OECD: JOBLESSNESS CITED AS LINGERING RISK

Paris, April 26 (WSJ)- The risk that unemployment remains at current levels after the financial crisis -including in the U.S.- is a major concern, the Organization for Economic Cooperation and Development said in a report Wednesday.

The OECD listed a number of countries where jobless rates had jumped by more than two percentage points since the crisis began. They included the U.K., Italy, Ireland, Greece, Portugal, the U.S.-where the jobless rate has risen five percentage points- and Spain, where the jobless rate has risen more than 12 percentage points.

"A main concern in countries most severely hit is that persistently high levels of unemployment -and a rising share of unemployed workers facing long spells without a job- will eventually result in widespread deterioration of human capital, discouragement and labor-market withdrawal," the OECD said. "The risk is strongest for youth and less-skilled workers who have been disproportionately affected by the rise in unemployment”.

The OECD highlighted concerns about the U.S., noting the "unusually high share of long-term unemployment" in the current labor market.

The U.S. jobless rate has started to fall, it said, but it noted evidence that the odds of a jobless person finding work within a month -the so-called unemployment outflow rate- have worsened significantly compared to levels in previous recessions. "Such developments raise concerns about future persistence of unemployment," the report said.

Germany, Austria, Belgium, Finland, Japan, Korea, Luxembourg and the Netherlands have benefited from time-sharing programs among workers, which helped absorb the fall in gross domestic product from the financial crisis.

"The labor market has yet to recover from the crisis," the OECD said. In the short term, countries should focus on boosting labor demand by slashing labor costs through temporary tax cuts, such as cuts in payroll taxes, the OECD said. Governments can do more to match workers with jobs by strengthening public employment services and training programs, the organization said.

The OECD also suggested that countries reduce the gap in protection between regular and temporary worker contracts, pointing to significant overhauls under way in Greece and Spain. While the impact of such reforms takes time to materialize and they are politically difficult to launch amid high unemployment, they could boost hiring and labor-market resilience, it said. One option would be to link job protection to seniority instead. These "two-tier" systems have led to turnover in the work force in countries including France, Italy and Spain, with no permanent effects on the unemployment rate itself.

Countries including Germany and Netherlands should phase out public subsidies, such as short-term work programs, the OECD said.

<