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Governments must take further action to boost job opportunities at an older age

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In the face of rapid population ageing, governments must promote more and better job opportunities at an older age to protect living standards and the sustainability of public finances, according to a new OECD report.

Working Better with Age projects that, based on current retirement patterns, the number of older people (50+) out of the labour force because of inactivity or retirement who will need to be supported by each worker could rise by around 40% from 42 per 100 workers in 2018 to 58 per 100 workers in 2050 on average in the OECD area. In some countries such as Italy, Greece and Poland, there could be nearly as many or more older people out of the labour force as workers by 2050.

But by delaying the average age at which older workers leave the workforce as well as reducing the gender gap in labour force participation at younger ages, this average rise for the OECD area could be cut to just 9%. “The fact that people are living longer and in better health is an achievement to be celebrated,” said Stefano Scarpetta, OECD Director of Employment, Labour and Social Affairs, at the launch of the report in Tokyo. “But rapid population ageing will require concerted policy action to promote active ageing so as to offset its potentially serious consequences for living standards and public finances.”

The report stresses that much progress has been made to encourage older workers to continue to work up until the age of 65 and beyond in some OECD countries. Nevertheless, in virtually all OECD countries, the effective age at which older people exit the labour market is still lower today than it was 30 years ago, despite a higher number of remaining years of life. This is explained by a combination of poor incentives to continue working at an older age, employer reluctance to hire and retain older workers, and underinvestment in employability throughout working lives.

Further measures are required in many countries to ensure that work at an older age is encouraged and not penalised. Employment regulations as well as seniority wages should be reviewed and reformed where necessary so as to boost labour demand for older workers and discourage the use of precarious forms of employment after a certain age. Greater flexibility in working time and better working conditions more generally are also needed to promote higher participation at all ages. For example, long working hours may deter some older people from working longer and prevent some women, returning from child-rearing breaks, from pursuing longer work careers. Poor working conditions at a younger age may lead to poor health and earlier retirement at an older age.

It is also important to invest in older workers’ skills, says the OECD. Many of them exhibit lower levels of digital readiness than their children and grandchildren, and they participate much less in job-related training than younger workers. “One key factor preventing older workers from closing the skill gap with younger employees lies in the fact that the employers usually do not see the benefits of investing in the training of their older employees”, said Stefano Scarpetta. “Providing good opportunities for workers to upgrade their skills and learn new ones throughout their working careers is a key requirement for fostering longer working lives in good quality jobs”.

In line with the OECD Council Recommendation on Ageing and Employment in 2015, the OECD recommends governments take further action in three broad areas, namely:

Reward work at an older age by: i) ensuring that the old-age pension system encourages and rewards later retirement in line with increased life expectancy, and providing more flexibility in work-retirement transitions; ii) restricting the use of publicly funded early-retirement schemes and discouraging mandatory retirement by employers; and iii) ensuring welfare benefits are used to provide income support for those unable to work or actively seeking work and not as de facto early-retirement schemes.

Encourage employers to retain and hire older workers by: i) addressing age discrimination in recruitment, promotion and retention; ii) seeking a better match between the labour costs and productivity of older workers by working with the social partners to review pay-setting practices and eliminating special employment protection rules based on age; and iii) encouraging good practice by employers in managing an age-diverse workforce.

Promote the employability of workers throughout their working lives by: i) improving access to lifelong learning and skills recognition; ii) improving working conditions and job quality at all ages; and iii) providing effective employment assistance for older workers facing job loss or wishing to find another job.

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Post-COVID-19, regaining citizen’s trust should be a priority for governments

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The COVID-19 crisis has demonstrated governments’ ability to respond to a major global crisis with extraordinary flexibility, innovation and determination. However, emerging evidence suggests that much more could have been done in advance to bolster resilience and many actions may have undermined trust and transparency between governments and their citizens, according to a new OECD report.

Government at a Glance 2021 says that one of the biggest lessons of the pandemic is that governments will need to respond to future crises at speed and scale while safeguarding trust and transparency. “Looking forward, we must focus simultaneously on promoting the economic recovery and avoiding democratic decline” said OECD Director of Public Governance Elsa Pilichowski. “Reinforcing democracy should be one of our highest priorities.”

 Countries have introduced thousands of emergency regulations, often on a fast track. Some alleviation of standards is inevitable in an emergency, but must be limited in scope and time to avoid damaging citizen perceptions of the competence, openness, transparency, and fairness of government.

 Governments should step up their efforts in three areas to boost trust and transparency and reinforce democracy:

 Tackling misinformation is key. Even with a boost in trust in government sparked by the pandemic in 2020, on average only 51% of people in OECD countries for which data is available trusted their government. There is a risk that some people and groups may be dissociating themselves from traditional democratic processes.

 It is crucial to enhance representation and participation in a fair and transparent manner. Governments must seek to promote inclusion and diversity, support the representation of young people, women and other under-represented groups in public life and policy consultation. Fine-tuning consultation and engagement practices could improve transparency and trust in public institutions, says the report. Governments must also level the playing field in lobbying. Less than half of countries have transparency requirements covering most of the actors that regularly engage in lobbying.

 Strengthening governance must be prioritised to tackle global challenges while harnessing the potential of new technologies. In 2018, only half of OECD countries had a specific government institution tasked with identifying novel, unforeseen or complex crises. To be fit for the future, and secure the foundations of democracy, governments must be ready to act at speed and scale while safeguarding trust and transparency.

 Governments must also learn to spend better, according to Government at a Glance 2021. OECD countries are providing large amounts of support to citizens and businesses during this crisis: measures ongoing or announced as of March 2021 represented, roughly, 16.4% of GDP in additional spending or foregone revenues, and up to 10.5% of GDP via other means. Governments will need to review public spending to increase efficiency, ensure that spending priorities match people’s needs, and improve the quality of public services.

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Sweden: Invest in skills and the digital economy to bolster the recovery from COVID-19

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Sweden’s economy is on the road to recovery from the shock of the COVID-19 crisis, yet risks remain. Moving ahead with a labour reform to facilitate adaptation in a fast-changing economic environment, and investing in digital skills and infrastructure, will be crucial to revive employment and build a sustainable recovery, according to the latest OECD Economic Survey of Sweden.

The pandemic triggered a severe recession in Sweden, despite mild distancing measures and swift government action to protect people and businesses. GDP fell by less than in many other European economies in 2020, thanks to reinforced short-time work, compensation to firms for lost revenue and measures to prop up the financial system, but unemployment still rose sharply. Solid public finances provided room for further stimulus in 2021 to buttress the recovery.

 The Survey recommends maintaining targeted support to people and firms until the pandemic subsides, then focusing on strengthening vocational training and skills and increasing investment in areas like high-speed internet and low-carbon transport. Addressing regional inequality, which is low but rising, should also be a priority as the recovery takes hold.

 The Survey shows that Sweden has been among the most resilient OECD countries in the face of a historic shock. Yet, like other economies, it faces challenges from demographic changes and the shift to green, digital economies. Investments in education and training, and labour reforms along the lines negotiated by the social partners, will support job creation and strengthen economic resilience. Building on Sweden’s leadership in digital innovation and diffusion will also be key for driving productivity.

 After a 3% contraction in 2020, interrupting several years of growth, the Survey projects a rebound in activity with 3.9% growth in 2021 and 3.4% in 2022 as industrial production resumes and exports recover. The recovery in world trade is bolstering the Swedish economy, however the country remains vulnerable to potential disruptions in global value chains.  

The pandemic has aggravated a mismatch in Sweden’s job market, with unfilled vacancies for highly qualified workers coinciding with high unemployment for low-skilled workers and immigrants. The public employment service needs strengthening to provide better support to jobseekers, including immigrants and women, and labour policies should strike the right balance between supporting businesses and workers and supporting transitions away from declining businesses towards growing sectors.

A rising share of youths and older people in the population, especially in remote areas, is affecting the finances of local governments, which provide the bulk of welfare services. Strengthening local government budgets and ensuring equal welfare provision across the country will require providing tax income to poorer regions more efficiently and raising the economic growth potential across regions through investments in innovation. Improving coordination between government entities and reinforcing the role of universities in local economic networks would help achieve that aim.

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Fewer women than men will regain work during COVID-19 recovery

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Generations of progress stands to be lost on women and girls' empowerment during the COVID-19 pandemic. Photo: ILO

Fewer women will regain jobs lost to the COVID-19 pandemic during the recovery period, than men, according to a new study released on Monday by the UN’s labour agency.  

In Building Forward Fairer: Women’s rights to work and at work at the core of the COVID-19 recovery, the International Labour Organization (ILO) highlights that between 2019 and 2020, women’s employment declined by 4.2 per cent globally, representing 54 million jobs, while men suffered a three per cent decline, or 60 million jobs. 

This means that there will be 13 million fewer women in employment this year compared to 2019, but the number of men in work will likely recover to levels seen two years ago. 

This means that only 43 per cent of the world’s working-age women will be employed in 2021, compared to 69 per cent of their male counterparts. 

The ILO paper suggests that women have seen disproportionate job and income losses because they are over-represented in the sectors hit hardest by lockdowns, such as accommodation, food services and manufacturing. 

Regional differences 

Not all regions have been affected in the same way. For example, the study revealed that women’s employment was hit hardest in the Americas, falling by more than nine per cent.  

This was followed by the Arab States at just over four per cent, then Asia-Pacific at 3.8 per cent, Europe at 2.5 per cent and Central Asia at 1.9 per cent. 

In Africa, men’s employment dropped by just 0.1 per cent between 2019 and 2020, while women’s employment decreased by 1.9 per cent. 

Mitigation efforts 

Throughout the pandemic, women faired considerably better in countries that took measures to prevent them from losing their jobs and allowed them to get back into the workforce as early as possible. 

In Chile and Colombia, for example, wage subsidies were applied to new hires, with higher subsidy rates for women.  

And Colombia and Senegal were among those nations which created or strengthened support for women entrepreneurs.  

Meanwhile, in Mexico and Kenya quotas were established to guarantee that women benefited from public employment programmes. 

Building forward 

To address these imbalances, gender-responsive strategies must be at the core of recovery efforts, says the agency. 

It is essential to invest in the care economy because the health, social work and education sectors are important job generators, especially for women, according to ILO. 

Moreover, care leave policies and flexible working arrangements can also encourage a more even division of work at home between women and men. 

The current gender gap can also be tackled by working towards universal access to comprehensive, adequate and sustainable social protection. 

Promoting equal pay for work of equal value is also a potentially decisive and important step. 

Domestic violence and work-related gender-based violence and harassment has worsened during the pandemic – further undermining women’s ability to be in the workforce – and the report highlights the need to eliminate the scourge immediately. 

Promoting women’s participation in decision-making bodies, and more effective social dialogue, would also make a major difference, said ILO. 

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