iOS app Android app More

OECD Warns Of 'Muted' Recovery, Criticizes Congress For Allowing Unemployment Benefits To Lapse


First Posted: 07/07/10 08:21 PM ET Updated: 05/25/11 06:00 PM ET

An international economic organization criticized the U.S. Congress on Wednesday for allowing extended unemployment benefits to lapse at the end of May, a move that thus far has denied more than 2 million Americans a critical lifeline during the worst economic downturn since the Great Depression.

In its report on the global employment outlook, the Organization for Economic Cooperation and Development noted that a "particularly worrisome feature" of America's deep recession is the high number of workers who have been unemployed for more than six months.

Nearly half of the unemployed fall into this category, while more than 1 in 4 has been unemployed for longer than a year, the Paris-based OECD noted.

In the view of the OECD, "this group raises particular concerns for public policy," as the long-term unemployed "are at an elevated risk of falling into poverty" and "risk becoming permanently marginalized in the labor market."

"In this context, it is troubling that the temporary extension of unemployment benefits to last as long as 99 weeks has been allowed to expire," the report's authors wrote.

In the 36 days since extended jobless benefits expired, Congress has shot down several attempts to renew them, the last falling just before legislators took the week off to celebrate Independence Day. In the meantime, layoff victims have been left ineligible for additional weekly benefits beyond the six-month period provided by states.

By the end of this week, more than 2.1 million workers will have lost those benefits, according to Labor Department figures compiled by the National Employment Law Project. The group estimates that without action, that figure could rise to more than 3.2 million unemployed workers by the end of July -- just before Congress goes on vacation for an entire month.

And if Congress continues its obstinacy, the unemployed may remain out of work for years; the OECD doesn't forecast a roaring recovery.

"The economic recovery will be too muted to result in strong job creation," the OECD report said. "Unemployment is likely to recede only slowly."

The U.S. recession has been particularly brutal compared to that experienced by the other 30 countries comprising the OECD, a group of advanced economies. On average, the OECD nations have seen unemployment rates rise by 50 percent; in the U.S., unemployment doubled from about 5 percent at the end of 2007 to more than 10 percent by the fall of 2009.

To combat the high unemployment rate and restless job-creation machine, the OECD recommends that governments "should place a high priority on trying to encourage employers to step up hiring." While most governments "have little room to apply additional monetary or fiscal stimulus" -- given the Fed's near-zero interest rate policy and the hundreds of billions in stimulus funds the Obama administration has already committed -- nations should try employment-boosting measures that "achieve a lot of bang for the buck."

Nearly 15 million American workers are unemployed, according to the latest Labor Department figures.

Among the methods the OECD suggests are government-sponsored programs that encourage private businesses to reduce workers' hours rather than lay people off -- something that "significantly reduced job losses" in 24 OECD countries -- and "well-targeted hiring subsidies" like tax breaks for companies that hire additional workers. The OECD praised the HIRE Act enacted by Congress in March, which employs this method, adding that it could be "even more cost-effective" if firms were required to demonstrate that their new hires increased the firm's overall payroll. Belgium, Ireland and other OECD members call for such a requirement. The U.S. does not.

READ the OECD's report:


OECD on USA

*************************

Shahien Nasiripour is the business reporter for the Huffington Post. You can send him an e-mail; bookmark his page; subscribe to his RSS feed; follow him on Twitter; friend him on Facebook; and/or become a fan and get e-mail alerts when he writes.

FOLLOW HUFFPOST BUSINESS
Subscribe to the HuffPost Money newsletter!