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
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + competitive: SThree: Are you looking to take your ...

SThree: Trainee Recruitment Consultant

£20000 - £40000 per annum + competitive: SThree: Exciting career prospect for ...

Ashdown Group: Trainee Consultant - Surrey / South West London

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

Ashdown Group: Trainee Consultant - Surrey/ South West London

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

Day In a Page

A groundbreaking study of 'Britain's Atlantis' long buried at the bottom of the North Sea could revolutionise how we see our prehistoric past

Britain's Atlantis

Scientific study beneath North Sea could revolutionise how we see the past
The Queen has 'done and said nothing that anybody will remember,' says Starkey

The Queen has 'done and said nothing that anybody will remember'

David Starkey's assessment
Oliver Sacks said his life has been 'an enormous privilege and adventure'

'An enormous privilege and adventure'

Oliver Sacks writing about his life
'Gibraltar is British, and it is going to stay British forever'

'Gibraltar is British, and it is going to stay British forever'

The Rock's Chief Minister hits back at Spanish government's 'lies'
Britain is still addicted to 'dirty coal'

Britain still addicted to 'dirty' coal

Biggest energy suppliers are more dependent on fossil fuel than a decade ago
Orthorexia nervosa: How becoming obsessed with healthy eating can lead to malnutrition

Orthorexia nervosa

How becoming obsessed with healthy eating can lead to malnutrition
Lady Chatterley is not obscene, says TV director

Lady Chatterley’s Lover

Director Jed Mercurio on why DH Lawrence's novel 'is not an obscene story'
Farmers in tropical forests are training ants to kill off bigger pests

Set a pest to catch a pest

Farmers in tropical forests are training ants to kill off bigger pests
Mexico: A culture that celebrates darkness as an essential part of life

The dark side of Mexico

A culture that celebrates darkness as an essential part of life
Being sexually assaulted was not your fault, Chrissie Hynde. Don't tell other victims it was theirs

Being sexually assaulted was not your fault, Chrissie Hynde

Please don't tell other victims it was theirs
A nap a day could save your life - and here's why

A nap a day could save your life

A midday nap is 'associated with reduced blood pressure'
If men are so obsessed by sex, why do they clam up when confronted with the grisly realities?

If men are so obsessed by sex...

...why do they clam up when confronted with the grisly realities?
The comedy titans of Avalon on their attempt to save BBC3

Jon Thoday and Richard Allen-Turner

The comedy titans of Avalon on their attempt to save BBC3
The bathing machine is back... but with a difference

Rolling in the deep

The bathing machine is back but with a difference
Part-privatised tests, new age limits, driverless cars: Tories plot motoring revolution

Conservatives plot a motoring revolution

Draft report reveals biggest reform to regulations since driving test introduced in 1935