaptability Inclusiveness Labour market policies and institutions, and other structural & macroeconomic policies Policies

For further information: Contact: mark.keese@oecd.org OECD Directorate for Employment, Labour and Social Affairs: www.oecd.org/els OECD work on displaced workers: http://www.oecd.org/els/emp/displaced-workers.htm OECD Employment Outlook: www.oecd.org/employment/outlook @OECD_Social