Factbox: IMF views on fixing "dire" global labor markets

OSLO (BestGrowthStock) – Following are main points from an International Monetary Fund paper on reducing the human cost of recession, presented in the Norwegian capital on Monday at a joint conference with the International Labour Organisation.

* “Labor markets are in a dire state” with over 200 million people around the world unemployed. Nearly three-fourths of the increase in the number of unemployed during the global recession has occurred in advanced, high-income economies.

* The problem is most severe in the United States, where unemployment has increased by 7.5 million people since 2007. The U.S. jobless rate has risen to 9.6 percent, while Spain’s has topped 20 percent.

* “A recovery in aggregate demand is the single best cure for unemployment. Hence as a strategy, most advanced economies should not tighten fiscal policies before 2011, because tightening sooner could undermine the recovery.”

* Consolidation plans for the most advanced countries imply an average tightening of 1.25 percentage points of GDP in 2011. “A more severe consolidation would stifle still-weak domestic demand,” although circumstances differ from country to country.

* “Monetary conditions can remain accommodative for the foreseeable future in most advanced economies” with inflation pressures subdued at around 1.25-1.5 percent in 2010 and 2011.

* “As recovery takes hold, subsidies to short-term work could be phased out over the coming year.” Provision of unemployment insurance benefits should be tied to requiring job training and social work, so that the unemployed maintain some attachment to the labor force.

* “The potential costs and inefficiencies of hiring subsidies are arguably less severe than the costs of persistent unemployment.” Specific targeting strategies should spur hiring for groups that are most adversely affected and least likely to be rehired in the absence of subsidies.

* “Over the remainder of this year and next” the strategies of 1) supporting aggregate demand through fiscal and monetary stimulus, 2) easing the pain in labor markets through short-term work programs and 3) provision of unemployment insurance benefits “should remain in place.”

(Reporting by Wojciech Moskwa)

Factbox: IMF views on fixing "dire" global labor markets