Worker Displacement: OECD Policies

Abstract

According to OECD statistics, in 2003–2013 annual incidence of job displacement varied from 1% to 7% of total number of wage and salary workers aged 20–64. Labour reallocation is a necessary part of labor market flexibility and economic growth however worker displacement generally also leads to an increase in unemployment and to a decrease in the income of those dismissed. Therefore, a set of measures to mitigate the negative consequences of this process is becoming an important direction of labor market policy. Significant cross-country differences in the ratios of re-employment and the size of wage gaps between jobs indicate that a well-designed and effective labor market measures, as well as properly “tuned” institutions, can significantly reduce the social risks of layoffs. Employees of obsolete professions who require serious professional retraining are in the group of primary risk after the displacement. Given the increasing dynamism and flexibility of the labor market throughout the world, the development of a more targeted system of financial support for the dismissed which involves coordinating the payment of benefits of various types, as well as taking into account the interests of vulnerable workers who do not have time to gain the tenure necessary to participate in the voluntary insurance program, is needed. Present study outlines the main policies for mass layoffs in OECD countries. Particular attention is paid to the characteristics of the system of financial support for the displaced workers, including the specifics of unemployment benefits and severance pay, as well as the configuration of active programs in the labor market and the practices of the public employment service.