Labour Market Structure, Unemployment and the Role of VET in OIC Countries
Date: 27 March 2014

It is now beyond contention that the recent global economic and financial crisis was severe by any metric. It left long-lasting harms on real economies in terms of output contractions, large deficits and high unemployment rates. Although the negative impacts of the crisis on the real economy varied widely among countries and regions, the sharp increase in unemployment rates around the world was the common and most severe one. A heavy price has been already paid in terms of lost jobs, reduced hours and associated income losses. Low-skilled workers, young people and workers on temporary contracts with limited employment protection have suffered quite a lot. In response to these challenges, interventions at labour market mostly concentrated on training, reductions in working hours and job search assistance (ILO, 2010). However, during the following six years since the onset of the crisis, global unemployment could not be contained and remain well above the pre-crisis level.

In the literature, much of the discussion on finding solutions to the unemployment problem has centred on the pivotal role of faster economic growth and cuts in real wages. With expansionary monetary policies, central banks around the world targeted to foster economic growth in an effort to facilitate generating more jobs after the crisis. Cuts in real wages were also believed to reduce the costs of labour and increase the ability of firms to employ more workers. Yet, how much growth and how large a fall in real wages would be required to reduce the size of the unemployment problem both remain matters for debate. The literature suggests a number of other solutions to the unemployment problem, including policies for reducing the supply of labour such as work sharing, early retirement, and reducing migration. However, these policies have not found enough support from economists.

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Labour Market Structure, Unemployment and the Role of VET in OIC Countries (English)