The European Elections: Record figures may spur new work policies

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The Independent Online
American and European failure to adapt to the globali sation of the world economy, mounting competition and rapid technological change are at the root of the world unemployment crisis, the Organisation for Economic Co-operation and Development said yesterday, writes Peter Torday.

The OECD's comprehensive report on unemployment in the industrialised world, commissioned by its 25 leading industrial member states, may now be used as a benchmark for policy changes - as yesterday's heated political debate in Britain demonstrates. It says unemployment in the OECD area has hit a record 35 million, against an average of below 10 million during the Fifties and Sixties.

The Organisation dismisses three popularly cited causes for the jobless crisis. It says it is wrong to blame unemployment on changing technology, imports from low-wage economies such as the dynamic countries of South-east Asia, and intensifying global competition. 'Evidence from a range of countries, especially over the past few years, indicates that none of these suggested causes is primarily or even importantly responsible for today's unemployment.'

History shows when technological change accelerates, so do growth, living standards and employment. Worries about a 'jobless' recovery appear unfounded: the current upswing in the US and a number of other countries has brought job growth in its train.

The OECD plays down the threat of imports from low- wage countries. The impact of imports from these countries and their weight in OECD markets is too small to account for the problem, the OECD says. Most competi tion in the OECD area comes among member states themselves. Market globalisation has intensified this process.

Slowing this change through protectionism 'would be to seek to cut off economies from the forces that have always been the mainspring of economic growth and betterment', it warns. The history of protectionism, moreover, shows that consumers' costs rise, successful businesses are penalised, exports are crippled, migration rises, monopolies increase and lobbying, bribery and corruption become more widespread.

Instead, the Paris-based agency argues that the problem began in the mid-Sixties. In the post-war economic era living standards rose in most OECD countries, narrowing the gap with the richest of them - the US.

There then followed the turbulent Seventies, with two oil price shocks, the breakdown of the Bretton Woods fixed exchange rate regime and soaring inflation. In the Eighties, widespread financial market deregulation and increased competition accelerated the pace of change.

But even as these momentous changes occurred, policies to achieve greater social protection were set in train, making labour markets more rigid in continental Europe, Australia and New Zealand. At the same time, the public sector became progressively more important as an employer in these countries, expanding just as impediments to private sector hiring increased, and the incentive to accept low- paid work diminished.

Today, the phenomenon of 30 million working poor in the US has arisen because many of those with few skills can only find jobs with poor wages and conditions. In Europe, Canada and Australasia such low-wage jobs have been largely disallowed by society. Britain stands somewhere in between. 'Both have thus stemmed from the same root cause: the failure to adapt satisfactorily to change.'