The Burrow
Oct 28, 2020
The Great Depression was the single most impactful global unemployment trigger of the 20th century, with some 15 million people unemployed in America alone.1 Now, almost a century later, COVID-19 threatens to mirror the impact of the Great Depression on employment figures around the world.
We have compared statistics from OECD member countries to look at some of the largest unemployment trends of this century to date. The top 3 unemployment rates from OECD member countries are followed from 2000 to 2019.
Please note: Key findings in this piece are based on unemployment reports published by the OECD.
What is the OECD?
The Organisation for Economic Co-operation and Development (OECD) is an intergovernmental economic organisation that works to establish evidence-based international standards. The OECD is comprised of 37 member countries who work with other countries, organisations and stakeholders to find solutions to a variety of economic, social and environmental challenges.
In the first few years of the 21st century, the OECD average figure stayed relatively stagnant, with a moderate unemployment rate that sat between 6.14% and 6.61%.2
The Russian financial crisis in 1997 kick-started a period of economic inactivity that continued through to the start of the new century.3
In the early 2000s, Slovak Republic and Poland had one of the highest rates of unemployment amongst the OECD countries, holding the top spots across the member nations. Figures for both countries continued to rise over the next few years.
The Russian Financial crisis from a few years earlier, combined with the economic slowdown that occurred across 2001 and 2002 led to a period of severe inactivity in the labour market across many European countries over the next few years.4
A big portion of the unemployed in Poland were people working in the agricultural industry, who lived in rural areas without owning their own farms. According to Eurofound, they made up as much as 42.1% of all unemployment in Poland in towards the end of March 2002.5
We see Latvia appear for the first time this century. During this time, Latvia was negotiating their accession to the European Union (EU) and settled plans for an official date in 2004.6
Having consistently risen until this point, Poland appears to take its first positive steps towards reducing unemployment figures. This was due to significant growth in the employment sector, primarily by means of temporary employment through contract work.7 Between 2002 and 2016, 2.4 million total net jobs were created, of which 1.7 million were occupied by temporary contract workers between 2002 and 2008. Although unemployment rates are considerably improved, the high frequency of temporary work then became the main labour market concern for the country.8
On 1 May 2004, Latvia officially celebrated their accession into the EU. This transition was closely followed by a sharp incline in their Gross Domestic Product (GDP), alongside the other Baltic States of Lithuania and Estonia.9 The strong correlation that exists between a countries’ GDP and unemployment rates suggested that Latvia’s workforce was on the road to recovery as their GDP continued to rise by 33% over the next 3 years.10
Boasting one of the biggest economies in all of Europe, Germany had a post-war high unemployment rate of 11.02% in the mid-2000s.11 Although peaking in 2005, the figure continued to decline in the coming years as the world economy started to improve.
Despite the Global Financial Crisis (GFC) occurring from 2007 – 2008, the mid-late 00s saw the average OECD unemployment figure improve from 6.6% to an impressive 5.96%. The world economy was in a state of positive growth, particularly with growing employment and falling unemployment rates.12 The effects of the GFC didn’t appear full force for many countries until a few years later.
Interestingly, when the earlier effects of the GFC started to kick in, the construction industry was more highly affected in countries such as Ireland and Spain due to a large boom in residential construction.13 Sharply rising housing prices meant that the construction industry was in strife even before there was a decline in total employment.
Spain was one of the first countries to quickly fall into recession as a result of the GFC and to this day, still hasn’t clawed its way back to the rates it held before the crisis.14 The figure from 2008 (as seen below) reflected a 3% leap from 8.2% the previous year.
After slowly improving over the previous few years, both Poland and Slovak Republic made a considerable improvement in 2007.
Germany had a 1.6% decrease in figures, allowing Turkey to appear for the first time with only a slight rise of 0.1% from the previous year.
Before COVID-19, the major worldwide economic event of the 21st century was the Global Financial Crisis – or the GFC. According to the Reserve Bank of Australia, increased borrowing and more relaxed loan processes from US lenders were significant factors that led to the GFC.16
While it began in the United States, foreign banks were also involved in these lending practices within the American housing market, which in turn led to other nations being affected.17
The GFC left a lasting impact on several countries for years to come – especially those in Europe.
The next few years became tangled up in a major global recession, which brought the OECD average from 5.96% to 8.16% in a single financial year (2008 – 2009).
Despite positive growth at the start of the century, in 2009 Latvia had one of the largest year-on-year unemployment spikes of the last twenty years, as it jumped by almost ten per cent from the previous year. That’s close to an additional 1 in 10 people within the job market that became unemployed over just one year! The Latvian economic crisis occurred between 2008 and 2010 and was largely attributed to the fall of the easy credit market and influx of foreign capital, leading many businesses to fold due to bankruptcy.18
2009 also saw a big leap from Spain (6.7% increase) and Lithuania (8% increase). The effects of the GFC were really starting to show in the later years of this decade.
For Greece, the GFC coincided with their own debt crisis. In the height of this economic collapse, it was revealed that the country’s debt was around one-and-a-half times its GDP in 2011.19 Having already struggled to service their ongoing debt,20 Greece’s unemployment started to decline even more rapidly over the coming years.
It’s of little surprise that the country that shares a border with Spain also experienced the start of its own economic downturn just a few years after its neighbour. Spain itself continues to show increased unemployment rates, while Greece takes another negative leap with an additional 6.5% of the population finding themselves out of work.
In 2013, Greece’s unemployment level was the highest among OECD member countries at 27.5%. Youth unemployment was especially prevalent in Greece after the GFC, as over 4 in 10 people between 15 and 29 were without work in 2012 – which was double the rate of adults elsewhere.21 This figure is the highest unemployment figure of the OECD member countries in the 21st century to date.
As the second highest unemployment country in the OECD during 2013, Spain also had over a quarter of their workforce unemployed.
2014 saw the beginning of financial recovery and a positive transformation in the average unemployment rate, which would only continue to improve every year leading up to the present.
Apart from Greece and Spain, every OECD member country that experienced a downturn directly after the GFC have seen their unemployment rates decrease to levels close to where they were before the crisis. In some instance, they’re even lower.
In 2014, more than a quarter of Greece’s population aged between 15 and 29 were neither employed nor in education or training.22 Despite showing improvements in employment figures, the country still had an alarming number of people out of work.
After showing similar figures for the previous two years, 2016 sees Italy knock Portugal out of the top 3 highest unemployment figures. Both countries were in a period of steady improvement as the economic effects from the GFC started to recede.
In 2018, over 85 per cent of temporary workers in Spain were in such employment because they were unable to find permanent work.23 In addition to this, 19.9% of youth (aged 15 to 29 years) were not in employment, education or training.24 Despite this, the economy continued to slowly improve, including the placement of 200,000 new jobs in the first half of the year.25
Deteriorating labour market conditions in Turkey lead towards the country making an appearance in the top 3 for 2018.26
Turkey shows a considerable jump from the previous year, regardless of the OECD average moving in the opposite direction. The continuation of a currency and debt crisis pushes the country further into recession.27
By studying OCED data it can be seen that unemployment spikes occur, on average, every 10 years. Although we are only 5 years from the last peak in figures, we can’t ignore the scale of COVID-19 and the implications it is likely to have on the global economy.
In comparison, the 1918 influenza (Spanish Flu) saw a minimum of 20 million deaths.28 This led to a shortage in labour availability resulting in higher wages.29
The average unemployment percentage across all OECD countries in the last 20 years has been 6.66%. The following countries have always stayed below that mark:
Protect yourself if the worst happens
While most income protection policies do not offer support for those who are unemployed, there are many insurers that will provide cover if you’re unable to work due to sickness or injury. Having income protection for sickness and injury can be invaluable, as it can help to continue to pay bills while you recover. Find cover today using our easy income protection comparison tool.
Sources
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