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Italy should boost investment in training for the future of work

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The government, business and workers in Italy will need to invest substantially more in training to prepare for the future world of work, according to a new OECD report.

Adult Learning in Italy: what role for training funds? says that the skills needed by workers for successful careers are changing rapidly in response to digitalisation and globalisation. As a result of the introduction of new technologies, 15.2% of jobs have a high risk of automation, and a further 35.5% may experience significant changes to how they are performed. Italian adults will need better opportunities over increasingly longer careers to develop their skills to keep their jobs or switch to new ones. To address these challenges, investing more in adult learning should become a policy priority for Italy.

Today only 20% of adults in Italy participate in job-related training, half the OECD average. This percentage drops to 9.5% for low-skilled adults, who are arguably those who need training the most.

Italy’s Training Funds have the potential to equip adults with the skills needed to thrive in the labour market and society. Funds are associations run by social partners that finance workers’ training, using resources collected through a training levy paid by employers (0.3% of payroll).

They are intended to encourage firms to train their workers and improve access to training. However, there is little awareness of these funds, which mirrors a low demand for skills and a lack of a learning culture relative to other OECD countries, especially among SMEs. On top of that, red tape and training costs remain burdensome for many SMEs.

Moreover, training is not always aligned with labour market needs. Compulsory Occupational Health and Safety (OHS) training represents over 30% of all training activities supported by the Funds, while ICT training accounts for just over 3%. The Funds often work in silos, with no formal coordination efforts taking place among them or with institutions and other actors involved in adult learning (e.g. regions, public employment services). More structured coordination mechanisms should be put in place to avoid duplication of efforts and create synergies between training programmes developed by different actors.

Finally, the Training Funds require adequate and sustainable funding to function well. In recent years, they have been the object of significant budget cuts by the government, which in 2017 absorbed over 40% of the funds that were collected through the training levy. In addition to reducing resources for training, budget cuts may also affect the credibility of the Training Funds and undermine overall trust in the system.

To ensure that the Training Funds are used more effectively, the OECD recommends that action should be taken to: 

Increase training participation among SMEs and vulnerable workers by, for example, fostering a learning culture among SMEs, training entrepreneurs, further reducing red tape and training costs for SMEs, and putting in place targeted initiatives to ensure that training reaches disadvantaged groups.

Align training to the skills needed in the labour market by, for example, strengthening the involvement of social partners in training decisions, making better use of skills assessment and anticipation exercises, and forbidding the use of Training Funds for compulsory training.

Enhance coordination among different actors by, for example, setting up a National Observatory on Adult Learning that coordinates the activities of the different actors involved in adult learning.

Ensure that Training Funds receive adequate and sustainable funding, by minimising governments’ withdrawals for purposes other than training.

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Urgent action needed to address growing opioid crisis

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Governments should treat the opioid epidemic as a public health crisis and improve treatment, care and support for people misusing opioids. Overdose deaths continue to rise, fuelled by an increase in prescription and over-prescription of opioids for pain management and the illicit drugs trade, according to a new OECD report.

Addressing Problematic Opioid Use in OECD Countries examines how, over the past few years, the crisis has devastated families and communities, especially in North America. It documents that deaths are also rising sharply in Sweden, Norway, Ireland, and England and Wales.

Between 2011 and 2016, in the 25 OECD countries with available data, opioid-related deaths increased by more than 20%. In Canada, for example, there were more than ten thousand opioid-related deaths between January 2016 and September 2018, with rates increasing from 8.4 per 100,000 people to 11.8 over this period. Opioid abuse has also put a growing burden on health services through hospitalisation and emergency room visits.  

“The opioid epidemic has hit the most vulnerable hardest,” said Gabriela Ramos, OECD Chief of Staff and G20 Sherpa, launching the report in Paris. “Governments need to take decisive action to stop the tragic loss of life and address the terrible social, emotional and economic costs of addiction with better treatment and health policy solutions. But the most effective policy remains prevention.”

The majority of those who die in Europe are men, accounting for 3 out of 4 deaths. However, in the United States, opioid use has been rising among pregnant women, particularly among those on low incomes. Having a mental health disorder was also associated with a two-fold greater use of prescription opioids in the US.

Prisoners too are vulnerable. The prevalence rate of opioid use disorders in Europe was less than 1% among the general public but averaged 30% in the prison population. Social and economic conditions, such as unemployment and housing, have also contributed to the epidemic.

An increase in prescription and over-prescription of opioids for pain management is among the factors driving the crisis. Governments should review industry regulations to ensure they protect people from harm as, since the late 1990s, manufacturers have consistently downplayed the problematic effect of opioids.

Doctors should improve their prescribing practices, for instance through evidence-based clinical guidelines and increased surveillance of opioid prescriptions. Governments can also regulate  marketing and financial relationships with opioid manufacturers. Coverage for long-term medication-assisted therapy, such as methadone and buprenorphine, should be expanded, in coordination with harm minimisation specialised services for infectious diseases management, such as HIV and hepatitis.

Strengthening the integration of health and social services, such as unemployment and housing support, and criminal justice systems would help improve treatment for people with Opioid Use Disorder.

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Italy should boost spending and strengthen cooperation and integration of employment services

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Italy should boost spending and cooperation at national and regional levels as part of broader efforts to help more people into work and reduce the country’s high unemployment rate, according to a new OECD report.

Strengthening Active Labour Market Policies in Italy says that the country faces greater labour market challenges than most other OECD countries. The employment rate and labour productivity are low, youth unemployment is still around 30% and the gender employment gap and long-term unemployment are decreasing only slowly.

Regional disparities are high and persistent compared to most other OECD countries. Spending on active labour market policies (0.51% of GDP) is close to the OECD average but well below the average of EU countries and levels in countries with similar unemployment rates. Moreover, active labour market policies are not well targeted to the most effective programmes and people in need, relying heavily on employment incentives. Only 2% of the budget is devoted to services that have internationally proved to be more cost-effective, such as job mediation, job placement and related services.

Public employment services play only a modest role as job brokers. Only about half of unemployed persons in Italy are registered with the public employment service (centri per l’impiego) and only half of them use these services to look for work. Access to and quality of employment services vary greatly across the country.

“To improve the performance of employment services, there is a need for further funding, boosting the local offices’ staff and their skills and modernising the IT infrastructure,” said Stefano Scarpetta, OECD Director for Employment, Labour and Social Affairs, launching the report in Rome. “The ongoing reform started by the Jobs Act and the recent additional financial allocations to the system of public employment services have the potential to improve the performance of employment services in Italy.” 

However, for the real gains to the labour market to emerge, cooperation and co-ordination should be simultaneously introduced in the system. Within the decentralised governance system, national and regional authorities need to agree on a binding framework for accountability, enabling to measure performance of employment offices according to a set of indicators and their regionally-adjusted target levels.

The funding of local offices from the state budget should be somewhat contingent not only on the number of clients to serve but also on improvements in performance indicators, thus providing incentives to improve the quality and effectiveness of services provided.

The recent introduction of the citizen income (Reddito di cittadinanza) adds further responsibilities to the system of employment services as the new benefit recipients should receive support with job-search and should be provided the necessary active measures to succeed in that. As such, improvements in the investment and performance of the system of employment services become today more critical than ever.

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Oil Market Report: Markets remaining calm

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The theme we identified in last month’s Report of “mixed signals” is appropriate again this month, with geopolitics and industry disruptions confusing the supply outlook, and the first change to our 2019 demand outlook for several months. The ongoing geopolitical supply concerns around Libya, Iran, and Venezuela have been joined in the past few days by the attacks on shipping off Fujairah and on two pumping stations in Saudi Arabia. At the time of writing, there is no disruption to oil supplies and prices are little changed. The IEA is monitoring the situation, particularly in view of the proximity of Fujairah to the strategically vital Strait of Hormuz. We are also monitoring the impact of the contamination of Russian crude oil passing through the 1.4 mb/d Druzhba pipeline system. The issue will be resolved in due course, eased by commercial and government stock draws by Russia’s customers. One consequence could be a loss of confidence in the quality of the crude flows and thus a search, where feasible, for alternative supplies that could intensify price pressures for heavy/medium sour crude oil.

Despite the difficult geopolitical backdrop and other supply problems, headline oil prices are little changed from a month ago at just above $70/bbl for Brent. In the intervening period, the decision by the United States to cease the waiver programme for buyers of Iran’s crude oil did see Brent briefly reach $75/bbl. However, there have been clear and, in the IEA’s view, very welcome signals from other producers that they will step in to replace Iran’s barrels, albeit gradually in response to requests from customers. There is certainly scope for other producers to step up production with our data showing that in April parties to the Vienna Agreement collectively produced 440 kb/d less than they promised, with Saudi Arabia producing 500 kb/d below its allocation. Of course, as we wrote in the February edition of this Report, there are quality issues for refiners used to processing Iranian barrels and the fact that increases in output come at the cost of reducing the global spare capacity cushion.

In this Report, there is a modest offset to supply worries from the demand side. Our headline growth estimate for 2019 has changed little since the middle of last year, but this month we cut it by 90 kb/d to a still healthy 1.3 mb/d. The reduction is mainly concentrated in 1Q19 on weaker than expected data for Brazil, China, Japan, Korea, Nigeria, and elsewhere lowering growth by 410 kb/d versus our last Report. Even so, slower demand growth is likely to be short-lived, as we believe that the pace will pick up during the rest of the year. An important implication of our revised demand data is that in 1Q19 the oil market saw an implied surplus of supply over demand of 0.7 mb/d, which was higher than previously suggested. As we move through 2Q19, while there is considerable uncertainty on the supply side, it is highly likely that the implied balance will flip into an indicative deficit of about the same size. Stocks in the OECD at the start of April have fallen back to the level seen in July in terms of days of forward cover and other stock indicators are pointing in the same direction.

For now, despite all the supply uncertainty, headline Brent oil prices are little changed from a month ago. However, the backwardation has steepened considerably and front month prices are about $3/bbl higher than for six months out. The decline of 230 kb/d in the North Sea loading programme for June versus May, although not a surprise, is another important factor adding to overall concerns about supply. Elsewhere, contract prices are rising sharply with Asian customers paying significantly more for barrels from Middle East sources as they seek to replace their normal supplies of Iranian crude. Basrah Light, for example, was reported as offered at its highest level for nearly eight years.

The IEA is reassured to see that the challenges posed by the supply uncertainties are being managed and we hope that major players will continue to work to ensure market stability.

IEA

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