Labour market policies

Although job creation has improved, the effects of the recession on the labour market remain severe. Unemployment duration is still extremely high, and many have withdrawn from the labour market altogether. Because the weakness is largely cyclical in nature, policy makers should place a high priority on supporting aggregate demand in the short term. Even so, policies are needed to help individuals return to work, as there is a risk that high long-term unemployment and weak labour market participation could evolve into structural problems. Greater emphasis should be put on activation measures that help individuals search for jobs more effectively or find adequate training programmes. In the longer run, education and training are key to raising the skills and wages of the workforce. In this regard, educational reforms are needed to increase student achievement at all levels. High-quality vocational training can also be used to advance the skills of high-school graduates. College completion rates could be improved by reducing financial and other barriers to education, and enhancing the community college system would be a cost-effective way to provide more individuals with an affordable way to obtain tertiary education. Disability insurance reforms are needed to reduce dependency on these programmes and encourage participation in the workforce.