The Assessment: Unemployment and Inequality

The rise in unemployment in OECD economies is considered in the context of the changing patterns of labour demand and supply since 1973. The deteriorating position of the least qualified is highlighted with an index which combines both their employment and earnings experience; the importance of including labour market withdrawal as well as registered unemployment is documented. Falling wages for the least qualified was neither a necessary nor sufficient condition for their employment opportunities to be maintained in the 1980s. Explanations for the deterioration in the relative position of the less skilled are reviewed, distinguishing between approaches which see technological and structural changes as responsible and those stressing the differential impact of reduced aggregated demand. Policies to improve employment prospects for the least qualified are discussed with emphasis on their distributional impacts.