Davos council recommends “two-handed” approach to tackling unemployment

The World Economic Forum (WEF) just released new reports on how to tackle the unemployment crisis. One report says that “contrary to what some commentators believe, current record-high unemployment rates cannot be attributed to skills mismatch. Indeed, there is no evidence that skill levels have collapsed during the crisis.”

The reports were produced by WEF’s council on employment. The first report is a short overview that lays out the council’s recommendations for tackling unemployment. It says that “Policy should act on both the supply and demand sides. A “two-handed” approach is needed.” The paper then lists specific recommendations on the demand side and the supply side also provides recommendations for employers and trade unions. The second report goes into greater detail on each of these recommendations.

The third report is a detailed study of the extent of various kinds of skill mismatches in OECD countries and what can be done about them. Some key points:

  • Skills mismatch has become more prominent in the global economic crisis. However, it is primarily a structural issue and as such existed prior to the recent global economic slowdown. For the same reason, contrary to what some commentators believe, current record-high unemployment rates cannot be attributed to skills mismatch. Indeed, there is no evidence that skill levels have collapsed during the crisis.
  • The economic crisis has caused a large increase in unemployment and underemployment in many advanced, emerging and developing countries. Yet, many employers still report difficulties in finding the required talent. Although employers tend to attribute these perceived shortages to skill deficits among job applicants, they are often explained by other factors, such as geographical mismatch between skill supply and demand, poor working conditions and inefficient or stringent human-resource practices. In the short term, a key driver of skills mismatch is the limited job opportunities available in many (especially advanced) economies, which are pushing many individuals to accept mismatched and lower-quality jobs. With weak demand, employers may become more particular when recruiting, as they can afford to wait for the perfect candidate or hire over-skilled workers. At the same time, firms facing difficult economic conditions may be required to reduce training and recruitment expenditures, which can exacerbate skills shortages and mismatch within the workplace. The underutilization of the skills of mismatched workers is an important policy concern, as it entails scarring effects on their future careers and may contribute to depreciation of their unused skills.

Posted by at 3:56 PM

Labels: Unemployment

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