OECD sounds warning on lost generation

Persistently high unemployment "could eventually result in discouragement and permanent withdrawal from the labour force", especially among younger and less skilled workers. The stark warnings about a permanently higher level of unemployment comes from the Organisation for Economic Co-operation and Development, the "club" comprising all the world's developing economies, including the UK.

Britain is one of a number of countries identified as being at particular risk of seeing the present high levels of youth unemployment – standing at almost 1 million 16 to 24-year-olds – turning permanent. The reason, the OECD said, is that alienation of the workforce and a failure to acquire and keep skills through up-to-date on-the-job training, will mean some people in effect leaving the labour force.

The OECD said: "Concerns about unemployment persistence are particularly pronounced in countries that have experienced large increases in long-term unemployment.

"The longer individuals remain unemployed, the more difficult it becomes for them to find a job and the less they may try. In at least 10 countries (eg the United Kingdom) the share of long-term unemployment has risen significantly during the crisis, pointing to a significant risk." This phenomenon is called "hysteresis" in economic jargon, or, more graphically, "scarring".

Western governments should promote training schemes and protect them from cuts as budget defects are reduced, the OECD said, "so as to help unemployed to preserve work ethics and limit skills erosion". They should also strive to make resources available to jobcentres for the same reasons, the organisation said.

Ministers will be encouraged by the OECD's implied endorsement of their cancellation of a planned rise in employers' national insurance contributions, as well as the efforts to move people off disability and invalidity benefits. This, though, may become more difficult as long-term unemployment takes hold. "In a number of countries, unemployment peaks associated with recessions have tended to be followed by spikes in disability rates about two years later. Such a pattern is particularly visible in the US, but some evidence can also be seen in UK," the OECD said.

Recently, the National Institute for Economic and Social Research estimated that structural unemployment will be higher by 320,000 because of this "scarring" effect. Overall, some 840,000 have been jobless in the UK for more than a year, and 362,000 of those for two years. They say that more than one in five 16 to 24-year-olds are neither working nor studying full time.

No wage inflation pressure, so no change likely at this rate

The Bank of England will leave interest rates on hold in May, City economists believe, based on the latest evidence to emerge from Threadneedle Street.

The absence of any serious pressures on wage inflation and thus of a domestically generated inflationary spiral seems to be the key factor in the Bank's mind. The long-expected turn in the interest rate cycle may not arrive until August or even November.

The latest minutes of the Monetary Policy Committee show that there has been little hardening of opinion, with the vote on 7 April to leave rates at their historic low of 0.5 per cent again passed by 6 to 3. Views on the MPC are split four ways, with one "dove" wanting a further loosening of policy via a £50bn extension of "quantitative easing". Of the three "hawks", two voted for a 0.25 percentage-points rise; Andrew Sentance, who attends his final MPC on 5 May, argued for a 0.5 per cent rise.

The majority on the MPC, including the Governor, Mervyn King, argue that: "The risk that increased inflation expectations might become entrenched in wage- and price-setting was material, but there was no evidence yet of that crystallising."

Key will be the preliminary estimate of GDP growth in the first quarter, published on 27 April.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Recruitment Genius: Customer Service Advisor

£15000 - £16000 per annum: Recruitment Genius: A Customer Service Advisor is r...

Ashdown Group: Trainee Consultant - Surrey / South West London

£22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

SThree: HR Benefits Manager

£40000 - £50000 per annum + pro rata: SThree: SThree Group have been well esta...

Day In a Page

The difference between America and Israel? There isn’t one

The difference between America and Israel? There isn’t one

Netanyahu knows he can get away with anything in America, says Robert Fisk
Families clubbing together to build their own affordable accommodation

Do It Yourself approach to securing a new house

Community land trusts marking a new trend for taking the initiative away from developers
Head of WWF UK: We didn’t send Cameron to the Arctic to see green ideas freeze

David Nussbaum: We didn’t send Cameron to the Arctic to see green ideas freeze

The head of WWF UK remains sanguine despite the Government’s failure to live up to its pledges on the environment
Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Set in a mythologised 5th-century Britain, ‘The Buried Giant’ is a strange beast
With money, corruption and drugs, this monk fears Buddhism in Thailand is a ‘poisoned fruit’

Money, corruption and drugs

The monk who fears Buddhism in Thailand is a ‘poisoned fruit’
America's first slavery museum established at Django Unchained plantation - 150 years after slavery outlawed

150 years after it was outlawed...

... America's first slavery museum is established in Louisiana
Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

The first 'American Idol' winner on how she manages to remain her own woman – Jane Austen fascination and all
Tony Oursler on exploring our uneasy relationship with technology with his new show

You won't believe your eyes

Tony Oursler's new show explores our uneasy relationship with technology. He's one of a growing number of artists with that preoccupation
Ian Herbert: Peter Moores must go. He should never have been brought back to fail again

Moores must go. He should never have been brought back to fail again

The England coach leaves players to find solutions - which makes you wonder where he adds value, says Ian Herbert
War with Isis: Fears that the looming battle for Mosul will unleash 'a million refugees'

The battle for Mosul will unleash 'a million refugees'

Aid agencies prepare for vast exodus following planned Iraqi offensive against the Isis-held city, reports Patrick Cockburn
Yvette Cooper: We can't lose the election. There's too much on the line

Yvette Cooper: We can't lose the election. There's too much on the line

The shadow Home Secretary on fighting radical Islam, protecting children, and why anyone in Labour who's thinking beyond May must 'sort themselves out'
A bad week for the Greens: Leader Natalie Bennett's 'car crash' radio interview is followed by Brighton council's failure to set a budget due to infighting

It's not easy being Green

After a bad week in which its leader had a public meltdown and its only city council couldn't agree on a budget vote, what next for the alternative party? It's over to Caroline Lucas to find out
Gorillas nearly missed: BBC producers didn't want to broadcast Sir David Attenborough's famed Rwandan encounter

Gorillas nearly missed

BBC producers didn't want to broadcast Sir David Attenborough's famed Rwandan encounter
Downton Abbey effect sees impoverished Italian nobles inspired to open their doors to paying guests for up to €650 a night

The Downton Abbey effect

Impoverished Italian nobles are opening their doors to paying guests, inspired by the TV drama
China's wild panda numbers have increased by 17% since 2003, new census reveals

China's wild panda numbers on the up

New census reveals 17% since 2003