New OECD report: lessons for Nordics' crisis preparedness

“The corona crisis was like putting the car in first gear while making sure it kept running. What was the most important thing I did as prime minister? It was to give people the chance to get further education. I meet people in the supermarket who tell me this changed their lives,” says Katrín Jakobsdóttir during the panel debate after the report was presented in Reykjavik.

Next to her is the Director General of Iceland’s Directorate of Labour,  Vinnumálastofnun (VMST), Unnur Sverrisdóttir.

“It was like being hit by a hurricane. Everything had to happen so fast. New legislation on unemployment support was proposed on 5 March, it was agreed in parliament on 21 March and people could start applying on 25 March,” she says.

On the other side of Katrín Jakobsdóttir is Stefano Scarpetta, Director of Employment, Labour and Social Affairs at the OECD. He has been through several crises before and put the corona pandemic in perspective.

“On average it took eight quarters, or two years, for the OECD countries to get back to the same employment levels they had before the corona crisis. Compared to the 2008 – 2009 financial crisis, things went much, much better,” he says.

“It took four years on average to get out of the financial crisis, but for certain groups – like young people – it took ten years before they reached the same employment level as before the crisis.”

The Nordic countries handled the two crises using slightly different measures. But Iceland was hit harder than neighbouring countries both times. During the financial crisis, all of the countries’ banks folded and the state was forced to bail them out.

During the corona crisis, tourism – Iceland’s largest industry – was hit especially hard because nobody could travel anywhere. Tourism workers were also often foreign and harder to tempt back once restrictions were lifted, explained the Icelandic Minister of the Labour Market Guðmundur Ingi Guðbrandsson earlier in the day.

Iceland’s Minister of the Labour Market, Guðmundur Ingi Guðbrandsson.

The state support given to businesses and people on furlough during the pandemic far exceeded what was offered during the financial crisis. One type of support was what the OECD calls Job Retention – paying businesses to keep workers on their books.

“Job Retention should not be used under normal circumstances because this type of state support would distort competition. But the extent to which JR was used was far bigger than during the financial crisis when 3.5 per cent of businesses got such support. During the corona crisis that figure was 25 to 35 per cent,” says Stefano Scarpetta.

“And rightly so, since the businesses weren’t the ones doing badly. It was the government that introduced measures which stopped them from doing business.”

The report’s authors say the corona crisis taught us that existing labour market measures can be rapidly extended but that totally new measures take time to introduce. Not all crises are as clear-cut as the corona crisis and might sneak up on us.

“During a crisis, it is important that employment services are able to adapt and be flexible. We go as far as recommending the introduction of a certain level of predetermination so that when it becomes necessary to adapt it has already been decided how to do it.”

The OECD also calls for greater flexibility when it comes to courses and training offered to unemployed people. Offering shorter courses might be better than one-year-long education modules and people’s existing work experience could count for more when applying for a course. Employment services also need better access to information that already exists in various systems and a faster way of gathering it.”

The OECD report is called “Nordic lessons for an Inclusive Recovery?” The question mark indicates uncertainty over how inclusive the recovery has actually been. Like in many parts of the world, the Nordic region also saw differences in how hard different social groups were hit. Young people, low-skilled workers and immigrants were among those who faced the greatest consequences. 

But thanks to the rapid recovery, many of these consequences had been evened out by early 2022. 

“It is good that the report shows that our model with a social safety net works like a kind of support and helps include vulnerable groups into the labour market, especially when a crisis hits,” says Iceland’s Minister of the Labour Market Guðmundur Ingi Guðbrandsson.

The crisis did not hit men and women very differently, according to the report, although that was something many believed would happen. But women worked more from home than men. 

Karen Ellemann, Secretary General for the Nordic Council.

There might, however, be ways in which the crisis hit men and women differently which the report has not looked at, pointed out Karen Ellemann, Secretary General for the Nordic Council, who had commissioned the report.

“During the lockdowns, old gender patterns sometimes returned. This made it difficult for women to do their jobs properly. I believe politicians can learn from this and be extra vigilant to avoid future crises triggering unforeseen gender gaps,” she says.